Daos in NFT – Useful Tools or a Trap?

DAOs in NFT - useful tools or a trap?

NFTs, despite all the ups and downs in the market, remain the fastest-growing segment of the crypto space and show signs of recovery. One of the recent NFT trends is the integration of DAOs, which are traditionally more associated with the DeFi sphere.

So, it is definitely worth it to look at how and why NFT projects use DAOs and how decentralized organizations influence NFT marketing.

Peculiarities of Dao in Crypto

Blockchain technology and smart contracts: how to attract community members to NFT from DAO | Smart contracts and community members that traditional organization cannot offer

Decentralized autonomous organizations are in a curious state right now. On the one hand, they are trending, so lots of developers and executives are interested in implementing them. On the other hand, the same developers and executives have a lot of concerns regarding DAOs since they necessitate significant changes in business and management processes.

We decided to address the most pressing of these concerns and answer the most popular questions about DAOs, their quirks, and their potential for business. After all, decentralized organizations are not as scary and complicated as people often think.

Сan Dao Undermine Your Project?

One of the most common concerns of emerging NFT developers regarding DAO is the loss of control over their projects. It is scary to let someone else make decisions about your prized creation.

However, communities in crypto are extremely robust and understanding – DAO voting rarely results in a stupid decision.

What Control Do Developers Have?

Developers are able to define and limit the authority of DAO (prior to its launch, of course). Typically, questions like approving changes to the platform’s rules, unlocking funds, or approving grants to contributors are decided by token holders’ voting. But in some cases, it can be a good idea to let them decide on partnerships with other projects and so on. It is very much possible to maintain a balance between community power and developers’ ability to exercise control over the project.

Naturally, there are also cases where DAO was added to a project as a misleading ploy, and token holders have virtually no power over the project. In most cases, such an approach backfires heavily.

Are Crypto Daos Legal?

decentralized autonomous organizations (daos) and rare NFTs: how to attract crypto enthusiasts?

As a general rule – yes. As long as crypto, in general, is not outlawed in the jurisdiction in question, crypto DAOs are also legal.

A much more complicated question is whether DAO decisions can be legally enforced off-chain. This is a “grey area” in most developed countries.

It would be a wise strategy to stick with DAO operating on-chain only for the near future.

How Can You Gain More Profit With Daos?

Despite the fact that one of the main functions of DAO is to prevent a blatant money grab by a single player at the community’s expense, decentralized autonomous organizations have great potential to make any crypto project more profitable.

DAOs provide a huge benefit from a marketing point of view. Establishing positive and meaningful relationships with the audience is extremely important in crypto in general and in the NFT space in particular.

We will talk about the marketing and PR benefits of DAOs for an NFT project further down the line.

How NFT Projects Use Daos

NFT projects and platforms integrate decentralized autonomous organizations into their business model in a variety of ways.

Community Governance

That is a more or less “traditional” DAO application – emerging NFT projects can use protocol DAOs to ensure that the voice of the community will be heard. 

For example, DAO members can pick the theme of the next collection that will be drawn by the artist. It helps artists to establish effective communication with their audience and maintain the community’s interest in their work.

Another function of governance DAOs in the NFT market is selecting emerging NFT creators. Foster marketplaces use voting for this purpose quite often.

In some cases, DAO becomes a sort of “side project” to NFT. A good example is MeebitsDAO – holders of Meebits NFTs use it to build a metaverse around their avatar tokens.

Collective Ownership DAOs

NFT prices can be quite hefty, and collective ownership DAOs are one way the crypto community answers this challenge. 

Votings of DAO members determine what will be done with the token the community owns, and blockchain-based smart contract makes sure that there is no foul play. Essentially, such investment DAOs are the only reliable way to ensure true collective ownership of any digital asset, including NFTs.

NFT Creators’ DAOs

A wide-spread and active community is the key to success for any digital artist, especially if they want to use NFTs to monetize their work. But only already famous artists can establish such a community with relative ease. Emerging NFT creators have a much harder time reaching the audience.

So, some artists pool their resources together via decentralized autonomous organizations. Such a collective, relying on blockchain technology, helps its members to raise funds, market their arts and collections, and so on. Typically, artists have to sell their NFTs to get DAO tokens and become a member of the community.

In a way, this forms a two-way symbiotic relationship since NFTs essentially work as collaterals backing the DAO token.

NFTs as Governance Tokens

An interesting approach to the interaction between NFTs and DAOs is the use of non-fungible tokens as governance tokens – only NFT holders gain the right to vote.

This creates a unique dynamic since every vote can be directly linked to a specific token. Naturally, this poses significant challenges to privacy. Thus, this is not a particularly popular approach, although it is extremely successful in some DeFi applications.

How to Use NFT Daos in Marketing

A decentralized autonomous organization can provide a number of marketing advantages to your NFT project, be it a collection, a marketplace, or any other NFT-related platform.

  • Transparency and community governance help boost the project’s public image.
  • DAO helps to build a robust and active community by giving voice and actual power to the community.
  • DAOs provide reliable feedback – voting is a much more powerful tool to gauge the audience than any poll.

Decentralized governance (or at least some elements of it) is already perceived as an almost mandatory component of a modern crypto project, including NFTs. So, it is very easy to use DAOs for marketing – much easier than to explain to the audience the reasons for not having one.

Who Can Assist With NFT Promotion via Dao?

Effective promotion is a key aspect of a successful project, relying on DAO – without a thriving, active, and loyal community, NFT can’t exist properly.

Moreover, the effective use of DAO for NFT promotion necessitates changes in marketing approaches in comparison with more “traditional” projects, so specialists with specific experience in working with DAO communities are required.

The professional team at ICODA provides comprehensive promotional services for both emerging and already established collections. Whether you need to make sure that your NFT will gain enough momentum or galvanize your existing community – just contact us, and we will take care of the entire promotion for you.