Proposal: Nouns investment in the Verse Protocol + Glasses NFT Project

[neuroswish]

TLDR

This proposal is for a NounsDAO investment + project collaboration with Verse, a new protocol for autonomous NFTs on Ethereum.

Who is behind this proposal?

hey everyone! My name’s Kiran Cherukuri. I’m the founder of Verse, an autonomous NFT protocol on Ethereum. Previously, I worked on product design for PartyDAO, and in my web2 life I was a product engineer at health-tech startup Tilda Bio.

What is Verse?

Verse is a protocol for autonomous NFTs on Ethereum. What does that mean? Verse enables the creation of NFTs with an embedded ERC-20 exchange. Here’s a quick overview of how the protocol mechanism works:

Through the protocol, a creator deploys a contract Pair consisting of an ERC-20 Exchange contract and an ERC-721 Hyperobject contract. The dynamic price and supply of the ERC-20 token is managed by a bonding curve acting as an AMM. Simply, this means that anyone can buy and sell the token at any time with instant liquidity, and the contract will programmatically adjust the price based on the circulating supply. Holders of at least 1 atomic unit of the ERC-20 token can then redeem their token. Redeeming a token transfers the holder’s ERC-20 to the paired Hyperobject contract, which mint s a new NFT and transfers it to the redeemer in exchange.

You can find more information about the protocol here.

What is the status of Verse?

The contracts for Verse V1 are live on mainnet, and the public beta interface to interact with the protocol is live at verse.xyz.

What can be built on Verse?

The Verse Protocol represents a new medium for NFTs, and enables the creation of digital objects that have their own embedded microeconomy.

One of the most exciting applications for the Verse Protocol are for “build-your-own” NFTs - NFTs which are essentially a blank canvas at time of mint.

• After minting, the NFT holder can “build” the NFT, altering its state and modifying the tokenURI according to predefined logic set in the NFT contract.
• This idea is similar to mechanisms found in projects like Shields and OKPC.
• The NFT is no longer a random, static asset; it’s a dynamic object that is programmatically changed according to the holder’s actions.

Nouns: Create-your-own-Glasses

As a launch project for Verse V2 and for the “official” release of the protocol, we want to collaborate on a Nouns “Create-your-own-Glasses” NFT project built on the Verse Protocol.

Here’s how the project would look:

• On Verse, we deploy a contract pair of ERC-721 Noun Glasses NFTs and an ERC-20 $GLASSES token.
• The $GLASSES token is exchanged through the contract’s embedded AMM, and can be redeemed for the underlying Noun Glasses NFT at any time (as described in the protocol notes above).
• Each Noun Glasses NFT is just a blank, black and white pair of Noun Glasses when initially redeemed for the $GLASSES token.

Here’s where it gets interesting

• On an NFT like OKPC, each OKPC NFT acts like a mini-computer, and is able to dynamically display artwork on its screen.
• Each artwork is its own NFT, painted by other OKPC owners.

We’d like to supercharge this concept for Nouns Glasses.

Each Nouns Glasses NFT would essentially have its own “operating system”.

• Nouns Glasses NFT holders can customize the appearance of their Glasses by outfitting them with skins and cosmetics created by other holders.
• Holders could sell their created skins - only able to be purchased using the $GLASSES token.
• Thus, the $GLASSES token - while fundamentally a unit of exchange for the corresponding Nouns Glasses NFT - also acts as a native currency used to economically catalyze the development of new designs.

You can even imagine a future in which big brands like Louis Vuitton, Bud Light, or Adidas design their own skins that people can buy with $GLASSES and outfit their glasses.

• Or an even nuttier (yet somehow more tangible) future in which other NFTs, websites, and brands can read your Glasses’ URI and automatically integrate your Glasses’ design and theme into other products and UIs, customizing your experience across the internet.

That’s not where the possibilities stop.

• Essentially, the $GLASSES token acts as a native incentive for token-holding developers to integrate Nouns Glasses NFTs into new experiences.
• There’s a tangential relationship here to Nike & RTFKT’s CryptoKicks - which are customizable digital shoes.
• However, with this new mechanism for the Nouns Glasses NFT on Verse, we’ve not only created a customizable object, but we’ve created a microeconomy around developing designs, features, and experiences around the NFT.
• In the long-term, I envision a future where everyone has a pair of their own, customized digital Noun Glasses like they’re a pair of Chuck Taylors or Air Force 1s.
• You’re going to take them everywhere you go on the internet, and each one is customized by each holder and there’s a whole universe around them.

Ultimately, everyone having their own pair of Glasses supercharges & proliferates the Nouns meme and makes the glasses a staple of internet culture.

On Verse, The Nouns Glasses are an autonomous, self-sustaining, unstoppable idea on the internet. Anyone can interact with $GLASSES/Nouns Glasses contract at any time to buy, sell, or redeem at any time, independent of any intermediary, marketplace, or authority. Thus, Verse turns the Nouns Glasses into a piece of public internet infrastructure that exists forever.

Note: Currently, Verse V1 only supports static NFTs and is more designed as a proof-of-concept to test the autonomous exchange. However, Verse V2 is currently being built and tested to support custom ERC-721 integration, which will enable us to create the contracts & logic for customizable Glasses.

NounsDAO investment in the Verse Protocol

Verse is a new NFT protocol designed to catalyze the future development of internet objects we use every day. Nouns is the prototype for meme proliferation and how to build a CC0 brand that permeates the internet. Ultimately, both entities are designed to build a more composable internet in which individuals build, own, and use digital objects that accrue value as they’re integrated across the web.

We’re currently putting together a funding round for Verse, and firmly believe that the protocol shouldn’t only be owned by traditional venture or finance institutions - it should have ownership from decentralized groups actively advancing and building progressive technologies in the NFT ecosystem.

Thus, we’d like to propose an investment from NounsDAO in the Verse protocol, with the specific stipulation that one of the protocol’s launch projects be the Nouns Glasses project as described above (obv. with any necessary changes that are agreed upon by the DAO before approval).

We think that an investment/long-term partnership would be far more powerful than a grant in that an investment incentivizes both parties (NounsDAO & Verse) to ensure that the Nouns Glasses project is a top-tier product designed for long-term community development and success.

There’s tremendous synergy between the goals of Nouns and Verse, and a long-term partnership would entail close collaborations to build future Nouns-related NFT projects on Verse, and the ability for DAO members to have a real hand in how the protocol evolves over time.

Investment Specifics

NounsDAO invests 110 ETH + 1 Noun in exchange for ~1% equity into Verse Labs (the incorporated company building the Verse protocol) with an optional token warrant (terms of which are not finalized). These equity figures are consistent with the current terms we have with our lead investors for this funding round.

This funding would go toward scaling the Verse team, hiring fullstack & Solidity engineers to build V2 of the protocol as well as dedicating specific resources to building the custom contracts + interface for the Nouns Glasses project. Additionally, it will be used toward compensating members of the DAO who would be interested in working on the Glasses project in a contractual capacity. Lastly, we’d like to propose the addition of 1 Noun so that Verse can be a voting member of the DAO and align our interests even tighter.

Investment Logistics

Over the past few months there has been a rapid increase in DAOs investing in crypto-native companies and protocols. However, this dynamic is still relatively nascent and there’s no standard structure for how to structure a DAO investment. For the NounsDAO investment in Verse, I propose that legal ownership of the shares be initially held by the Nouns Foundation. Since the Nouns Foundation is already an operational legal entity with a functioning board, I believe this will be the most straightforward way to handle the investment logistics and handle any legal + operational requirements that must be fulfilled in the near future.

Tentative Timeline

(Note that depending on feedback/proposed product changes, these dates could vary)

May 11

Proposal Voting Deadline

May 16 - May 25

NounsDAO community discussions & brainstorms for Glasses project

• Collaborate w/ community members on ideas for NFT design, initial skins, pricing curve parameters, & launch functionality

May 26 - May 29

• Finalize project specs, finalize Verse V2 contracts & deploy to testnet

May 30 - June 17

• Build & test custom logic contracts and integrate into Verse V2 Protocol Contracts

June 18 - July 16

• Build custom UI for exchanging & building the Glasses (conceptually, an immersive web app like okpc.app, shields.build EmblemWeaver, or Nike ID Studio.

July 16 - August 1

• Testing & preparation for public launch

August 1

• Public launch

With Verse V2 already into development, we’d like to execute the Nouns Glasses Project for a current target release around the beginning of August. We think that the excitement around new NFT experiments/projects this summer (and esp. after NFT.NYC) will be immense, and believe that launching the project + publicly launching the Verse protocol shortly after this time will provide a ton of valuable exposure for Nouns + Verse.

We’d like to formalize this proposal on-chain with a deadline of May 11. We realize this is a tight timeline, but also recognize the need to move extremely quickly to get started and execute our proposed timeline for the Glasses project.

I couldn’t be more excited to present this proposal and talk to all of you about this collaboration. Please don’t hesitate to ask any questions or present feedback - let’s make this happen together and make the Nouns Glasses an unstoppable piece of internet infrastructure.

-Kiran

[anounymous]

Hi Kiran, thank you for the thoughtful proposal.
I find aspects of the concept to be immediately compelling & will try to think through the mechanism in more detail in coming days.

First question is just about housing equity in the FC (foundation company); I assume this is a legal protection for you (avoiding possibly offering unreg securities to unqualified dao members etc…) ?

Generally I see equity accumulating assets on behalf of the DAO to be an undesirable precedent & not particularly aligned with the spirit of Nouns as i currently see it. Curious what other structures you may be able to dream up?

Thanks for your attention

-wag

[neuroswish]

hey! upon speaking to some other members of the DAO, it looks like the Foundation owning the shares actually isn’t feasible, so we’d have to find another way to structure the ownership. I’m open to discussing better alternatives and coming up with a solution that is beneficial long-term for the DAO. If/when the proposal gets executed, I’m happy to work this out and anticipate that we’d work with an experienced crypto legal team to iron out the details.

[noun40]

Hey Kirin, thanks for the proposal. I’m curious to understand a bit more about how this all works. What is the bonding curve of the AMM on Verse? Wouldn’t the use of an AMM here imply a certain asymptotic supply ceiling on the ERC-20 $GLASSES token? I’m asking b/c parts of the proposal and your twitter thread made me think that the intent is for the Nouns Glasses NFT to be ubiquitous but the existence of an AMM would counteract that (price going up as circulating supply goes up and at some point supply being limited).

Also I’m a bit curious to understand why you’d think that a microeconomy would form around the $GLASSES token (brands selling skins for the Nouns Glasses NFT in $GLASSES token) rather than forming around ETH?

[neuroswish]

Definitely! The bonding curve is different from those of AMMs like Uniswap, etc. Namely, there are no external liquidity providers; the contract acts as its own source of liquidity. I’ve described the exact formulas and mechanism more here. Lmk if this thread makes sense - if not, happy to answer any follow-ups more in-depth!

You’re correct - use of an AMM would practically imply an asymptote on the circulating supply of $GLASSES. I believe that to generate initial demand/hype & meme proliferation for the Glasses (and to seed a strong community at launch), it’s necessary to impose a certain level of scarcity for the product. At a high level, I think of the Glasses as the internet’s Yeezys. Namely, you want to create a certain level of “luxury”/scarcity initially such that the Glasses become a sought-after item. Over time, the community of $GLASSES holders can vote on modifying the $GLASSES price curve such that the supply steadily increases & allows more people to buy the token (in this way, $GLASSES truly becomes programmable money).

So in effect, the ubiquity of Glasses is a long-term, progressive thesis. If you think about it, this mechanism is similar to how Nouns works! I’d argue that if Nouns started by mass-releasing 10k NFTs with a low mint price, it wouldn’t be a blue-chip project like it is now or achieve the level of ubiquity it has steadily gained. The most effective way to achieve long-term ubiquity is through short-term scarcity and gradual, intentional increases in supply which constantly maintain the “feeling” of the product being a luxury item.

To answer your last point about $GLASSES catalyzing a microeconomy: this is more of an experimental thesis, but I think it has precedent. If I’m a $GLASSES holder, I’m incentivized to increase the price of $GLASSES. How could I easily do that? I could create an amazing skin for the Glasses NFT, and price the skin such that it could only be purchased with $GLASSES. Thus, to get the skin, more people would acquire $GLASSES and raise the price. I’m not necessarily a fan of BAYC & the $APE token, but they have shown that such a model can be successful for treating the ERC-20 as a native currency in the NFT’s ecosystem. Will this model work long-term? I have no idea - but I think it’s worth trying. If it turns out that people just want to transact in ETH, it doesn’t mean that $GLASSES loses all its value - it’s still the only means of exchange to acquire the Glasses NFT, and that’s extremely valuable.

Hope those explanations helped answer your questions. Please lmk if you have any follow-ups!

[noun40]

Thanks for the detailed reply Kiran. The twitter thread you shared was helpful in me getting a bit more understanding. But the question I have there now that I know there isn’t any ability to add more liquidity in the Verse AMM, isn’t that a problem in limiting the growth of liquidity of $GLASSES? Essentially the price movement (slippage) either up or down based on 1 ETH of buying / selling is predetermined along the curve. No one could add more $GLASSES/ETH to make it more liquid if they wanted to. To solve this issue around the liquidity being fixed, there might form Uniswap/Sushiswap pools of $GLASSES and ETH but that kind of defeats the purpose of everything being contained in Verse. Maybe this is meant for NFTs where fixed / predetermined liquidity is sufficient for the use case?

On the point of starting with a small supply of NFTs and then gradually making them more available. Is the adjustment you’re suggesting that maybe after the first 1000 NFTs worth of ERC-20s are sold along a certain bonding curve, we could adjust to a new bonding curve to release the next 10,000 NFTs worth of ERC-20s?

I actually think this is quite different than the Noun NFT issuance (despite the admitted similarly that supply does continuously increase). Nouns you can think of as a simple linear issuance, what bitcoin would be if it didn’t have the halving. Nouns is “luxury” / scare in the sense that the issuance is low (it would take ~30 years to get to 10k) and it sticks to that low issuance. There is no step function change in the supply or centralized adjustment in price. In the case of a bonding curve adjustment, I feel like it would just be a new NFT collection, no? It would be a separate tier of Nouns Glasses NFTs that have a different definition of scarcity.

Also, yes, understood regarding the $GLASSES token forming a microeconomy being an experimental thesis. Yeah, I guess I was just skeptical of that in the same way that I’m skeptical of $APE becoming a true medium of exchange, or rather, that behavior emerging without a centralized entity enforcing that norm in a walled ecosystem, which seems less likely in the Nouns ecosystem.

Thanks for sharing your thoughts here (and your interest and belief in Nouns)!

[neuroswish]

Sure thing!

You’re correct in that the price movement is predetermined based on the curve’s formula, and that there’s no way to directly add liquidity. However, we can influence the supply another way. By increasing the reserve ratio, we can push the price asymptote further to the right, effectively decreasing the price per token and enabling more buyers to enter the market.

Now, for an individual creator who deploys an NFT on Verse, they’d have administrative control over adjusting the price curve parameters. However, specifically for this Nouns Glasses project, I’d imagine that this administrative power would be placed in the hands of a multisig (initially) or a DAO (over time) of $GLASSES holders who can vote on if/when they want to change the reserve ratio at any time to modify the price curve and enable more buyers to enter the market. In this way, the community of $GLASSES holders decides when it’s time to grow the community and expand the number of holders. Again, I don’t anticipate this to happen rapidly; I think it’ll be a gradual process as the market for $GLASSES matures.

I understand your point about Noun NFT issuance. Agreed - these would be different types of issuances, with Nouns being linear and Glasses being more of a sloped change. But I think from a practical perspective, both would represent very intentional, steady changes in supply without shocking the market. With Nouns, this rate of increase is pre-programmed. With Glasses, this increase would be decided by token holders who would have no incentive to flood the market, but would predictably weigh the tradeoffs of increasing supply & reducing short-term price with the potential for increased proliferation and long-term increases in price to a higher equilibrium.

Thanks for these questions! Really helpful to think through this project & protocol from a long-term perspective and analyze the differences between Verse & traditional systems of token distribution.

[sarahmeyohas]

Kiran

I’m not a Nouns holder but am intrigued by the vision you layout as a case study for composable IP.

Clarifying questions:

• In the v2 release, could anyone design a glasses NFT, or would this be limited to those who hold an erc20, or say, holders of Nouns?
• Have you all considered the connection to a product like Geyser where you could stake the corresponding NFT for the erc20?
• From a retail perspective, how do you think Verse could help onboard more ppl in crypto particularly through the Nouns ecosystem?
• Could I build your Verse contracts into a native UI of a Bitchcoin website for example?
• Is there any way to move from the erc721 back into an erc20?

One idea we’ve thrown around at my studio is providing liquidity in an erc20 that then can be redeemed for a corresponding NFT, this way mint price can be variable to match demand much better than a dutch auction could.

Excited to see Verse continue to develop!