Monkey Business: Why Solana NFT Project SMB and Its DAO Are Battling Over Its Future

As the Solana NFT ecosystem has risen in recent months, Solana Monkey Business has emerged as the leading project—much like CryptoPunks or the Bored Ape Yacht Club on Ethereum—racking up sizable sales while attracting notable owners like Steve Harvey, Steve Aoki, and Alexis Ohanian.

But now the creators and a DAO community of collectors are sparring, with some holders considering a drastic measure akin to a hard fork that could split the project in two and affect its future.

At the heart of the dispute are royalty funds that come from secondary market sales of the NFT collectibles. Solana Monkey Business (SMB) has generated more than $150 million worth of secondary trading to date, per CryptoSlam, and each sale has a small royalty to fund community efforts.

MonkeDAO, a community-run decentralized autonomous organization (DAO) that was independently established by NFT holders, says that it needs additional funding to pursue further initiatives that potentially benefit all SMB holders.

The dispute between MonkeDAO and Solana Monkey Business has spilled out onto blog posts and social media, spread across tweets and Twitter spaces. Members of MonkeDAO and a SMB co-founder tell Decrypt that all options remain on the table, including the potential for members to fork the project by “entangling,” or wrapping, their NFTs to circumvent the current royalty model.

Big ‘Business’

Solana Monkey Business launched in June 2021 with just 205 total NFT collectibles, each showing a pixel simian in space. Holding a full set of all four original SMB NFT types grants the owner a share of the 2.5% Gen1 royalty attached to the 5,000 Gen2 avatars, which were released last August. Just 25 of the full Gen1 sets are available.

The Gen2 avatars—which have a more traditional profile picture design akin to CryptoPunks or Bored Apes—are what exposed Solana Monkey Business to a broader audience. This collection of 5,000 NFTs is what most collectors more commonly associate with the SMB brand. They launched as the Solana NFT market was picking up steam, and even yielded a $2.1 million NFT sale in October as they became Solana’s premier blue chip NFT project.

MonkeDAO was founded shortly after the Gen2 launch to provide a community for holders, and has since built out a DAO structure and pursued various initiatives—such as running a Solana validator, community staking in Solana’s native coin SOL, online events, and even investment in startups (such as Solana NFT metaverse project Portals). The DAO is also considering launching its own token.

Many in the Solana Monkey Business community believe that MonkeDAO has driven the majority of the value to SMB in recent months, while the creators have been hands-off by comparison. To some extent, it’s similar to backlash around CryptoPunks, with creator Larva Labs taking flak for its own perceived lack of community interaction.

For its part, MonkeDAO appears to be keen on leading that charge for the SMB community, even without a formal relationship with the pseudonymous creators. But MonkeDAO and the SMB creators are butting heads over how to fund the DAO’s efforts, as well as who should really benefit from the collection’s rising profile and value in recent months.

Following months of negotiations, SMB sent 1,000 SOL—about $135,000 at the time—to MonkeDAO in January to help fund its endeavors, following the creation of MonkeDAO’s multi-sig wallet, a more secure kind of crypto wallet that requires multiple private keys to sign transactions. At issue now are the remaining funds, as well as whether the existing royalty structure should be reworked to benefit the community DAO.

“Since the inception of MonkeDAO, MonkeDAO was promised funds from the SMB community wallet. To date, only 20% of the promised funds have been delivered,” the DAO’s board members told Decrypt in collectively written responses.

Royalty disputes

The Solana Monkey Business creators insist that MonkeDAO needs to implement fully decentralized, on-chain governance in order to send them additional funds. But there are potential technical hurdles due to the outdated metadata code of the SMB NFTs, which the creators would need to update to function properly with Solana DAO governance tools.

MonkeDAO’s board told Decrypt that it is trying to work with the SMB creators to find a solution, but that it has received “conflicting information” about potential ways forward. The board said that it has met with the SMB team to discuss “what it will take to bring full decentralized governance to MonkeDAO.”

“The desire of the SMB team is, and has always been, decentralized governance that is in line with how a true DAO should operate, removing the ability for any individual to act in bad faith,” SMB co-founder Daddy Monkey told Decrypt. “As the debate has intensified, we are both interested in finding a quick and efficient solution for the issues at hand.”

However, there is also a dispute over how Solana Monkey Business royalties should be handled. Currently, there is a 5% total royalty on secondary sales, with 2.5% going to the Gen1 full set holders, 2% to the creators, and 0.5% to the community fund.

Some holders believe that SMB should lessen or fully remove the Gen1 royalties and push those funds towards the community—i.e. MonkeDAO. But the SMB creators see that as a betrayal of the promise made to Gen1 holders, who spent potentially large sums of money collecting a full set of the NFTs in order to receive ongoing royalties.

“Any taking of these royalties, and thus in the unspoken contract between these holders and the project, would be nothing short of a rug [pull],” the SMB team wrote in a proposal posted on February 12. “This will not happen for ethical reasons, of course, but also for image and trust reasons towards the project.”

Instead, the creators have proposed raising the overall secondary sales royalty to 6.5%, bumping the community’s take to 2% with an eye to funnel that towards MonkeDAO’s efforts. MonkeDAO’s board tells Decrypt that it has submitted its own proposal to the SMB team, but it would not specify the requested terms.

“The MonkeDAO board feels MonkeDAO could receive more support and acknowledgement from the SMB team,” the board told Decrypt. “MonkeDAO would like to make this a stronger union regardless of % so that all holders feel like their opinions are valued.”

Entangling alliances

Amid ongoing negotiations between the sides, there’s a wild card in the mix: “entanglement.” That’s the name given to the proposed process of wrapping the existing Solana Monkey Business NFTs as new NFT assets, thus providing the ability for holders to set new royalty terms independently of the original creators.

It could also, however, effectively fork much of the project away from the creators of Solana Monkey Business. It’s seen as a nuclear option that could potentially divide the SMB community, but it would let participating holders override the creators’ set royalty terms.

The entangler tool was created by Jordan Prince, a developer at Solana Labs, and is a smart contract that ties the original SMB NFT to a new Solana token. Prince previously created a similar tool for Exiled Apes, a project composed of NFTs that were part of the Degenerate Ape Academy, but discarded when its original minting process was prematurely halted.

“I’m sorry for inadvertently starting a vicious debate using the entangler,” he tweeted this week. “I just want people to see what is possible in the NFT space with a little elbow grease and innovation when the options seem limited. Ultimately it is your choice whether or not to use it.”

Part of what’s fueling the “vicious debate” is the view that someone on Solana Labs’ payroll has created a tool that could potentially wrest control of an NFT project away from the original developers. A prominent SMB holder who asked not to be named told Decrypt, “Protocol engineers should not be actively taking sides in these situations.”

Entanglement has turned into a weighty bargaining chip between the sides as they discuss whether to rework the existing SMB royalties structure, as well as how to best address the technical hurdles to enabling fully on-chain decentralized governance for MonkeDAO.

“While we’ve had conflicting answers to the question of whether or not entanglement would be necessary for voting,” the MonkeDAO board told Decrypt, “we do see consensus within the DAO that the value of SMBs has largely been driven by the activities of MonkeDAO, and that the current royalty structure is not equitable or sustainable.”

MonkeDAO’s board said that entanglement would be “both voluntary on an individual basis and reversible” for SMB holders who wish to associate with the DAO. Furthermore, the DAO board said that it will “make every effort to respect creator and artist royalties” in any structural shift.

“Community members feel strongly that such a change could not and should not end artists’ rights to benefit from their work,” the board added.

In its recent statement, the Solana Monkey Business team wrote, “If MonkeDAO chooses to dissociate and walk away from SMB, it is their decision, but it is of course not possible for SMB to support an unofficial version of our NFTs.” In other words, the already-fraught alliance between SMB and MonkeDAO could fracture entirely via entanglement.

“We hear the community and appreciate their frustration,” said SMB’s Daddy Monkey on Tuesday. “Our vision for this project has always been community-first and we feel dividing the community is not in the best interest of anyone, whether by MonkeDAO or otherwise.”

“The entanglement has been presented as the only option thus far and naturally the community has embraced it,” he added, “but there are other options that are available which we think are worth exploring.”

Reason for optimism?

The launch of the entangler has dialed up the tension in the dispute over the future of the Solana Monkey Business community, and there are hurt feelings in the mix. “We have not felt supported, and certainly not reassured,” the SMB team wrote in its statement, following perceived “threats” by MonkeDAO representatives.

However, the increasingly public nature of the dispute also seems to have lit a fire under everyone to find compromise, rather than pursue the nuclear option of entanglement. The two sides have been meeting this week to discuss the options, and both told Decrypt that they are optimistic that an amicable solution can be reached.

Today, Solana Monkey Business tweeted that the metadata for the NFTs can be updated to comply with the latest Solana Metaplex standards, potentially opening the gates to on-chain voting in the DAO. In other words, the entangler may not be necessary to attain the shared goals of decentralized governance and royalty-based funding for community initiatives.

“All parties involved are smart, passionate individuals who want the best for the broader community,” said the MonkeDAO board on Tuesday. “We’ve been optimistic on a positive partnership since the formation of MonkeDAO and we continue to believe the two entities have the same goal of promoting what is best for the community and ecosystem.”

The board noted that it cannot make a decision on behalf of the entire DAO. Rather, the board can agree on a potential solution and then present it as an option to MonkeDAO members, who can then vote on that among other options.

The SMB team, MonkeDAO, and the Gen1 NFT holders all “seem ready to make some compromises,” said Daddy Monkey, “and we are therefore rather confident about the outcome.”

https://decrypt.co/93193/solana-monkey-business-monkedao-battling-over-future

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