Nouns DAO Faces Fork as Investors Utilize New Mechanism to Redistribute Wealth

In the ever-evolving landscape of blockchain and decentralized autonomous organizations (DAOs), a groundbreaking development is unfolding as approximately 25% of NFT owners have utilized a novel mechanism to vote on the fork of Nouns DAO and the redistribution of its treasury. The NFT project is standing at the precipice of a “splitting into two” scenario. After several dramatic episodes in the world of DAOs, some have now adopted new mechanisms aimed at protecting minority investors.

In simple terms, DAOs typically vote based on token holdings, where those with larger assets wield greater influence, resulting in decision-making power concentrated in the hands of major organizations and whales rather than individual small-scale investors.

To address this issue, some DAOs have recently introduced mechanisms that allow for a fork of the treasury if 20% of token holders wish to “part ways.” A notable case study of this approach is the recent story surrounding Nouns DAO.

Nouns is one of the popular and high-value NFT collections in the digital art space. However, the project has not been immune to the broader downward trend in the NFT market this year, with blue-chip collections experiencing an 83% decrease in value.

A drop in prices has inevitably led to the phenomenon of “bagholders,” where many investors reluctantly consider cutting their losses, such as those who “sold at a loss” of 624 ETH after holding Bored Ape Yacht Club (BAYC) NFTs for nearly a year.

Similarly, some Nouns investors who joined the hype have grown less enthusiastic about the project and want to “cut their losses.” However, selling at current market prices would result in significant losses. Therefore, some are leveraging Nouns DAO’s fork mechanism, as mentioned earlier, to claim a share of the assets. Currently, Nouns DAO holds 30,620 ETH, equivalent to $50 million USD. If this fork proposal is approved, departing investors will receive a portion of the total assets, specifically 7,669 ETH, equivalent to $12.4 million USD.

The voting process for the fork will last for 7 days, and at present, 216 Nouns token holders have participated, accounting for over 25% of the total supply. Consequently, the likelihood of this fork being approved is high.

Not only are Nouns holders divided over this split, but the broader crypto community is also embroiled in debates surrounding this issue. Some support the mechanism aimed at safeguarding minority investors, believing it could open new avenues for DAOs. In contrast, others are less optimistic, fearing that well-funded malicious actors could exploit the new mechanism’s vulnerabilities for their gain.

The community has observed that several wallet addresses have been accumulating Nouns NFTs in recent days, raising suspicions that a group might be attempting to fork Nouns DAO into a new entity to serve different purposes, rather than solely representing the interests of small-scale investors looking to “part ways” with the project.

As the voting period unfolds, the outcome will determine whether Nouns DAO becomes a precedent-setting case in the world of DAO governance or a cautionary tale of potential exploitation in the decentralized realm. The crypto community will closely watch this development, as it holds the potential to reshape the dynamics of DAOs and their investor protection mechanisms.

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