Other people's web3 strategies: Nouns
Introduction
Previously, I have investigated how companies have adapted to incorporate web3 into their existing business models. Today we’re going to switch things up; we’re deep diving on a web3-native project.
Nouns is a generative NFT avatar project that has seen sustained success and has continued to launch initiatives, consistently at the bleeding edge of the web3 strategy.
Rain or shine, bull or bear, Nouns have kept floor prices and engagement high. Let’s look at how…
What are Nouns?
Nouns are an experimental crypto project that seeks to find new, better ways to build on-chain avatar communities. In the words of Pepper Shin, “While projects such as Cryptopunks have attempted to bootstrap digital community and identity, Nouns attempt to bootstrap identity, community, governance, and a treasury that can be used by the community.”
The project was founded in June 2021. It all started when 4156, a prominent NFT collector, creator and influencer tweeted:
The tweet was a call to arms for a group of web3 builders and creators, who quickly assembled to start work on the project that was to become Nouns. Some of the high-credibility artists and technologists who had responded to the call became the 10 founders of the project (known as Nounders) along with 4156. You can see a full list here.
The next day, 4156 followed up with a thread that laid out the project’s structure:
TL;DR
- Each day, until the end of time, a new Noun is randomly and trustlessly generated and sold via auction.
- The proceeds from the auction would go to The Nouns DAO, designed to fund Noun community projects.
- There would be some mechanism by which the Nounders would continue to profit from the proceeds of the projects. At this stage the idea was for the proceeds from Noun auctions for days 365-730 to be sent to The Nounders DAO.
This potentially throws up a few questions (i.e. what does trustlessly generated mean? And what’s a DAO?) - scroll to the bottom for the answers.
What has made Nouns so successful?
So now we have the down low on what Nouns are, it’s time to look at what has made the project so successful. Of course, there are endless little reasons, but I’m going to dig into two key things that I believe play a huge part in the rise and rise of Nouns.
Here are some of the things that I believe have been fundamental in establishing the Nouns brand, identity and success:
- The credibility of the Nounders
- Their use of CC0 (creative commons zero)
- NounsDAO’s grant funding mechanism (and what it funds, e.g. naming a frog species)
- Nouns as culture
1. The credibility of the Nounders
From the very first tweet, when 4156 made their call to arms, it was obvious that the Nouns team was going to be an all-star cast of web3 greats. But how does web3 credibility get built and why does it matter?
The case of 4156
The short story
- He was early to crypto
- He is passionate about the potential of the technology, and keen to create value in the space that attracts others
- He’s a builder and a creator
- He shared his wisdom by collecting and curating art through his punk4156 identity
The long story
In an episode of the PROOF podcast, 4156 spoke about his backstory. He has been part of the crypto world since 2013 when he was working in startups and has a personal interest in speculating in financial markets. When he read the Bitcoin whitepaper he describes having a eureka moment where he “stood up off [his] couch and was like woah this thing’s gonna change the world”.
Over the next bit, he mined Bitcoin, did well off the second bubble and was able to leave his job to work full time on crypto ideas. In the meantime he was also getting into Punks, Beeple and XCOPY very, very early.
When CryptoPunks started getting valuable he realised that NFTs, not DeFi, were going to be what made crypto go mainstream. There weren’t going to be enough people in the world who would care about the “weird derivatives” that crypto created in the financial space, but people do care about culture.
He initially planned on using his pseudonymous identity to create his own goofy art, but then came to the realization that there were some much more gifted artists already in the space; what was needed instead was a collector and curator, so that’s what he became.
While 4156 is able to code well enough to build an MVP, he says that to make something big, you need to work with a suite of experts. In his words, “If you want to build really really interesting things you have to move into a position that is more like the conductor of an orchestra or the director of a film.”
Enter 4156’s orchestra of Nounders
Due to 4156’s long term presence and reputation within the crypto twitter-verse, he was connected to, and known by, a lot of major players. So when he made his casting call, lots of “amazing, super talented people reached out and said they would try working on it”. These were 10 of the best people in the world at what they do, and within hours they were in a Discord, building.
It’s a bit like if Beyoncé put a Tweet out asking who would be up for making an album with her; I’m sure she’d get some pretty 🔥 responses.
What does this crypto credibility mean for the project’s success?
If a project is led by all the stars of crypto, the chances of being rugged are pretty slim.
Not only that; buying work from a collection of OG creators is likely to be a pretty solid investment, relative to other NFT collections. There’s the hype, but there’s also the promise of what the collection will become into in the longer term.
If you’re interested in learning more about credibility in web3; how it’s built, how it’s judged and how it needs to change, I highly recommend this episode of the Noun O’Talk podcast with Brian Flynn, founder of RabbitHole.
Aside from reputation, between the Nounders, they had most of the NFT world on their follower lists which is always a helpful head start...
2. Nouns’ use of CC0
What is CC0 and how have Nouns used it?
CC0 stands for Creative Commons Zero. It means that all copyrights to items belong to the public domain; anyone can use CC0 items for almost any purpose, including using the IP to create their own content. This means that anybody is free to create commercial goods and content from CC0 NFTs.
On the face of it, it seems pretty wild to relinquish all rights to the reproduction of art in the crypto world; the home of the ownership economy. Isn’t it the security, the scarcity, the royalties, the indisputable, publicly available data about ownership that makes NFTs valuable? Is this value not destroyed by the use of CC0?
Nope. In fact, CC0 is part of the reason Nouns are as famous, and thus as valuable as they are.
Let me explain…
A first edition of Mary Shelley’s horror classic Frankenstein would be pretty valuable, right? Right. In 2021, one fetched $1.17million at auction. But the work of Mary Shelley is in the public domain (since she died more than 70 years ago); so by that logic, the contents aren’t scarce and thus, not valuable. In reality, Frankenstein’s existence in the public domain is exactly what makes the first edition so sought after; all of the Halloween costumes, corny horror movies and cheap paperback books have built the fame of the book, making the first edition all the more valuable.
The same applies to famous artworks; I’m sure if The Sunflowers was painted by some unknown painter from the same period as Van Gogh it would be worth something but it would be worth nothing like what it is worth thanks to its fame, in part created by the all the reproduction postcards.
Nouns not just condones, but encourages, enables and promotes the use of their artwork in other projects.
On the Nouns’ website you can create your own Noun (for free) to use as your PFP, Nouns hosts a page dedicated to derivative projects and the DAO distributes free grant funding to those seeking to build new spin off projects.
The recompense the Nounders seek from these projects? Fame, and thus fortune. Each spin out project makes the originals more valuable.
3. NounsDAO funding
A major factor in the rise of Nouns is how the treasury is used: to fund activity that will “proliferate Nouns”.
100% of proceeds from the daily Noun sales go into the NounsDAO treasury, which currently has a value of around $40,000,000. The DAO is governed by all owners of a Noun (so currently ~450), each of whom has 1 vote on funding proposals. Considering the cost of a Noun is consistently above 40 ETH, it would seem like it’s pretty difficult to get your feet under the Nouns’ table. Luckily, however, the NounsDAO proposals are made and discussed on a platform that is open to anyone - Discourse.
Discourse
This is where members of the Nouns diaspora (not just Noun holders), come to propose, discuss and draft grant proposals. Even if you don’t own a Noun, you can encourage a Noun holder to sponsor your proposal, which leads to lots of projects being led by enthusiasts who want to join in the Nounish fun. Fortunately for Nouns holders, the most enthusiastic community members want to run their own projects, the more the word of the Nouns is spread, and the more important and valuable they become.
Nounish?
Nounish is an adjective used to describe things that embody the spirit of Nouns. It’s one of those untranslatable words ; it both refers to the Nouns themselves but also the spirit of the Nouns which is reflected in derivative projects.
Some highlight Nounish initiatives funded by the NounsDAO:
There’s no guarantee that those who receive NounsDAO grants will deliver on their promises, in the words of Vapeape (a nounder) “There is technically nothing stopping them from running off with the eth. However, we expect that people won’t want to burn their reputation and further access to funding from the DAO.”
4. Nouns as culture
In the next few days, the Nouns discord will be closed down. You can hear more about it on this recording of a recent Noun Square Twitter space with 4156.
The TLDR is that the Nounders believe the Discord has been overrun by “unreasonable” individuals who are predominantly interested in Nouns for their value and who are not truly Nounish (i.e. creators, artists, people looking to f*ck about and find out).
In addition to the un-nounish usurpers, having a centralised congregating place doesn’t make sense for a decentralised protocol. And it adds up; Nouns are about culture and the most successful cultures transcend space, place and ownership of assets.
A good way of thinking about this is to take a look at the difference between what it means to have an identity that is reliant on a central institution (e.g. being British) and what it means to be part of a decentralised culture (e.g. rock and roll).
British identity hinges for the most part on Britain, and the institutions that make it - if they all fall apart, many of the assets of British identity cease to be valuable (the pound, the passport, eventually the culture itself). In effect, the value of being British hinges on the decisions made by central institutions.
There’s no single thing that could undermine rock culture (apart from being appropriated by the alt right, perhaps); if the Rock and Roll Hall of Fame burnt down or some rock legend produced a terrible album, the spirit of rock would live on. This is because rock and roll has many derivatives (i.e. subgenres), spin out fashion, language etc, has no barrier to entry and it does not depend on institutions or places. It is a culture; it transcends everything else.
Nounish culture seeks to be more like rock and roll than Britain, and removing the Discord, it further encourages a decentralised, derivative, rhizomatic culture. I’m calling in now, Nouns is a scenius.
Conclusion
The main takeaway: if you seek to build culture in earnest, without considering short-term financial success, your project has a far better chance of prospering in the long-term.
In a world where there is such an emphasis on capturing value, building customer dependency and guarding intellectual property, it seems perverse to give things away for free, push customers away from your platform and encourage others to use your ideas.
Almost everything Nouns has done has been counterintuitive but it has given rise to one of the most thriving, and long-term successful, web3 cultures out there; not just the culture of nounishness, but a deeply thoughtful culture of web3 builders, creators and philosophers. It’s the web3 Enlightenment.
Questions you may have…
How are Nouns trustlessly generated?
Nouns relies on a suite of smart contracts to mint randomly generated artworks and initiate, execute and settle auctions. In addition to this, a smart contract also ensures that every tenth Noun generated is sent to the Nounders DAO. This collection of smart contracts that make Nouns function is known as the Noun protocol.
A smart contract is a programme that runs on the blockchain; they operate according to predetermined code that forms a series of “if/then” functions. Since these programmes are written to the blockchain they gain some powerful capabilities:
- They operate without human input
- They are immutable (i.e. they will never stop functioning)
- They are incorruptible (i.e. they will always operate in the same way)
- The code according to which they operate is publicly viewable
It is for these reasons that DAOs, such as NoundersDAO, use smart contracts to operate their projects and why 4156 was able to state that Nouns will continue to operate in the same way forever.
What’s a DAO?
A DAO is a decentralized autonomous organization (DAO), which has a set of rules and regulations that govern the organization, its members, and its operations.
Usually, DAOs operate around a treasury of assets that are co-owned and governed by the DAO’s members. More often than not, there will be a token associated with the DAO which acts as both an access pass to the community (i.e. you have to hold a certain amount of a token in your wallet to gain access to the DAO’s platform) and a tradable cryptographic asset. Read more about DAOs here.
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