NounsDAO heading toward treasury split with NFT holders rage quitting

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NounsDAO faces financial challenges as hundreds of NFT holders rally for a refund. With many holders in favor of exiting, a split of NounsDAO’s treasury looms near.

As of late, the digital collectibles space has been shaken up by a critical mass of NFT holders attempting to “rage quit” their project to claim their share of the project’s tokens. Rage quits are becoming increasingly accepted as a way for shareholders to regain their stake in decentralized projects.

Nouns is a generative non-fungible token project on the Ethereum blockchain in the form of 32×32 pixel characters based on people, places and things. With around 362 owners, Nouns is governed by NounsDAO. This decentralized autonomous organization leads the project by voting on proposals funded by the treasury.

At NounsDAO, a rally takes place as NFTs are dealing with a bear market and owners are in search of higher prices for their digital possessions. NFT holders are aiming to procure a superior rate by accessing the project’s ether tokens immediately. Eager traders include notable figures within the NounsDAO, such as user DCFGod, who currently owns 28 Nouns.

NounsDAO’s treasury system

NounsDAO’s treasury, which has funded over 158 projects and proposals, exists for NounsDAO participants to “allocate resources for the long-term growth and prosperity of the Nouns project.” The future of NounsDAO’s upcoming projects remains unclear with the threat of a treasury split.

Last month, NounsDAO chose to regulate rage quits by implementing a new system called v3. This version of regulations permits forking, allowing shareholders to exit the project peacefully.

Forking allows NFT holders to modify the fundamental regulations or protocol. When a fork happens, the chain splits to produce a second blockchain, which shares the history of the original but is headed in a new direction.

NounsDAO argues that the forking mechanism is necessary to guarantee the stability of the community. A DAO contributor, Elad, commented in a recent YouTube video that “Every DAO needs a minority protection mechanism.”

Now that v3 is effective, NounsDAO will be confronted with a fractionalization of its coffers over the course of one week.

According to NounsDAO’s “rage quit” rules, if 20 percent of Nouns NFT holders unite in their demand for this “fork,” they possess the authority to break away from the collective and claim their rightful stake in the project. When the fork concludes, holders will be able to split from the main group and take their share of around 35 ETH.

There are currently 334 Nouns in the fork, which amounts to almost 40 percent of holders wanting to leave the organization. The current fork treasury amassed a total of 7,598 ETH. Since the book worth of ETH is $59,600, the fork treasury is worth approximately $12.4 million.

The crypto community is voicing concerns that if NounsDAO, one of the most successful and well-known DAOs, is facing this challenge, things may not be looking very good for other DAOs.

Some voices, though, are hopeful. Twitter user NiftyNoonNFT found a silver lining in the situation, insinuating that this treasury split helps the NFT market in the short term.

“[NounsDAO] exit may be a small liquidity event that helps the market,” NiftyNoonNFT said. “There will be thousands of ETH returning to the hands of NFT-natives.”