0x32d1a53f…d4f5sent to0xf790a5f5…1365·#19,482,493·view on Etherscan
# Comparative Economic Audit of Various Exit/Forking Mechanics
*shared from folks @ cryptecon.org*
### Problem Statement
Since last year, there has been a growing divide in the Nouns DAO community between those who see Nouns as collectibles with voting rights and those who see them as arbitrage opportunities. Several measures have been taken to address the growing number of arbitrageurs holding Nouns, including initiatives such as [burning](https://w.mirror.xyz/AmHOzH-FQZVO3IhGXHSvCRxRSf2MO6VCZdmMwNEIyKE) [and](https://mirror.xyz/verbsteam.eth/W4gaOrp6NC6jopc6vGsGuhz3o4ej0G_0TFhBlcLed94) [setting](https://nouns.wtf/vote/384) [thresholds](https://nouns.wtf/vote/439). The disparity has sparked extensive debate within the community. Arbers aim to predict the book value of NFTs at the time of the next fork and buy them at auction for less to ensure a profit. This strategy distracts from the real demand for nouns, pushing their valuation toward a strictly financial viewpoint and overshadowing their communal and cultural value.
### Proposal Overview
We propose to commission a focused research project to explore possible alternative exit schemes specifically designed to incorporate the uniqueness of NFTs planning to exit a DAO. This project aims to investigate different models (such as compensation based on contributed Ether) to minimize the arbitrage opportunities that distort the Nouns ecosystem. By incorporating additional factors into the treasury allocation formula, the aim is to develop a more equitable valuation mechanism that aligns with genuine demand for individual NFTs.
### Research Objectives:
* Design possible exit schemes that reduce arbitrage opportunities.
* Evaluate the different mechanisms.
### Menu Offer
Cryptecon can offer economic research in various depths. As such, the research proposal consists of the following two modules that can be combined freely:
* **Module 1: Comparison of different exit schemes** (USDC 23'000): We start with a critical review and comparative analysis of varying exit schemes, such as 'book value' and 'contributed eth.' Leveraging our expertise in game theory, we design an economic model to discern and evaluate the incentive structures that drive Noun holders and potential buyers within your unique market environment. This model aims to unravel agents' interactions within the Nouns ecosystem, providing actionable insights into economic behaviors under various mechanisms. The duration of this module is three weeks.
* **Module 2: Simulation and Performance Analysis** (USDC 35'000): In Module 2, we shift our focus from theoretical design to empirical assessment. Here, we use an agent-based simulation to test the exit schemes formulated in Module 1. Using historical data, we perform a sequence of robustness tests to observe how these schemes would have historically performed. Additionally, hypothetical market conditions are put to the test. We evaluate the resulting prices of each exit scheme, scrutinizing how they respond to market volatilities, such as substantial fluctuations in ETH value. The objective is to surface any potential weaknesses and strengths in the schemes, ensuring they can mitigate risks associated with arbitrage opportunities. This proactive approach allows us to anticipate the effects of various market conditions on the Nouns DAO, including extreme risk scenarios. This module will take six weeks.
### Proposed Research Group
[Cryptecon](https://cryptecon.org/home.html) brings a deep academic background in cryptoeconomics and extensive experience in designing and auditing protocols. Their game theory and ecosystem simulation expertise are critical to analyzing and optimizing participant behavior and systemic resilience within the Nouns ecosystem. Their track record makes us an ideal partner. Cryptecon's approach to solving complex decentralized system challenges aligns with Nouns DAO's vision for sustainable growth and innovation.
### Past Relevant Projects (more on [cryptecon.org]([cry](https://cryptecon.org/home.html)))
- **[Synthetix](https://synthetix.io/)**: We supported the team in the design phase of their future contract project, using simulation and game-theoretic analysis.
- **[Polkadex](https://polkadex.trade/)**: We helped during the design phase of the cryptocurrency exchange, designing the token economics and the automated market maker.
- **Pact.fi**. Support designing efficient incentive mechanisms and setting a fair price for the exchange's assets.
- **[Folks Finance](https://folks.finance/)**: Long-time partner. We helped set up their lending platform with simulations for parameter setting and game-theoretic analysis.
exploring-novel-treasury-allocation-mechanisms-for-nouns