NFT marketplace provider @ourZora recently released @nounsbuilder, a tool to easily deploy a Nouns-style DAO of your own in minutes.

The tool enables any user to create and deploy a Nouns-style DAO without any coding knowledge, using a simple interface. But what is Nouns DAO and what makes it special?

The current DAO paradigm

The majority of DAOs today use ERC-20 tokens as the means of governance over the protocol. Many protocols choose to launch their own token after reaching maturity in the market, and perform retroactive airdrops of the tokens to early users of the protocol.

The hope is that a good percentage of users will continue to hold their tokens, stay as active members of the community and participate in governance. But how well does this work in practice?

In reality this has led to a bystander-effect of low participation amongst holders. In addition, the method has led to rampant sybil attacks, airdrop farming and overall volatility of prices. Many ERC20 tokens also have complicated (and at times controversial) distribution models that leave much to be desired.

Could there be a better solution for governance out there?

How is Nouns DAO different?

With the Nouns model the community is grown at a set and steady pace over time by distributing ERC-721 NFT tokens in the form of an auction. Any user that is interested and committed to joining the DAO can bid. Funds raised from the auction are added to the treasury controlled directly by the holders.

The DAO itself can be viewed here. The model has been wildly successful so far, with over 550 Nouns minted and almost 29k Ether (~$34,000,000) in the treasury currently.

One NFT is minted per day. Every day. Forever. A stark contrast to traditional DAO formation.

How does Nouns Builder work?

Users interact with a factory contract that deploys all the necessary contracts for the formation of their DAO including the art (stored on chain), auction parameters, founders details and allocations etc. View the Docs here for more information.

Perpetual Funding and Dilution

Funds are raised and added to the treasury at a steady pace set by the founders of the DAO. One major dilemma that web3 projects face is funding after the initial supply. One option is releasing more NFTs, where the creators affectively “dilute” the supply and potentially reduce the value of existing NFTs. This injures current holders of the project.

Dilution is not a risk with the Nouns model. The slow distribution model attracts only serious and committed individuals. There is less parasitic activity that would lead to excessive price speculation.

Moving Forward

Will the Nouns model become the future model of the Web3 landscape?

With this tool, users (without any coding knowledge) can bootstrap a DAO with only social influence - the opposite of the current paradigm

Additionally, current struggling DAOs could adopt the Nouns model with this simple tool and move away from existing governance models that fall short.

Will your community try the Nouns model?