A Decentralized Autonomous Organisation(DAO) is an organization that is built using smart contracts on the blockchain, with its rules transparently written in a set of codes. The governance of DAOs is similar to democracy as they do not have an independent authority but are governed by members.

Basically, a group of people with a similar goal come together to form an organization. In this case, a DAO. But instead of the traditional method of buying shares to get voting power, members buy tokens or NFTs. Then, each member has voting power based on how many tokens or NFTs they hold. After voting, whatever decision they reach is implemented by the smart contract.

DAOs may be classified into many categories based on their modus operandi, structure, and technology, as shown below:

Protocol DAO

Protocol DAOs are governance structures in which tokens are used as a voting measure for enacting protocol modifications. MakerDAO, for example, has transformed the DeFi industry with its DAI stablecoin.

Collectors DAO

Collector DAOs are focused on the NFT ecosystem especially. They allow members to collectively own a fraction of different high-priced digital assets.

Service DAO

Service DAOs are projects like MetaverseDAO, providing talent-seeking services and supporting acquisition models to people and agencies.

Investment DAO

They’re also known as Venture DAOs because they allow capital pooling to democratize DeFi investing. Finally, investment DAOs are popular among millennials because they are transparent and accessible to anyone worldwide.

Entertainment DAO

Entertainment DAOs provide decentralized entertainment by allowing artists to bring their ideas to reality while maintaining control over their governance. Flufworld members, for example, can customize 3D NFT Flufs (a collection of one-of-a-kind bunnies) and license them.

Media DAO

Media DAOs allow content product owners (i.e., readers) to contribute directly to the native token as a reward for their contributions without requiring advertisers. For example, Forefront provides a wealth of resources for DeFi enthusiasts, such as a crypto teaching center and growth choices for incubated enterprises.

Social DAO

Social DAOs are collaboration platforms for social networking in the crypto world, such as Blockster. These platforms provide a sort of digital democracy in which everyone’s voice is heard, and individuals may share common interests.

Grant DAO

In a Grant DAO, the community contributes money to the grant pool and votes on how the funds are allocated and distributed. These DAOs are used to fund innovative DeFi projects, demonstrating how decentralized communities are more flexible with funding than traditional organizations.

What is an NFT?

NFTs (Non-Fungible Tokens) are one-of-a-kind digital assets that cannot be replaced. To put it another way, if you sell a Bitcoin and acquire another, the value of both remains the same. However, each NFT is distinct, even though they appear identical. Therefore, it isn’t the same when you sell an NFT and replace it with an identical one. NFTs are primarily digital art, such as music, drawings, and animations.

The Connection Between NFTs and DAOs

• As previously stated, one of the ways NFTs and DAOs are linked is through collector DAOs, a type of decentralized organization dedicated to creating NFT communities. Usually, buying a popular NFT can cost a lot of money that most investors cannot afford. Collector DAO allows investors to pool their funds to buy an NFT. This means each investor owns a fragment of the NFT. Take, for example, PleasrDAO. It’s a group of DeFi pioneers, early NFT collectors, and digital artists who raise money for extremely valuable NFTs. PleasrDAO members collectively share the cost and ownership of all the NFTs it purchases.

• Apart from allowing investors to fractionally own NFTs, DAOs also help in NFT project governance. They help members of the NFT community to come together and make decisions about the future of the NFT project. DAOs also help them enforce the decision reached.

• Also, because an NFT project’s success is largely dependent on widespread support from a passionate community, NFT projects can benefit from the community-building feature of DAOs. Using DAOs as an avenue for crowdfunding, people can support new artists and projects by collectively pooling funds and deciding on what project to support. All of these are done using a DAO.

Conclusion

NFTs and DAOs each play vital roles in the relationship. For example, NFTs can be used as governance assets in a DAO. DAOs also help with governance and community building for NFT projects.