SubDAOs - Lil NounsDAO & Nounlets
The Tally Newsletter, Issue 77
Welcome back for issue 77 of the Tally Newsletter, a publication focused on DeFi and DAO governance. We’ll keep you updated on key proposals, procedural changes, newly launched voting systems, shifting power dynamics, and anything else you need to know to be an informed citizen.
My name is 0xThanos, an NFT native and the newest member of Tally’s newsletter collective. I will provide deeper insights on NFT DAO’s and their takes on governance. As well as any NFT meta conversations that may affect governance.
In today’s issue, we will take a deeper dive into subDAOs, specifically NounsDAO subDAO’s Lil NounsDAO and Nounlets.
Intro
gm anons. Today we will cover more nounish projects and the implications theyhave on DAO governance. It’s time for a deep dive into Nounlets and Lil Nouns. Both projects are subDAOs of NounsDAO, but theyare executed in different fashions.
Crypto as a small ecosystem has dabbled in many governance structures. We first witnessed governance at the L1 layer; Bitcoin's 90% threshold can be thought of as a form of governance. As Etherum began to empower protocols, the protocols themselves created their own governance structures. Governance was really thrust into the limelight when Maker was launched. When Maker’s transitioned to a DAO, other protocols followed suit.
Prior to the NFT boom of '21, DAOs launched with ERC20 governance token. In a DAO governed by an ERC20 token,, buying a tiny percentage of the token supply to be able to vote is easily accessible. In an ERC721 environment where the token can not be split, the barrier to participate (or exit) in DAO governance is much higher. For example, Moonbirds announced their DAO this week; the floor price for Moonbirds is 9.05 ETH. Our beloved Nouns have an average price of 68.4 ETH per Noun (https://pronouns.gg/), effectively pricing out any normie (for better or worse). NFT DAOs that want to expand participation and reach are dabbling with subDAOs. NounsDAO has led the charge, yet again. We’re seeing multiple interesting implementations of expanding governance accessibility via subDAOs. With the arrival of Tessera's Nounlets, I wanted to take a deeper dive into the different subDAO implementations of NounsDAO. First, let’s do a brief overview of NounsDAO governance.
NounsDAO Governance Overview
NounsDAO has a simple yet elegant approach with the core thesis being “1 Noun = 1 Vote”. Everyday exactly 1 Noun is auctioned as a way of raising funds for the NounsDAO treasury. Today the NounsDAO treasury holds 29,116 ETH (~$37.6m). The DAO allows anyone with a Noun to create proposals to the DAO. The DAO then votes on each proposal which has a minimum threshold dependent on how many Nouns are in existence.
The DAO approach is a bottoms up approach of 1 Noun being auctioned every 24 hours. There are currently 474 Nouns in existence. To give you perspective, in order for Nouns to have a supply of 10,000, the standard mint for projects, it will take 27 years. Therefore, finding avenues of controlling governance is appealing.
Current NounsDAO subDAOs
The ability to control governance power in NounsDAO has come in a few flavors. The prominent three being:
Lil Nouns
Tessera's Nounlets
Budlight's Noun (if this really counts)
Lil NounsDAO
Lil Nouns DAO is an interesting experiment of NounsDAO. By decreasing the auction window to 15 minutes, Lil Nouns became a hyper dilutive derivative of NounsDAO. There are two reasons that there has veen significant interest in Lil Nouns: Nounish art exposure and partial voting power in NounsDAO.
The art speaks for itself, these Lil Nouns are so damn cute. Besides the art - every often so often Lil Nouns acquires a Nouns from NounsDAO. The Lil Nouns DAO then votes on the NounsDAO proposals within their DAO to determine which way the Lil Nouns treasury Nouns should vote. Each Lil Noun can thus be thought of as a fraction of a Noun.
Lil Nouns DAO periodically proposes to buy Nouns in their DAO. As you can see with Noun 184, the proposal was made and executed. Although, the purchases of Nouns have been sporadic which is one to the pitfalls of Lil NounsDAO. Due to random acquisitions of Nouns, the % of overall noun votes controlled by a Lil Nouns DAO varies depending on the number of Lil Nouns issued. The consistent moving target can be hard to justify what the book value to NounsDAO treasury is for each Lil Noun. Lil Nouns is currently auctioning off Lil Noun 6434 which controls 8 Nouns, therefore about .0012 Noun equity per Lil Noun. Although the problem with this number is that Lil Nouns DAO implemented a .15 ETH floor per auction, otherwise the Lil Noun is burned. Therefore the Lil Noun serial numbers are not actually indicative of how many Lil Nouns are in existence. Nonetheless, a moving target.
What I do lik about Lil Nouns DAO is they directly vote on each NounsDAO proposal in their DAO. This directs the 8 Nouns votes in that direction. They have a small toggle to go in between DAOs, very cool.
Nounlets
Tessera has been in the business of making all NFT's accessible by allowing NFT holders to create tesseracts (fractions) of their NFT's and sell them to people interested in owning a piece. Nounlets, Tessera's newest project, is a Noun in a vault that is controlled by 100 Nounlets. Each Nounlet is considered to be partial ownership of the vaulted Noun. Nounlets act as their own subDAO to control the one vote of the Noun. The Nounlets appoint a delegate to become a part of the NounsDAO discord, vote in NounsDAO proposals, and put forth proposals.
What makes Nounlets fun is that each Nounlet has the same head as the Noun that the Nounlets are controlling. The other traits (glasses, body, accessory, etc.) all are randomized just as a regular noun is. Nounlets are auctioned off in 4 hour intervals similar NounsDAO and Lil Nouns DAO. Here is vaulted Noun 315:
Here are some of the corresponding Nounlets that have been spawned from the same head:
What differentiates Nounlets from Lil Nouns DAO is there is always the ability for something Tessera calls an "Optimistic buyout". In the event that a buyer thinks that the governance power or Noun is worth more than the going rate of the Nounlets, a Nounlet holder can make a bid to buy the vaulted Noun. In the event an auction is triggered and the Noun is sold, all the Nounlet holders are proportionally distributed the funds.
I think Nounlets is the best implementation in terms of proportional ownership. The unfortunate part is that the delegate (nounlet315.eth) is in control of the vote. I would expect Nounlets of the future to vote based on its own DAO votes.
Bud Light Noun
Bud Light was gifted when NounsDAO executed a proposal for Noun glasses to be included in the Bud Light super bowl commercial. Bud Light then leveraged its Noun as an incentive for people to buy their Bud Light NFT’s. The Bud Light NFT’s artwork is not related to Nouns but still had a gated discord in which each Bud Light NFT holder could vote which way the Bud Light Noun voted.
Bud Light’s Noun is not controlled by on-chain voting or delegation, but by emoji reactions in the discord to each Noun Proposal (not even kidding).
This supposed “subDAO” pretty uninteresting. That being said, it might be an opportunity for cheap governance power for anyone that seeks it. Each Budlight NFT is .01 and could likely control the entire Bud Light Noun vote.
Conclusion
I’m really excited for Nounlets and think they can rise as the superior Nouns subDAO, although there are a few things they could incorporate. For example, having each Nounlet vote directly on NounsDAO proposals instead of leaving it to the delegate to decide. Also, currently, Nounlets is a one-off experiment. I imagine Tessera has plans to bring a similar model to more Noun holders and other projects that seek to launch tesseracts or subDAOs similarly. Nonetheless, the subDAOs have arrived, wake up anon.