NFT is an emerging and exciting market, and the decentralized autonomous organization DAO is also very young. The combination of the two, NFT+DAO, is a fresh and very broad track. In the past six months of the vigorous development of the NFT market, DAO has played an increasingly indispensable role in it, ranging from small Twitter social groups composed of people with common hobbies to large "corporate organizations" that generate huge profits.
According to the nature of DAO, we believe that NFT-based DAO can be divided into four categories:
Investing in DAO: Members collectively make decisions, jointly invest, hold, and release NFT artworks, and maintain the "NFT treasury".
Social DAO: A DAO organization with strong social attributes based on different interests and hobbies. Social DAO is divided into collection DAO and creator DAO;
Governance DAO: Use token governance to delegate power to the community, and community members can vote to manage the community;
Guild DAO: Similar to corporate organizations and talent pools, it provides resources, talents, services, etc. for community members.
By analyzing the top projects of four types of NFT-based DAOs, we found that they generally have the following characteristics:
The same DAO may have multiple attributes: the classification of the above four types of DAOs has no clear boundaries. For example, some investment DAOs have strong social attributes, and social DAOs may also be clubs formed based on a certain art collection;
Use the token economy to drive the effective operation of the community: most top projects have a relatively reasonable token economy, such as token functions, incentive mechanisms, release rules, matching rules, treasury design, etc., making tokens the glue of the community agent;
Community members have a strong sense of belonging: head projects often have the characteristics of strong community stickiness and high participation enthusiasm of members
At the same time, we believe that the integration of NFT and DAO has the following five points worth noting:
Private DAO deserves attention: The more community members the better, the quality of members is more important than the quantity, and the private DAO dominated by the invitation system is a direction worthy of attention;
Credit on the chain is an important combination direction of NFT+DAO: FT governance has drawbacks, and using NFT can give participants a "badge" that represents their identity and reputation;
There are certain obstacles in the development of creator DAO: How to attract high-quality creators, produce high-quality content, improve user stickiness, and property rights disputes are all problems that creator DAO may face;
Metaverse DAO or an important subset of NFT DAO in the future: Metaverse DAO is like a company in Metaverse. This type of DAO may create new occupations and types of work in the future, change the status quo of involution or improve people's lives;
The asset allocation type of the DAO treasury is controversial: from a financial point of view, in addition to holding native tokens, the DAO treasury should also consider allocating assets with large market value and relatively stable, but from the perspective of the community, allocating other assets will affect community commitment.
Market Overview of DAOs
Most DAOs are small but growing
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Overview of DAO fund management scale, source: DeepDAO
A small number of members manage most of the funds
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The five most active voting members in DAO, source: DeepDAO
Four types of DAO models based on NFT
Invest in DAOs
Invest in DAOs
Collective investment in NFT artwork
Investment DAO (Venture DAO) is the main category of the integration of NFT and DAO at the current stage. The main logic of this type of DAO is that community members jointly make decisions, invest, hold or release NFT art collections, and jointly maintain an NFT Collection. We believe that NFT's Venture DAO has the following three benefits:
Ordinary retail investors can indirectly invest in them by holding some "shares" of high-value NFTs by holding tokens.
The establishment of NFT "funds" in the form of "collective decision-making" disperses the risk of high-risk investments such as NFTs.
In NFT auctions, DAO's bids are generally higher than those of wealthy individual buyers, and the chances of success in bidding for high-value NFT collectibles are greatly improved.
Divided into public and private DAOs
Venture DAO can be divided into two categories according to the degree of openness: public DAO and private DAO.
Public DAO: Users can participate in community voting and governance by holding tokens, and obtain project benefits. Voting rights and income are related to the number of coins held by the address. Retail investors and ordinary players can participate in it by purchasing tokens in the market, representing projects such as Whale and JennyDAO.
Private DAO: Members need to be invited by other members to join the community. Most members of this type of DAO know the true identity of other members. Members gather together for common beliefs or hobbies in NFT, more like a high-net-worth player NFT "private club" for professionals and professionals. The community usually has its own native tokens, but most of them will not circulate in the secondary market and are only used within the community.
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Featured ProjectJennyDAO
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JennyDAO's uJenny liquidity ranks first, source: Unicly
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The number of votes needs to reach the set threshold before the NFT can be released, source: Unicly
Social DAOs
Social DAOs
Social DAO is a unique form of community organization in the NFT field. Different from DeFi, NFT represents the on-chain of real hobbies such as art, music, video, and literature. People with common hobbies often have the need to socialize and share resources. Social DAO was formed, and social DAO also made people realize that the crypto world has not only financial value, but also social value. In the table below we summarize the main projects of Social DAO:
To sum up all the above projects, we believe that NFT-based social DAO can be divided into two categories: collectible DAO and creator DAO.
Collections DAO
Collectibles DAO mainly refers to a group of people who form a community with a specific identity consensus and sense of belonging by purchasing the same NFT collectibles. The NFT they buy symbolizes their identity. Collectibles DAO is more like a club. Bored Ape Yacht Club, Bored Ape Kennel Club, Cool Cats, Meebits, Wicked Cranium are all examples of this type of community. As of August 2, 2021, the total historical sales of Bored Ape Yacht Club exceeded 100 million US dollars, second only to Axie Infinity, NBA Top Shot, Cryptopunk, Art Blocks ranked fifth, and Meebits ranked 5th with a total historical sales of approximately 88 million US dollars six. During the week of July 26-August 1, BYAC sales rose 193.19%, while Meebits rose 686.05% over the same period.
Featured Project - Bored Ape Yacht Club (BAYC)
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The average price and the lowest price of BYAC, source: Dune Analytics
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Partial work by Bored Ape Yacht Club and Bored Ape Kennel Club, source: Opensea
CreatorDAO
Creator DAO is part of the social token track. Creator DAO has created income streams for long-tail creators through smart contracts and social tokens, subverting the model that the biggest beneficiary of the Web2 Internet is the centralized platform rather than creators. In Creator DAO, creators establish contact with their fan groups through social tokens, form small interactive and economic groups, eliminate middlemen, realize revenue sharing between creators and fans, and part of the revenue is distributed to the community, thereby increasing user and community stickiness.
Featured Items - Only 1
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Creator Staking Pool, source: Only1
Only1 has built an interesting interactive community for creators and fans through the token LIKE. There are four main uses of tokens: 1. Bidding creators’ NFTs; 2. Unlocking exclusive content; 3. Pledging favorite creators to obtain mining income; 4. Platform voting governance (expected to be launched in Q1 2022).
The primary reason Only1 chose to build on Solana is its scalability advantage. Only1 founder Leon Lee once mentioned in an interview that Only1, as a social platform, has very frequent transactions and activities on the chain, and the primary goal of the social platform is to attract users, so in the blockchain "impossible triangle" The first requirement is scalability, and Solana's innovative consensus mechanism has the advantages of low cost, high speed and strong scalability, and can also satisfy decentralization and security at the same time. The Solana ecology is still growing rapidly, and more and more projects are joining this ecology. In the future, there may be more resources by virtue of its ecological advantages.
The financing and investment institutions participating in Only1 include Animoca Brands, ROK capital, Bithub, Gate.io, Alameda Research, Liquefy Labs, Genesis Block Ventures, Petrock Capital, DuckDAO, NGC Ventures, etc., and are also supported by the Solana Fund. Actively attracting KOLs to join.
Governance DAOs
Governance DAO refers to the use of tokens to decentralize project governance rights to the community, thereby realizing community-driven and decentralized governance. Token holders can propose, vote, and govern projects. This type of DAO is essentially not much different from the model of using FT to govern the community in the DeFi protocol, except that the theme is NFT, and most of the governance DAOs include NFT trading platforms and projects that combine NFT and finance. The table below summarizes NFT-based governance DAOs:
Featured Project Rarible
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Proposal topics for the Rarible community in July 2021, source: Snapshot
TokenRARI
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Top 100 RARI holders position distribution, source: Dune Analytics
GuildDAO
The guild DAO is closer to the "company" model in the real world. It is essentially a distributed company that provides certain services based on specific tasks, including resources, facilities and talent support. The specific services include sales, operations, and financial services. , management, etc. We believe that this type of guild DAO can be used as a reference for future corporate organizational structures and human working models. Currently, such guild DAOs are relatively early in the NFT field. The main projects include the YGG DAO behind Axie Infinity and the Metaverse virtual wearable DAO Metafactory.
Featured Project - YGG
We won’t repeat the popularity of the popular chain game Axie Infinity here, but the model of the YGG guild behind it is worth thinking about. The YGG guild is similar to a "talent company". It was founded by Gabby Dizon, a senior game development expert in the Philippines. It consists of tens of thousands of game players. The guild's income mainly comes from investing in Play to earn games and NFT assets in games, YGG scholarships, advertising sponsorships, etc. . Token holders have the right to manage the community and share in community profits. We believe that the model of the YGG guild has the following three highlights:
Establish YGG Scholarship to generate cash flow for the community
YGG scholarship means that YGG guild lends the assets of Play to earn games (such as Axie elf) to guild members. YGG takes 10% of the game income from the players, and provides corresponding game training and guidance to the players. The main scholarship members of YGG Scholarship come from impoverished college students in the third world such as the Philippines, Indonesia, Venezuela, Brazil, etc., among which the Philippine Scholar accounts for 30%. At present, one tenth of the players in the YGG guild are Axie Infinity scholarship players. Lending game entry props to players lowers the entry threshold and helps attract new game players to join. For scholarship players, it realizes "Free to play, play to earn". The scholarship players in YGG Scholarship brought in-game income and brought considerable cash flow income to the YGG Guild treasury. The YGG scholarship makes the guild more like a "company", and scholarship members make money for it.
Invest in Metaverse chain games to expand the territory of Metaverse
People are familiar with YGG mainly because of Axie Infinity. In fact, the YGG guild is a Metaverse game fund. In addition to Axie Infinity, it also invested in several Play to earn metaverse games based on the opinions of members of the guild, such as The Sandbox, F1 Delta Time, Zed Run, League of Kingdoms, etc., the investment value of these investment games are potential sources of cash flow for the YGG guild treasury in the future, and the token YGG is like an index of Metaverse games. In addition, under the unified YGGDAO, each game has its own DAO organization, and each DAO organization has its own different rules. The main DAO provides resources for the DAO of each game, and part of the income of the DAO of each game belongs to the parent DAO. Different DAOs will have their own tokens, and token holders can propose or vote in their own DAO. The DAO and YGGDAO of each game are like the relationship between a subsidiary company and a parent company.
Utilize token economy ($YGG) to promote effective community governance
The native token YGG is an important factor for YGGDAO to turn the wheels. Users can pledge YGG tokens to obtain community voting and governance rights, game tutorials or skill improvement, special items, guild rewards, etc. according to the number of tokens they hold. Examples of guild rewards are the drainage of games in the guild: that is, YGG will provide token rewards to attract players to the game projects that the guild is optimistic about.
Five thoughts on the integration of NFT and DAO
NFT private DAO is worthy of attention
The private DAO dominated by the invitation system has been criticized for violating the essence of DAO because of its non-open principle, but we believe that the quality of NFT DAO members is more important than the quantity. The evaluation and investment decisions of NFT assets require professional knowledge and appreciation. Through KYC Or invited professionals may be more valuable to NFT DAO organizations than users with high currency holdings alone. For example, PleasrDAO made a Dao to Dao loan with Cream Finance based on the popularity and reputation of its members. We believe that users with large currency holdings may not necessarily have the most professional judgments, and at the same time, due to lack of professional knowledge of users, there may be situations where they are not actively participating in activities such as proposals, voting, and governance. Therefore, NFT DAO is not the more users, the better. Private DAO is more like an NFT expert group. The expert group has a good reputation on the chain, and the decisions and investments it makes are worthy of attention and reference.
Identity on the chain is an important application of the combination of NFT and DAO
Most of the NFT+DAO projects now essentially maintain the governance of DAO in the original DeFi world, but the theme of DAO organization is NFT, that is, the voting rights of DAO are determined by the number of tokens in the wallet address. The greater the number, the greater the rights and interests. DAO is governed by homogeneous tokens. This FT governance method may lead to situations where large households can affect the voting results through a flash loan. In addition, it is also possible that users with a large number of coins mentioned above may not have professional judgments and may not make truly beneficial decisions. community decisions. Therefore, we believe that the greatest application value of NFT in DAO lies in marking people's on-chain credit and on-chain identity. Specific examples of this kind of credit NFT are Uniswap's LP token and Bankless NFT representing members. In the future, what factors will be included in this kind of NFT that symbolizes credit on the chain is worthy of people's thinking and exploration, such as the degree of activity of members in the community (such as the contribution of high-quality content and opinions), and the role of members in social media such as Discord and Telegram (For example, social media group administrators can get NFTs that symbolize higher credibility), the number of proposals and votes of members, whether members have participated in multiple DAOs or have badges from other DAO organizations. Conversely, users with bad records on the chain (such as bad loan records) will also have corresponding NFTs.
Creator DAOs Are Hot, But There Are Barriers to Implementation
As mentioned above, the economic model of creator DAO can stimulate the economic creativity of long-tail long-tail creators. Creators can motivate fans through tokens, form small communities with fans, and share their copyright income with DAO organizations . In this mode, creators no longer need to rely on traditional content platforms, but can control copyright income by themselves. Creator DAO is an inevitable trend and direction under the concept of Web3.0. However, we believe that the creator DAO has the following difficulties in the specific implementation process: 1. It is difficult for the creator DAO platform to attract high-quality creators, and it is even more difficult to form a micro-economy with fans; 2. If the so-called "creators" issue The work is non-original, that is, the work is copied from other traditional Web2.0 platforms or NFT platforms. Are the copyright disputes and other legal disputes involved in it shared by the creator, the platform or the community? If the platform undertakes it, will there be a risk of personal privacy leakage? If the content received by fans is not original, what is the value of the content delivered by the creator DAO? 3. If some fans in the community only care about the fun or appreciation of the works themselves rather than the so-called on-chain ownership, how to ensure that the works of the creators of the platform can compete with the content of traditional Internet platforms? price strategy? How to improve user stickiness? These are issues that Creator DAOs need to face before they reach maturity.
Metaverse DAO or an important subset of future DAOs
We believe that in the context of the rapid development of metaverse, Play to earn, GameFi and other elements, Metaverse DAO similar to YGGDAO will be an important part of future DAO. They are like companies in the metaverse world, where players are employees and tokens are salaries. This type of DAO provides players with resources, specific counseling, and sends players into the game to make money for them, such as farming, fighting, developing real estate, etc., and then shares the income with players, just like the movie "Ready Player One". Technology company IOI. This type of Metaverse DAO may provide new occupations and types of work in the future, and cultivate more professional players. These new occupation opportunities may improve the current situation of involution in the real society, or actually improve people's lives like YGGDAO.
The type of asset allocation for DAO treasuries is still debated
According to DeepDAO statistics, currently the Top 1 tokens of most NFT DAO managed assets are their native tokens, such as Rarible's RARI, Decentraland's MANA, Aavegotchi's GHST, and NFTX. From a financial point of view, the diversification of DAO treasury assets is one of the important conditions for its sustainable development. If there is only one asset in the DAO treasury, native tokens, extreme market conditions in the market, or community protocols have security issues such as being attacked , the impact and loss on the community will be more serious, especially for NFT, an emerging and risky track, and its native tokens will also fluctuate more. Therefore, in addition to the native tokens, the asset allocation of the NFT DAO organization should also be matched with some assets that are relatively larger and more stable than the market value. But from the perspective of the community, if the community's native tokens do not occupy a dominant position in its treasury, it will have a negative impact on the community's commitment, confidence, member loyalty, and community stickiness.
