Nouns DAO carried out a so-called fork last month after dissatisfaction with the DAO’s discretionary spending pattern. After a proposal went live that would force Nouns to continue spending his treasury, the DAO split for a second time.
Nouns DAO, which uses one NFT coin every day and the money to advertise the project, instituted forking in May as a form of minority protection. So far, 62 nouns, or about 20% of the Treasury Department’s assets, have joined the split, which will be finalized Wednesday morning. The early outflows totaled 2035.49 ether, worth approximately $3.2 million at the time of writing, and will add to the more than $27 million lost during the initial fork.
The Noun fork mechanism technically allows former holders to use the project’s code for a spinoff project, but participants in September’s fork don’t seem interested in rebranding Nouns. The fork contract shows 224 separate transactions from users claiming their share of ether (ETH), leaving less than 1,000 of the original 16,000 ETH in the fork’s wallet.
At the time, Nouns employees told Blockworks that some of the Nouns holders who left were interested in an arbitrage opportunity where nouns could be purchased for less than their book value, or a pro-rata share of the DAO’s coffers.
After the fork, a Nouns proposal went live that would at certain intervals burn or liquidate a portion of the Nouns treasury if enough ETH was not spent, essentially forcing the DAO to spend its treasury on a regular basis. Part of the rationale for the proposal outlined in a blog post was to eliminate the arbitrage opportunity by spending the treasury of the nouns and thus reducing the book value of each noun.
The proposal led to the second fork of the nouns, which curiously was carried out days before the offending proposal completed its board vote. The proposal currently lacks the votes needed to pass.
The fork allows some holders to profit through arbitrage. The price floor for Nouns has fallen to just 25 ETH in recent weeks, per NFT Price Floor, and Noun’s current book value is around 27 ETH, or about $42,500, according to a Dune dashboard.
But the fork isn’t just arbitrage, with at least one former holder leaving the project entirely. 22 of the 62 nouns joining the fork came from Patricio Worthalter, a long-time noun holder who closed his position completely after claiming 24 nouns worth of state funds at the last fork. One of Worthalter’s soon-to-be forked nouns cost 113.33 ETH to acquire, which was worth approximately $357,000 at the time it was minted.