The role of DAOs in the NFT space

NFTs have come a long way since the first coin in 2014 of ‘Quantum’ on the blockchain. The market has seen prolific growth, providing investors with the ideal crossover between cryptocurrencies, traditional assets and digital ownership. As of May 2022, more than a million crypto users have bought or sold NFTs, and the global NFT market is expected to grow from $3 billion in 2022 to $13.6 billion by 2027.

Non-functioning tokens are unique digital assets held on the blockchain, giving physical asset holders the opportunity to extend ownership into the digital realm for the first time. Such property can include a range of ‘real’ collectibles, from art to fashion, sports and even physical objects. Since the introduction of the ERC721 token standard in 2018 and the groundbreaking sale of “Everydays: The First 5000 Days” by Beeple in 2021, which marked the entry of NFTs into mainstream culture, NFTs have enabled developer communities to invest, creating and self-custodianship of their own creative financial assets. NFTs are also seen as the next level of digital rights management. The increased hype around digital ownership of these assets has also attracted art collectors, who are tapping into the divide between traditional and digital art, while largely starting to attract a broad audience, from gamers to celebrities to crypto enthusiasts.

NFTs are the new brands and IP franchises

It is important to understand that NFTs are not just collectible images. The largest NFT collections, such as Bored Ape Yacht Club, Azuki, RTFKT, and Loaded Lions, have grown into mainstream intellectual property brands and franchises whose ownership is shared between their creators and the owners of each NFT unit. Each of them conveys a specific worldview, brand story and visual images. Like Marvel characters or Transformer toys, they appear on branded merchandise, are used in physical and virtual events, and are expected to lead to video game franchises.

Shared ownership means these brands have the potential to generate a much deeper engagement with fan communities than traditional brands, which explains why mainstream brands like Nike, Hublot and DC have created or invested in NFT initiatives.

From the standpoint of the NFT participants, shared ownership means that having an NFT in one’s crypto wallet doesn’t just give access to exclusive experiences (also known as token-gated experiences). It creates the expectation that the holder will have a voice in the direction and governance of the brand and participate in the long-term value creation of the franchise.

How does this board work? Enter DAOs (Decentralized Autonomous Organizations).

DAOs and NFTs

DAOs replace formal corporate hierarchies with community-owned structures without centralized leadership. While still in their infancy, they are gaining popularity and ultimately support Web3’s vision of returning the value of a network to its users.

DAOs are digital, community-led organizations powered by blockchain technology, where members vote on the direction and vision of their entity. For crypto-curious and natives alike, a DAO utility comes with the ability to amplify Web3’s goal of democratizing the creative economy with more direct and transparent connections between communities and specific projects. Technology is replacing DAO’s legacy institutions with more flexible and configurable governance models than the one-size-fits-all rights given to the shareholder of a massive corporation.

In addition, control and ownership are considered more democratic, similar to a cooperative organization. Each owner within a DAO is given voting rights via a governance token with underlying code that is 100% transparent, meaning no one controls the community, making decisions faster and more efficient. NFT creators and community members can jointly decide the future of an NFT project and direct the direction of the business by casting their vote in a secure manner that is visible to the other owners.

The DAO-NFT Community

DAOs have the potential to help emerging NFT makers foster a sense of community and bring together a group of investors to participate in gated community events, raise funds and provide access/voting for smaller projects. Users can meet, discuss and agree on a collective mission for the DAO on various social networking sites, and they can then contribute money using Ethereum contract development.

Often there are early adopter benefits when deciding to participate in a project, where investors can acquire rights to the discounts on products and lower fees. In an increasingly borderless world, DAOs can also benefit from bringing global communities together to collaborate and coordinate towards a shared vision. With an internet connection and governance tokens, virtually anyone can participate in building the future of Web3 within a DAO. Participating in a DAO also gives individuals a sense of ownership akin to being a co-founder of a start-up, as they can direct the investments of the project’s treasury, controlled by a multi-signature crypto wallet, enabling innovation. and even financial rewards are further promoted.

What’s next for NFTs and DAOs

In terms of NFTs and DAOs, they pose the philosophical question of what’s next in the peer-to-peer economy and how can Web3’s vendors make it more accessible to the next generation? For DAOs, we will continue to see unique use cases: music, art, buying high-value assets, and more.

Case studies for collaboration between DAOs and NFTs are emerging, and we are starting to see how DAOs, using a cooperative model of organizational structure, offer new participation opportunities for those people who participate in the creative economy in their own little way. Critically, with NFTs providing people with real-world property and benefits, and DAOs providing new driveways, the combination of assets and community will continue to drive innovation

As both the traditional and crypto markets face challenging times, individuals are increasingly looking for ways to write their future financial history through Web3’s empowerment and tools.

Ken Timsit is Managing Director of Cronos Chain and Cronos Labs, the first EVM-compatible Layer 1 blockchain network built on the Cosmos SDK.