What is the Buzz around DAO-Enabled NFT Platforms?
As popularity for Non-Fungible Tokens (NFT) continue to rise, let’s talk about decentralized autonomous organisations (DAO).
With more people getting involved in NFT trading, their purpose for creating and holding non-fungible tokens will vary, beyond just earning money or staking the NFTs for passive income. NFT holders are making millions of money selling JPEG images, video clips, GIFs and other digital arts in the form of NFTs. According to the data from Chain analysis, the market capitalization of NFTs has reached USD 41 billion by the end of 2021.
Due to such an overwhelming craze, many NFTs platforms have also been developed to benefit users and provide them with unique experiences. While every NFT platform is designed specifically to cater to specific needs such as gaming or trading, there’s a buzz around decentralized autonomous organisations (DAO), particularly, DAO-enabled NFT platforms.
Let’s discuss how NFT platforms are powered by DAOs in detail, how it differs from a standard NFT platform, and its benefits. We will also briefly share our breakdown of the concept of DAOs.
What is DAO?
The decentralized autonomous organization (DAO) is a blockchain-based organizational framework regulated through blockchain protocols and smart contracts. Through DAO, a group of people with common goals can come into an agreement to establish and run an organization. DAO provides the members with a safe environment where they can use the internet as a medium for communicating with each other and sharing values.
DAOs also arguably end the concept of bureaucracy, automating decisions through smart contracts and transferring the administer powers such as voting rights and proposals for policy changes to every member, not for some specific designation like CEO or board of directors.
What are DAO-enabled NFT platforms?
DAO-enabled NFT platforms offer features similar to any standard NFT platform, but they differ in regulation and how a platform operates. For example, a gaming-based DAO NFT platform does not require the involvement of any CEO or board of directors to allocate further decisions and execution of existing plans. Instead, DAO allows the members to come together on a decision and propose the changes.
How do DAO-enabled NFT platforms work?
DAOs are designed to bring transparency to the operating mechanism of an NFT platform. By automating the platform’s governance, DAOs remove barriers like interrupting centralized authority from the decision-making system. An NFT platform using DAOs doesn’t need to spend time deciding who can vote, who can propose changes to the NFT platform, and who is superior to whom. Let’s understand the working mechanism of DAO through an example:
An NFT marketplace built on Ethereum is decentralized and open-source. Anyone worldwide can join the platform and contribute to the ecosystem growth or even become a part of their developer community. That being said, the right to major decisions such as feature launch, expansion of tools, and upgrades remains with the original creators. DAO redefines this concept and brings autonomy by making members the “owners” based on how many tokens they own.
How can DAO-enabled NFT platform benefit users?
Following are the main benefits that DAO-enabled NFT platforms bring to the users:
Ownership
- DAO act as a decision-making tool for every NFT platform. It transfers the ownership rights to the hands of members instead of appointing a higher authority for it. Following are a glimpse of the ownership rights DAO offers:
- Members can review and suggest modifications to content moderation, auctions, and asset policy.
- Decisions in DAO-enabled NFT platforms are executed through smart contracts.
- Members can suggest additional feature integration changes and propose modifications to the existing features.
- Members can find out anything that comes under ‘policy violation’ and seek resolutions based on a collective opinion.
Voting rights
Voting in the DAO-enabled NFT platforms is regulated in three major steps- the proposals, votes submitted, and results. The NFT platforms allow every member to contribute to the platform’s governance by participating in voting and proposing the changes they want to see.
Rewards and income
NFT platform can offer any feature that helps users each reward and income. NOWADAYS, most NFT platforms are gaming-based to organize events such as NFT battles and temporary staking events for rewards and income distribution. Here, DAO plays a vital role since it allows users to decide the modes of generating rewards and income.
NFT Staking
NFT staking is how individuals can unlock their digital assets into the liquidity pool to generate passive income. The NFT staking feature is part of most DAO-enabled NFT platforms and is becoming more mainstream, with NFT holders seeking more ways to monetize their assets. NFT staking is also a great means to save the cost users spend on NFT minting and their trading.
NFT yield farming
NFT yield farming is similar to NFT staking. However, yield farming allows users to stake their NFTs and the NFT platform’s native token into the liquidity pool for reward. When regulated through the DAOs, an NFT platform can maintain complete transparency across the whole process of NFT yield farming and regulate a fair distribution of rewards, which can either be the tokens or the native currency of the platform itself.
The future is decentralized
Innovations and the constant development of technology have become integral to the digital world. In this chain, DAOs represent the next level of technological evolution as it replaces an organization’s centralized infrastructure with decentralized technology — blockchain. Likewise, the integration of DAO in an NFT platform indicates a future where every organization would be decentralized and autonomous.
Special thanks to Tremis Skeete, Executive Editor at Product Coalition for the valuable input which contributed to the editing of this article.
