Table of Contents
The Main Takeaways
- DAO stands for Decentralized Autonomous Organization. It is a community-led organization where members can vote on the direction of their entity.
- Collector DAOs enable multiple people to own a small part of an NFT. This gives smaller NFT traders the opportunity to join larger projects.
- NFT creators can collaborate with community members to decide the future of an NFT-related project using a DAO.
- DAOs can also help NFT creators start a community.
Since its inception, blockchain technology has made great strides. Blockchain technology has revolutionized many industries over the past few years, including the financial sector and creative industries. Other blockchain technologies, such as DeFi, GameFi and NFTs are becoming more mainstream. Decentralized Autonomous Organizations or DAOs (Decentralized Autonomous Organizations) are other popular options in the digital space. What is a DAO and what does it have in common with Non-Fungible Tokens (NFTs), and how can you define one?
Continue reading to find out the basics of a DAO and how DAOs may benefit the NFT ecosystem.
What Is a DAO and How Do They Work?
A Decentralized Autonomous Organization (DAO) is a community-led organization that uses tokens or NFTs to grant voting rights. Smart contracts are used to execute a command automatically when a certain set of conditions is met. DAOs, as their name implies, are autonomous and decentralized. A DAO’s rules are stored on an open-sourced Blockchain, which means anyone can view their code and transaction records. The decisions of a DAO are not made by a central entity. Instead, they are taken from proposals that are shared with the project community who then vote.
A DAO acts in a similar way to a corporation but it does not have a hierarchy. It tries to create a new democratic process through decentralized governance. A DAO member is not bound to any formal contract, unlike a traditional organization. Instead, they are bound by common goals or incentives that are written into their rules.
How Are DAOs and NFTs Connected?
Collector DAOs are one way NFTs and DAOs can be closely linked. A collector DAO (collector DAO) is an organization that pools funds to acquire and emit NFTs.
An NFT project can be expensive, particularly if it is popular. This could make it difficult for smaller traders who are unable to invest in the project. Multiple individuals can own a small amount of an NFT through collector DAOs. APE DAO is an example of a collector DAO. It fictionalized Bored Ape Yacht Club NFTs and allows multiple users to own a portion of the asset.
DAOs can also be used to link NFTs with DAOs. This is not just for collector DAOs. Through community governance, DAOs can help to create NFT projects. The NFT project’s future direction can be decided collaboratively by creators and community members.
DAOs can also help creators or smaller projects build a dedicated following. But, unlike celebrities or well-known artists, every emerging creator won’t have a dedicated following from the beginning. Collector DAOs, which can be used as a crowdfunding platform to raise funds for NFT projects and allow people to vote for the ones they want to succeed, can help to create engaged communities.
Conclusion: What Is a DAO and How Does It Benefit NFTs?
DAOs are a long-established technology with many interesting uses. They can be an important tool for supporting the growth and development of NFT projects, both existing and new. DAOs will be more common as the NFT space grows.
