Nouns DAO fork loses half its treasury in 3 days

The Nouns DAO, a decentralized autonomous organization that manages NFTs, recently underwent a significant fork that resulted in the loss of over half of its treasury in just three days.

Forking the DAO: Nouns DAO introduced a mechanism known as "DAO forking" to allow disillusioned members to create a new version of the project. This feature was introduced to protect minority token holders and required a 20% quorum of users to initiate.

The First Fork: The first fork, known as Nouns DAO Fork #0, took place on September 15th. It was carried out by a group of Nouners who were concerned about the DAO's spending from its treasury. This group sought to create a new version of the project with more fiscally conservative governance.

Outflow of Funds: Following the fork, more than half of the Nouns in the original DAO left the project, resulting in an outflow of over $27 million from the DAO's treasury.

Ragequitting: Users who participated in the fork had the option to "ragequit," which meant they could cash out on the proportional value of their Nouns. Many users chose to do so, further depleting the treasury.

Price Fluctuations: The price of Nouns experienced fluctuations during this period, with some holders taking advantage of price differentials to profit from the situation.

Arbitrage Opportunity: Some participants exploited an arbitrage opportunity created by the fork and the subsequent price fluctuations.

Debate Over Legitimacy: There is ongoing debate about which fork represents the true Nouns DAO. The original DAO retained the project's founders and sub-DAOs, and some believe it will ultimately prevail in terms of social consensus.

Value of Forking: Despite the challenges faced by the first fork, some participants still believe that the concept of DAO forking is valuable and provides protection for minority token holders.

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