ProposalsProposal 394

🔥 The Burn: audit funding

Executed

For

Against

Abstain

Quorum: 59

Proposed by

0xffAF...8d99

, sponsored by

0x13eE...DA33

🔥 The Burn: audit funding

We are planning to propose an upgrade that implements The Burn. The goals for the burn are described in the blog post above by wilson.

What's in this proposal text?

High level design details
Audit plan and budget request ($36K)

The burn code is in an advanced state, and if this proposal succeeds we hope to start the audit soon after.

Technical spec

We plan to deploy a new contract, with a single function that lets burn excess ETH from the timelock.

How much will be burned?

Excess ETH is defined as the difference between the treasury value denominated in ETH, and: adjusted_total_supply * trailing_N_day_mean_auction_price.

adjusted_total_supply is the number of minted nouns, excluding nouns held by the treasury or in the escrow contract.

In order to calculate the treasury value in ETH, the contract will consider only ETH, stETH, rETH & WETH. All other assets are ignored.

The number of auctions looked at when calculating the mean price is a configurable parameter; we suggest starting with 90.

Example based on numbers close to actuals:

Treasury has 2857 ETH, 10830 stETH, 228 rETH. Adjusted total supply: 394. Mean price of last 90 auctions: 30 ETH. Treasury value in ETH: 2857 + 10830 + 247 (228 worth of rETH) = 13,934 ETH. Excess ETH: 13,934 - 30 * 394 = 2114 ETH.

What is burned?

Only ETH is burned. If the Nouns runs out of ETH, it will need to swap other assets (e.g. stETH) into ETH to allow for more burn.

When can it be called?

The goal is for the burn to happen at predictable times. One parameter will define what will be the first noun id at which the first burn can happen. Another parameter will define how many noun ids need to be minted before the next burn can happen.

Example:

Suppose the first noun id is set to 1000, and the number of nouns between burns is set to 100. The first burn will be possible once a noun with id 1000 is minted. The next burn would be possible once a noun with id 1100 is minted.

Even if the first burn actually occurs when noun 1002 is auctioned, the next burn will still be possible starting id 1100.

Timelock upgrade

The timelock will be upgraded to a new version which will allow the burner contract to call it an burn ETH.

The timelock will only allow the burner contract to call it.

The address of the burner contract is a configurable param. Setting it to the zero address is effectively turning off the burn mechanism.

Audit costs

Our plan is to undergo a deep code review with solimander, and an audit with Sherlock. In a bit more detail:

Soli review (+ verbs fix things)
Sherlock audit
Verbs fix things + soli reviews fixes
Sherlock mitigation review

We are asking for 36K USDC to be sent to the Tech Grants Pod multisig to pay for the audit. 30K USDC will go to auditors and 6K USDC will go to Sherlock.

Next steps

Funding the audit will let us know the DAO wants the burn to be deployed. Once funded we will finalize the code, undergo the audit, and follow up with a proposal to upgrade the auction house contract and the treasury contract.

The upgrade will leave the burn disabled, since it seems best to separate the deployment of the mechanism from reaching consensus on its parameters. We will of course support any voters who will want to follow up with a proposal to set the burn parameters.

It's also worthwhile for voters to consider converting stETH into ETH ahead of the burn, since as mentioned above this simple design only burns native ETH.

Appendix: pseudocode

ExcessETHBurner:


// configurable params:

uint numPastAuctions;

uint nextBurnNounId;

uint mintsBetweenBurns;

function burnExcessETH() {

    if (auction().nounId &lt; nextBurnNounId) revert('Not yet');

    

    allowedTreasuryInETH = adjustTotalSupply() * meanAuctionPrice();

    excessETH = treasuryValueInETH() - allowedTreasuryInETH;

    amountToBurn = min(excessETH, timelock.balance);

    

    nextBurnNounId += mintsBetweenBurns;

    

    timelock.burnETH(amountToBurn);

}

function treasuryValueInETH() {

    return timelock.balance + stETH.balanceOf(timelock) + 

        wETH.balanceOf(timelock) + rETH.getEthValue(rETH.balanceOf(timelock));

}

function meanAuctionPrice() {

    return mean(auctionHouse.prices(numPastAuctions));

}

Appendix: current asset breakdown

At the time of writing this text, according to Etherscan:

Total treasury value is roughly $23.15M.
Its two main assets are:
- ETH at $4.391M (2631.493 ETH).
- stETH at $18.061M (10830.768 stETH).
These two assets alone make up over 96.7% of the total treasury value.
USDC is roughly 1.1% of the treasury, and we’re comfortable ignoring it for the sake of code simplicity.
wstETH is roughly 0.11% and is ignored as well.

Proposal votes

For

Against

Abstain

Quorum: 59

Activity

0xd4ef...7CdD

voted for (3)

I'm not sure about the specifics/parameters but am interested in getting a version audited.

482d

0xcC26...6Ed5

voted against (4)

FOR - 7 VOTES

robotfishgirl | "at minimum interested in the audit. Still on the fence wrt implementation, currently slightly leaning no despite agreeing with most of the arguments- but I'd prefer exploring the possibility of the burn fully to just dismissing it out of hand."

AGAINST - 33 VOTES

akva556 | "We should not audit this, because it should not be implemented. Doubling down on madness won't work. Didn't work before, won't work now."

brettdrawsstuff | "⌐◨-◨"

peterpandam | "give to builders instead"

adrianmcli | "The biggest issue I see with this is that this does NOTHING to address the need for higher quality proposals. In fact, it only incentives people to submit a high volume of low quality proposals because people know that we NEED to give the money out."

profwerder | "I'm not in favor of the burn so will be voting against any related props."

ABSTAINS - 5 VOTES

482d

0x5D80...1F16

voted for (1)

I appreciate Wilson, 40, Elad/David and others for thinking about this problem deeply, and coming up with a suggested solution to the problem of the arb and all the precious energy it sucks out of our community (notice I said energy, not ETH.) I don't know for sure if this will work, as there are many variables and many moving parts. But I do think that The Burn is an incredible meme, and it will potentially be a powerful forcing function to pressure us into cooperating to find and fund good projects and builders. I also trust the post-fork DAO to work together and ensure that we find big bets to take, strong teams to fund, and that we never let a single GWEI fall to the flames. This is all a great experiment after all, and to me the point of the treasury was always to spend it together, so let's encode it in the protocol and see what happens.

482d

0x6b26...c2B1

voted for (3)

Sent from https://goops.com Nouns Governance Pool

482d

0x10de...74cc

voted for (1)

I'll be here ready to execute the burn if the time comes.

482d

0x91dC...2937

voted against (1)

not convinced this is the right time to pursue something like this, agree with other against votes like yitong/12

482d

0x1db1...Bda0

voted for (1)

482d

0x13eE...DA33

voted for (1)

we either succumb to never ending forks or bake an alignment mechanism into the protocol. thanks to all involved

482d

0x8d2B...b275

voted for (2)

482d

0xEa9f...4E9c

voted for (1)

482d

0x4977...E333

voted for (1)

483d

0x7c12...7B2d

voted for (4)

I support allocating funds for an audit for The Burn mechanism to ensure its readiness if ever there is a need to for deployment. Having the code audited is an essential step in promoting further discussion, and the associated costs are negligible when compared to the significance of the issue at hand.

483d

0x5372...d00c

voted against (1)

I get the intention behind the burn, despite it being a clever and elegant solution to force us to deploy the treasury, I can't get behind burning eth even if in practice the burn is never triggered.

I much rather see a mechanism to automatically distribute excess funds to public goods being implemented and audited than a mechanism to burn the funds.

483d

0x7c62...d644

voted for (1)

it spends the eth on public goods, or else it gets the burn again.

483d

0x00cD...8772

voted for (1)

Given my current understanding and attitude, I am opposed to the burn. But funding novel and interesting public goods is peak Nounish and normalizing running audited code is healthy for the space. Getting this code audited is part of good faith discourse and the cost is insignificant compared with the importance of the matter at stake.

483d

0xDf6e...0019

voted for (2)

If I had to pick one word to describe NounsDAO, it'd be "forever." It's amazing to design a protocol that can stand the test of time. In my view, the 'fork' and 'burn' are essential features towards building a perfect DAO that can be played for many years by different generations of nouners without the need for supervision.

I believe the problem isn't a lack of leadership or a shortage of "hell yes" projects. After all, Nouns is a decentralized autonomous organization. IMO if people hadn't tried to control and inflate auction prices, no one would have financially overextended themselves, and everyone could have enjoyed the version 1 game.

Now, the DAO is in a situation where it must choose whether to spend a big portion of its treasury or continue losing money to arbitrage. Also I believe it is inevitable that the treasury will dip below 1000 ETH someday, and auction prices will fall below 10 ETH. However, in the grand picture of things, neither auction prices nor treasury size should be important if nouners use treasury to sponsor projects close to their hearts or build their own nounish projects. The burn mechanism makes it clear that nouners should use the treasury. I wish more nouners did build something nounish in the last two years. For example, projects such as "Free Glasses for Children," "PropHouse," "Nouns Esports," "Nouns Running Club," "Skate Parks," "Global Pizza Party," and others underscore the power of collective effort, something that might be financially and practically daunting for a single person.

The real essence of nouns isn't about flipping NFTs. It's about being a part of the community as a "nouner" and having access to the treasury. If you have an idea and join Nouns, you can tap into a pool of talented nouners. You won't need to find the first user for your project; you already have fans all around the world. There are many other benefits and perks in Nouns.

sent from voter.wtf

483d

0x44b1...11DE

voted for (0)

Agree with Will's sentiments. I haven't thought deeply enough about the burn yet but I do believe we should at least audit the code.

sent from voter.wtf

483d

0x3Cbd...8637

voted for (1)

I am in support of funding an audit for The Burn, so that the protocol is ready if the code is desired. My "For" vote is for funding the audit (which is what this proposal is actually for), and should not be taken as a "For" vote for the Burn.

I take issue with the way the proposal stated that "Funding the audit will let us know the DAO wants the burn to be deployed." The Burn, like The Fork, should be the subject of more extensive discussion given how consequential it is. By funding the audit, and learning more about the audit's findings, we can continue that discussion. But I don't want a future discussion to become "Oh, we funded the audit, so we've already decided on The Burn." Let's take it one step at a time.

sent from voter.wtf

483d

0x00D7...FB0a

voted for (1)

Continued iteration of the core protocol and mechanism is important for the success of Nouns.

483d

0xE26D...260F

voted for (1)

483d

0xB8a5...6776

voted against (0)

It is a testament to just how wrong things have gone with the DAO (how ineffective spend has been so far and how poor the prospects are for future spend) that it is now seriously considering burning millions of dollars.

Threatening to burn millions of dollars in the hope it will lead to better proposals is like a bank robber putting a gun to his own head and demanding the employees open the safe. There is no chance of achieving the intended outcome and if the DAO/robber follows through on the threat, it’s suicide.

The burn not a novel new experiment in governance, capital allocation, or software development. Wasting money and eliminating optionality by becoming a forced spender (when there is nothing attractive to spend the money on) is a self-evidently bad idea.

If things are truly this dire, then at this point a better alternative would be to force-ragequit the entire DAO and start over from scratch.

483d

0x75Ee...ca6E

voted against (6)

If things are truly this dire, then at this point a better alternative would be to force-ragequit the entire DAO and start over from scratch.

483d

0xDDF5...eaF3

voted against (1)

I respectfully vote AGAINST this proposal as a strong believer in the meme value of Nouns.

The Burn is a dangerous mechanism that could be existential for our DAO:

We will spend on low-quality proposals because we will have a mandate to burn ETH, otherwise we will have time pressure to spend even on proposals that could be better with another iteration.

We give ourselves fewer options, less time to adjust, and less influence in the ecosystem with a treasury that is forced to reduce on a timeline.

We force increased disbursement during times of speculative ebullience, but then self-inflict austerity in down markets.

We should have thoughtful, long-term solutions for attracting quality proposers. The Burn is a imprecise solution for a real problem. Yitong had many good suggestions in his vote with reason for how we could attract better proposers long term.

I hope to be in this DAO, making decisions with all of you, for decades to come and voting AGAINST this proposal makes it more likely that our community is here in the long term.

Charging up until the next proposal… Voltalik

483d

0x3B60...a43F

voted for (1)

It can be difficult to think like a Protocol and not an NGO. Nouns greatest gift to the world is the Protocol used to support CC0 and Public Goods. Voting Yes, to solve the alignment issue at the Protocol level.

483d

0xd3dB...dA5E

voted against (1)

483d

0x9c74...e623

voted for (1)

Keen to -carefully- move forward with this idea, shifting nouns away from a passive income scheme and realigning everyone with the world-building game that we started with.

Not worried about the lack of interesting props. Imo this will draw in daring proposals, healthy competition, attract new builders and create interesting PR!

Agree with 9999 that we should allocate funding for a crypto-economic review and modeling.

483d

0xDCb4...5E5e

voted against (16)

https://www.lilnouns.wtf/vote/nounsdao/394/votes

FOR - 741 VOTES

sqx10.eth | "Might as well get the audit! cost negligible in the scheme."

AGAINST - 53 VOTES

eusoujp.eth | "Burning ETH doesn't make sense to me, neither does the threat of doing it."

thenounishprof.eth | "I'm against the burn mechanic so will be voting no on related props."

ABSTAINS - 10 VOTES

484d

0xa903...a44C

voted for (0)

While this seems crazy from the outside, I think it's a valid solution that needs to be explored. We implemented the fork ability, so why not this? I think it may have a positive effect.

484d

0xCEEd...D915

voted against (1)

Although I understand this is merely for the audit, I disagree with the burn from a philosophical perspective for many reasons, mostly because it will not magically make better props appear. It's also a bad look to builders who see a "defeated" badge and get the message that we would rather burn eth than fund them.

I would rather a more comprehensive discussion and strategy on this before jumping into this extreme choice.

484d

0xc2d4...e413

voted for (1)

FOR getting code audits, but I think that's only half the work that's needed to make sure The Burn (or any other) protocol change works as intended. We should also be funding either a cryptoeconomic review or at the very least simple modelling of the new dynamics.

sent from voter.wtf

484d

0x83fC...45B9

voted for (19)

saving up the treasury in excess of the nft market cap leads to people bidding on the treasury instead of aligned membership. aligned membership is our most important resource because it is the primary driver of dao security, dao attention, and moving the project forward. given that aligned membership is currently blocked by the treasury (with no natural resolution in sight), i support upgrading the protocol to address the problem. thank you to wilson and verbs for the elegant solution

484d

0x32d1...d4f5

voted abstain (2)

HOW TO BURN // this Vw/R is focused on addressing the perpetual pressure of treasury drain via fork under v3 without altering the exit economics, diluting via Nouns redistribution or siloing funds. The simplest tool that remains is burn. The conclusion is that the spec does not adequately discourage toxic buying interest and mitigate long-term financially-motivated forking pressure.

To address, burn must continue, every day, proportional to the real volatility of the Nouns meme and the degree of 'moneyness' of the exit price. //

The reason v3 creates endless downward pressure on the treasury is because it issues a perpetual put option to a holder (or coordinated holders) with access to a % of Nouns >= the forking threshold struck at book value.

A put option is simply the right to sell an asset at a pre-arranged price (the 'strike' price, in this case, current pro-rata bv), and are widely used by hedgers as insurance on asset value loss. Nouns is first to market with meme insurance! I will use the option language going forward since I think it provides the greatest clarity, and will leave pricing math/models out (provide in other forums if of interest).

To the best of my knowledge there is no way to expressly eliminate this option as an asset bundled to a Noun without further constraining the fork mechanic. So, this means the problem to solve is how to properly price the put option so that the dao is compensated for assuming leveraged downside risk, or, at the very least, so that the token buyer is levied an appropriate fee to disincentivize free riders/option-value investors.

Options carry asymmetric upside (call options have unlimited return potential, and puts have potential to yield 100% of the strike price). In exchange for this upside, the option buyer must pay something to the seller. The seller, in this case, is Nouns DAO. What is an everlasting put option on Nouns worth? How much are we charging?

Positive value of the put consists of 2 primary components:

Intrinsic value- This refers to the value the option has if 'exercised' immediately. If the value of a Noun at auction/secondary is 20 and the exit value is 30, the intrinsic value is 10. Paying anything less than 10 for the option gives you, more or less, the infamous 'rfv.' The burn is solely focused on trying to reduce, or, in the minds of some advocates, eliminate this piece completely from new auction buying interest by driving the exit price at or below the sale price.
Extrinsic value- This refers to the insurance value the option has even if it is not 'in-the-money.' Having the perpetual right to sell a Noun at 30 has value, even if the auction price is 35, 50, 100, etc. Naturally, that value is reduced the higher the current market premium to the exit price becomes. The spec'd burn does not systemically address this value. However, as the % of the value of a Noun it is generally the more significant term, particularly when exit value is near parity with (or even resolutely below) auction prices. One of the main reasons for this is that the options term is perpetual.

Pricing perpetual options:

Vanilla options expire, which means the cost is proportional to the risk term. If you buy a put, or insurance (generally), it is not good forever. You pay a cost for a certain period of coverage. V3 insurance is different. We can't assign a fixed cost since the option is always good. The way this sort of asset is ordinarily priced is via a funding rate debiting at regular intervals until the option 'buyer' is out of capital to maintain the position. Its a subscription plan.

Nouns is, again, different. The tool to tax the option owner is not directly with new fees, but by progressively reducing the value of the option via burn. This assesses a fee to all option holders by intervallically reducing exit price. A burn can make the cost-of-carry of Noun ownership much more predictable and closely matched with its inherent value. The further the premium of market value to bv becomes, less burn is required.

Extrinsic value is figured according to the 'implied volatility' of the underlying asset. Volatility measures how much an asset changes in value over a period of time (independent of direction), and you can arrive at a statistically 'fair' value for an option if you have a good estimate of the underlying asset's volatility. At time of writing, for a year of $28k price insurance for BTC, for example, you must pay 20% of the current value (around $5.6k). Note the intrinsic value of this option is (at time of writing) $0. Also note crypto is in the midst of a historically low-volatility regime. In more active markets the amount could be 40% or even higher. These values correspond to a (current) low of 52% up to 100% implied annualized volatility.

In Nouns, a reasonable estimated range for the annual real value of an 'at-the-money' put (ie when exit value = auction value) would generally be worth between 35-95% of the market value of the asset. This uses a range of 100-250% implied volatility, & annualized burn rate would need to be in the range of 35-95% as long as auction price is near bv.

The values mentioned above frame the issue conservatively. Notice that implied volatility (extrinsic value) can not be well modeled using historical auction prices as long as there is intrinsic value arbitrage; meme value volatility is locally swallowed by the 1st order rfv. Instead, we can use pre-v3 auction prices (which, too are imperfect, due to the presence of bv-minded investors from the beginning), or the volatility of correlated assets (pfps, etc). As is hopefully intuitive to most, the volatility of memes is...not low.

If we want to charge less, or nothing, we can, but it opens the dao to severe stochastic arbitrage, and we likely invite in a voter base comprised primarily of volatility scalpers, the treasury operating as a bi-directional slush fund for the trade.

As drop in bv outpaces drop in 'meme value' (here generally meant as the fungible value of a Noun independent of exit value), the burn may slow, but never fully stop, since a perpetual 'out of the money' put holds nontrivial value. For example, an exit value at 15 with current meme value at 30, using an implied volatility of 150%, implies an annualized burn of 20%.

Burn must continue, every day, proportional to the real volatility of the Nouns meme and the degree of 'moneyness' of the exit price. Thus, the treasury tends logarithmically towards 0, and the value of the put becomes progressively more marginal (though never 0). In this way, exit ultimately is self-invalidating under v3. More aligned buyers will trickle in, with exit & the treasury correspondingly neutered.

Nouns = (almost) pure meme.

Problem (almost) solved.

Still, the fat-tail utility of the exit remains as long as there is eth in the treasury, and as meme value contracts, the puts become relevant selling pressure once again, forcing the dao to accelerate spending to adjust for its increased exposure. As long as the treasury has non-zero value, the puts stay on the book.

It may seem like a subtle point & one nobody is likely to stress much about. Sort of agree. What it means, though, is that forking pressure still lies in wait during market capitulation, adding addtl downside leverage to the meme itself (if forks are progressively delegitimizing, as i believe they are).

A separate conversation, but there is a case to be made that we would want to set ourselves up to be strong when the market is not, not thrown again into chaos with centralizing reversion as our only remedy.

Under v3, the treasury is a liability. burn it all

484d

0xC3Fd...36Bb

voted against (0)

I appreciate the hard work from Verbs and Wilson on the Burn, and recognize that many in the DAO already excited about this version of the future. With respect, I disagree with this approach. I don't think that as it stands today, our community is ready for this level of forced acceleration in spending, and don't think in general that it is wise to be forced to spend.

As someone who firmly believes in the meme value of Nouns, and is willing to invest heavily into it, I see this proposal as strictly increasing the overall risk of the project. If we think we are currently on track to spend the excess value by the burn date, then why have this mechanism at all?

If we want Nouns to last years to come, there will inevitably be dry spells, and we don't want to be forced into allocating into things that we wouldn't otherwise have just to avoid burning. If we're dissatisfied with the progress of some of our biggest spends, we want to be able to credibly say "hey, you need to change this or we might not be excited to fund you again". The burn removes that ability.

While it's true that more positive spend generates more attention from voters and proposers, I don't think it's the "healthy" way to do that. If we want to attract quality artists and builders, then we need to do the hard work of making Nouns more attractive to proposers by solving the friction points they experience today.

If attracting proposers is the goal, I'd rather see us invest in things like: extending candidate functionality, function tipping for clients, streaming payments tied to propdates, nouns retro-rewards, droposals, creating an incentive for proposal sponsors, etc.

As a builder, I should be excited about the burn because technically the DAO is now "forced" to spend more, but I'm not, because it doesn't solve any of the underlying mechanical issues that make contributing to Nouns DAO difficult. Throwing more money at the problem will make it seem like things are better, when in fact might actually make it harder to figure out where the builder pain points are.

Although the Burn might be exciting in the short term (and to be honest, I personally can't help but be excited to see how the experiment plays out), I worry that it unnecessarily jeopardizes the long term survivability of Nouns. Yes, we can technically "unship" it, but the reality is that once in, it'll be very hard to gather the social consensus to take it out, just like the fork. Even if we discover that the cons outweighs the pros, I expect that we'll have to live with it and try to fix it forward.

I want to be working on Nouns with everyone here for 10 years to come, and view the Burn as introducing more risk than benefit on that time horizon.

484d

0x008c...A7e4

voted against (9)

I would not go down this path.

In investing and in all things really, you create value by having more options rather than less. More choices, more time, etc many dimensions. The burn reduces the DAO's options timewise and reduces the treasury both. It's not innovation, it isn't reinventing investing or resource allocation or corporate governance, it's not even a good experiment, it's an ex ante mistake, a self-inflicted wound.

484d

0x2666...4607

voted for (3)

Expanding our tool kit to be able to do this is worth it, even if we never turn it on.

484d

0xbc3e...72C4

voted for (1)

Appreciate the thoughtful discussion here so far and look forward to more in the coming weeks.

One way or another, the DAO is currently setup to "burn" money. Currently this burn is to arbitragers. I'm not sure if anyone has run the total on what was arbed out in the last for but I'd guess > $2M.

Something has to change.

There are several proposals. The alternatives I am aware of--things like capped exit, timelocking funds--have significant downsides.

Timelocking hurts honest actors: imagine honest forkers trying to leave have their funds cut by a DAO voting to lock the funds away.

Capped exit arbitrarily disadvantages certain nouners owners solely based on the price their noun was sold for at auction. It would warp the secondary market: nouns bought at a higher auction price are worth more. And why? Why does a secondary buyer of a Noun auctioned for a high price deserve more in a fork? Why is an honest actor who bought at a low price and wants to fork capped in how much they can take away?

Moreover the energy of these proposals is hyper focused on eliminating the arbitrage, which I fund uncharismatic. No one want to join a DAO that is primarily focused on not getting arbed.

With the burn, I think we have a chance to fix the arb, while actually being primarily focused on more exciting things. I would support the burn even if the arb was not an issue. Already I see the burn forcing healthy conversation on things that were already issues, like, "What if it just amounts to a new round of funding to past proposers?" If the DAO is captured by past proposers, I'd like to know sooner than later! And the burn is creating efforts to break out to new proposer audiences.

The assumption of the opposition is that having more time leads to better outcomes. Sometimes! Generally not in young organizations. Things tend to happen quickly or not at all. Slow often = dead. Nouns is not a hedge fund with a salaried staff. There is more at play. We need attention from the voters to do well. We need attention from proposers. Slow often means less attention. People stop caring. "Nothing is happening over there."

What's the downside of the burn? It's pretty capped in my opinion. The DAO can vote to remove it. The DAO can mitigate via rapidly distributing the treasury Nouns. There are lots of options.

But I think in the best case we get to test a theory: that Nouns spending more aggressively will lead to better outcomes. And not just trying haphazardly to spend more aggressively, but doing so in a legible context: voters and proposers alike know the DAO is highly incentivized to spend X by a certain date. This is super helpful for organizing in a decentralized context.

That's my thinking, eager to hear yours. Let's find the best path, together 🫡

sent from voter.wtf

484d

0xba2b...F09F

voted for (1)

484d

0x8e71...71BC

voted for (2)

484d

0xE730...2911

voted against (2)

I respectfully disagree with Noun40.

The majority of creations touted as having significant "meme value" largely resonate only within our existing Nouns community. Rather than proliferating the Nouns meme to a broader audience they often preach to the choir.

A forced spend is a dangerous gamble that will only AMPLIFY this inward focus and drive DOWN the quality of proposals. It will encourage a surge of low-quality pitches, knowing there's an impetus to disburse funds.

We're playing with fire here, we risk sacrificing quality for quantity (spend volume). We ought to aim for impactful, external-facing initiatives rather than merely echoing our own voices.

485d

0xA868...9E63

voted for (1)

485d

0xe3D7...A436

voted for (2)

Voting for, largely based on the DAO-wide discussions and calls we had. Initially, I was against the idea of introducing a new mechanic at the protocol level (burn or otherwise), since I strongly believe the more simple and un-opinionated the protocol the better. The more mechanics we enshrine, the more unforeseeable the secondary and tertiary consequences.

In this case, however, I was swayed by the idea of experimenting with a burn mechanic to see how that adjusts DAO/proposer behavior. I am in favor of trying out a burn (even gamifying like the Mr Beast example) and assessing if it ended up being a meaningful driver to our overall goals.

sent from voter.wtf

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voted for (0)

I flip-flopped on this a bit, but took the time to understand what this means, thought through spending scenarios, and reframed this in my mind as 'forced spend.' I don't think ETH will be burned or wasted— it's time to accelerate the project and proliferate the meme!

Sadly, this is causing some serious issues in Lil Nouns and across the ecosystem. I think the framing/optics behind this have been pretty bad for those looking from the outside in.

sent from voter.wtf

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voted abstain (1)

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voted for (1)

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voted for (2)

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voted for (20)

(noun40 voting via agora)

the concerns around not having good props to spend on ahead of the burn are likely a bit over blown imo. we already have a stoopid buddy (nouns stories) prop asking for $1.8M. maybe that doesn't pass. but the rise of blus atrium movie could easily ask for another $1M? nounish is likely going to come for an 6 mo extension with a $0.5-1M prop too? esports will also likely come back for 2024 funding with a ~$1M prop? these are just our existing best executing teams that could easily ask for $2-3M. that's already more than the 2114 ETH excess eth burn amount calculated here. of course true market price of nouns might be 20 ETH instead of 30 when we have real price discovery. but then also we're experiencing fork #1 which will reduce the treasury size further. I just think "we won't have things to spend on!" and thus imagining some terrible forced spend is likely not to be true.

also the example given here as the first burn happening on noun id 1000 means the first burn would be around feb 1, 2024. that's around 5 months from now (ofc we could choose an earlier or later date when we are at the stage of deciding parameters but the point is that voting in the burn mechanism doesn't mean the first burn will occur immediately at that point).

so if normal spending already has a good chance of being enough spend for bv price to drop close to auction price in a 5 month timeframe then what is the whole point of adding this mechanism? it's the effect the existence of the mechanism will have for the long term in settling a long standing debate we've been having within nouns.

in the history of nouns governance there's been two fundamentally different views on how nouns nfts should attempt to be more valuable. the bv camp believes that that is done by growing bv (treasury size should grow FASTER than the nouns supply so that the pro rata share of treasury per noun goes up). a big part of this viewpoint has an underlying assumption that meme value (intangible value) accrual is likely not going to be a thing so the tangible thing (bv) should be the thing we focus on and grow. the other camp (let's say meme value camp) wants to really run the meme value growing experiment by actually spending and not being overly concerned about preserving bv in the short term. the endless debate about this fundamentally different viewpoint has resulted in nouns not being able to really commit to a given direction and so much brain cycles spent in the repetition of the same fundamental governance disagreements. the burn mechanism encodes that this dao is about running the meme value accrual experiment. my view is that we should make this encoding while we actually have the alignment on this topic. being able to resolve a long standing governance disagreement in an elegant way like this is a gift.

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voted against (2)

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voted against (22)

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ProposalsProposal 394

🔥 The Burn: audit funding

Executed

For

Against

Abstain

Quorum: 59

Proposed by

0xffAF...8d99

, sponsored by

0x13eE...DA33

🔥 The Burn: audit funding

We are planning to propose an upgrade that implements The Burn. The goals for the burn are described in the blog post above by wilson.

What's in this proposal text?

High level design details
Audit plan and budget request ($36K)

The burn code is in an advanced state, and if this proposal succeeds we hope to start the audit soon after.

Technical spec

We plan to deploy a new contract, with a single function that lets burn excess ETH from the timelock.

How much will be burned?

Excess ETH is defined as the difference between the treasury value denominated in ETH, and: adjusted_total_supply * trailing_N_day_mean_auction_price.

adjusted_total_supply is the number of minted nouns, excluding nouns held by the treasury or in the escrow contract.

In order to calculate the treasury value in ETH, the contract will consider only ETH, stETH, rETH & WETH. All other assets are ignored.

The number of auctions looked at when calculating the mean price is a configurable parameter; we suggest starting with 90.

Example based on numbers close to actuals:

What is burned?

Only ETH is burned. If the Nouns runs out of ETH, it will need to swap other assets (e.g. stETH) into ETH to allow for more burn.

When can it be called?

Example:

Even if the first burn actually occurs when noun 1002 is auctioned, the next burn will still be possible starting id 1100.

Timelock upgrade

The timelock will be upgraded to a new version which will allow the burner contract to call it an burn ETH.

The timelock will only allow the burner contract to call it.

The address of the burner contract is a configurable param. Setting it to the zero address is effectively turning off the burn mechanism.

Audit costs

Our plan is to undergo a deep code review with solimander, and an audit with Sherlock. In a bit more detail:

Soli review (+ verbs fix things)
Sherlock audit
Verbs fix things + soli reviews fixes
Sherlock mitigation review

We are asking for 36K USDC to be sent to the Tech Grants Pod multisig to pay for the audit. 30K USDC will go to auditors and 6K USDC will go to Sherlock.

Next steps

It's also worthwhile for voters to consider converting stETH into ETH ahead of the burn, since as mentioned above this simple design only burns native ETH.

Appendix: pseudocode

ExcessETHBurner:


// configurable params:

uint numPastAuctions;

uint nextBurnNounId;

uint mintsBetweenBurns;

function burnExcessETH() {

    if (auction().nounId &lt; nextBurnNounId) revert('Not yet');

    

    allowedTreasuryInETH = adjustTotalSupply() * meanAuctionPrice();

    excessETH = treasuryValueInETH() - allowedTreasuryInETH;

    amountToBurn = min(excessETH, timelock.balance);

    

    nextBurnNounId += mintsBetweenBurns;

    

    timelock.burnETH(amountToBurn);

}

function treasuryValueInETH() {

    return timelock.balance + stETH.balanceOf(timelock) + 

        wETH.balanceOf(timelock) + rETH.getEthValue(rETH.balanceOf(timelock));

}

function meanAuctionPrice() {

    return mean(auctionHouse.prices(numPastAuctions));

}

Appendix: current asset breakdown

At the time of writing this text, according to Etherscan:

Total treasury value is roughly $23.15M.
Its two main assets are:
- ETH at $4.391M (2631.493 ETH).
- stETH at $18.061M (10830.768 stETH).
These two assets alone make up over 96.7% of the total treasury value.
USDC is roughly 1.1% of the treasury, and we’re comfortable ignoring it for the sake of code simplicity.
wstETH is roughly 0.11% and is ignored as well.