The role of DAOs in the NFT space

NFTs have come a long way since the first minting in 2014 of ‘Quantum’ on the blockchain. The market has experienced strong growth, offering investors the ideal intersection between cryptocurrencies, traditional assets and digital ownership. As of May 2022, more than one million crypto users have bought or sold NFTs, and the global NFT market is expected to grow from USD 3 billion in 2022 to USD 13.6 billion by 2027.

Non-fungible tokens are unique digital assets held on the blockchain, giving holders of physical assets the ability to extend their ownership of the digital realm for the first time. Such ownership can include a variety of “real world” 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 NFT’s entry into mainstream culture, NFTs have empowered developers to invest, create and even . – custody of their own creative financial assets. NFTs are also considered to represent the next level in digital rights management. Increased hype around digital ownership of these assets has also drawn in art collectors, capitalizing on the gap between traditional and digital art as they largely begin to attract a wide 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 collectibles. The largest NFT collections, such as Bored Ape Yacht Club, Azuki, RTFKT and Loaded Lions, have emerged as mainstream brands and intellectual property franchises whose ownership is shared between their creators and the owners of each NFT entity. Each of them conveys a specific worldview, brand narrative and visual images. Just like Marvel characters or Transformer toys, they appear on brands, feature in physical and virtual events, and are expected to spawn video game franchises.

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

From the NFT shareholders’ point of view, shared ownership means that having an NFT in one’s crypto wallet not only gives access to exclusive experiences (also called token-gated experiences). It creates an expectation that the owner will have a voice in the direction and management of the brand and will participate in the value creation of the franchise in the long term.

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

DAOs and NFTs

DAOs replace formal corporate hierarchies with community-owned structures without centralized management. Although still in their infancy, they are growing in popularity and ultimately support the vision of Web3, where the value of a network is distributed back to its users.

DAOs are digitally native, community-led organizations powered by blockchain technology, where members vote on the direction and vision of their entity. For crypto-curious and native alike, a DAOs tool comes with its ability to drive Web3’s goal of democratizing the creative economy with more direct and transparent links between communities and specific projects. Enabled by technology, DAOs are replacing legacy institutions with more flexible and configurable governance models than the one-size-fits-all rights granted to the shareholder of a massive corporation.

Furthermore, control and ownership are considered to be more democratic, similar to a cooperative organisation. Each owner in a DAO is given voting rights through a “governance” token that has an underlying code that is 100% transparent, meaning no individual controls the community and decisions are therefore faster and more efficient. NFT creators and community members can jointly decide the future of an NFT project and shape the direction of the company by casting their vote in a secure way that is visible to the other owners.

The DAO-NFT community

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

There are often early adopter benefits when deciding to participate in a project, where investors can acquire rights to discounts on products and lower fees. In an increasingly borderless world, DAOs can also have the advantage of bringing together global communities to collaborate and coordinate on 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 similar to being a startup co-founder, as they can direct the investments to the project’s treasury, controlled by a multi-signature crypto wallet, driving innovation and even financial rewards.

What’s next for NFTs and DAOs

In the case of NFTs and DAOs, they present the philosophical question of what is the next frontier in the peer-to-peer economy and how can the providers of Web3 make it more accessible to the next generation? For DAOs, we will continue to see unique use cases: spanning music, art, purchasing valuable assets, and more.

Case studies of collaboration between DAOs and NFTs are emerging, and we are beginning to see how DAOs, leveraging a collaborative model of organizational structure, are offering new opportunities for participation for those people who participate in the creative economy in their own little way. Critically, with NFTs offering people real-world ownership and benefits, and DAOs offering new on-ramps, the alignment of assets and communities will continue to drive innovation

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

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