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What is an NFT DAO? Here’s How to Get Involved

What is an NFT DAO? Here’s How to Get Involved

by corporate trash

10/10/2022

NFT DAOs are some of the most exciting and innovative applications of building a community with Web3 technology. DAOs — or decentralized autonomous organizations — empower NFT communities by allowing them to vote and decide on various aspects of the project they hold, including how to spend the funds in a community treasury.

But many owners of NFTs with DAOs don’t really know how to participate in them. Contributing to DAOs can be a rewarding experience that keeps NFT holders engaged in the project, its ecosystem, and the community.

What are NFT DAOs?

DAOs use the power of smart contracts to trustlessly execute a demand. These demands are what the DAO decides via on-chain votes.

DAOs use decentralized governance instead of a hierarchy to make decisions for the project — primarily how to use the funds in the treasury. They also allow for publicly viewable and transparent transactions for that community on the blockchain.

Some NFT DAOs (like APE DAO, rest in peace) issue a token for their holders to represent partial ownership in a vault of NFTs. This article focuses more on DAOs which are for holders of those specific NFTs — where one NFT equals one vote in the DAO.

When an NFT is sold from a collection like Nouns, the smart contract can automatically send a portion of that revenue to its DAO treasury to support future proposals. Sometimes this is a manual process for NFT DAOs.

More often than not, NFT DAOs are not fully decentralized. This means treasury funds are held in a multi-sig wallet, with all transactions needing majority approval (signatures) from the founding team before being sent.

A few examples of NFT projects with DAOs (with a treasury) include:

How to Participate in an NFT DAO?

There are multiple ways to get involved with an NFT DAO and win funds to build from the community treasury with your big idea. But it starts even before the idea, by being active in the community, then submitting a proposal.

Understand How the NFT DAO Functions

Every NFT DAO has their own process for taking an idea to on-chain proposal voting, then to execution. Before you dive into an NFT DAO, it’s a good idea to understand the basics of how the DAO functions.

Here are a few questions to answer, amongst others:

  • What is the DAO typically used for? Look through past votes and what has passed.
  • What’s the vision for the DAO? This is often answered in the DAO’s documentation.
  • How does an idea go to proposal for a final vote?
  • What is usually included in a proposal? (i.e. rationale, budget, goal)
  • What is the voting quorum? 10 percent is standard, but some DAOs have dynamic quorum based on ask.

Tune into Discussion

Before you have even considered posting or sharing your proposal, the community should know who you are by being a genuine, active participant. If you’re not already a part of community discussion and contributing, your idea — no matter how good — is likely to fall flat on its face.

This is especially true of NFT communities, where community members garner unspoken reputation and trust over time just by showing up on Discord and Twitter.

Every proposal has a quorum — or minimum votes to pass. To reach that quorum, you’ll need the community behind you. To get the community behind you, you need to be somewhat known within it.

Test your Idea on Discord, Discourse, and Twitter

Before an idea gets to proposal, the community needs to see it, vet it, and changes will likely need to be made. Each NFT DAO has their own process to go from idea to proposal, but in all of them, there is discussion before going to a final vote.

By sharing your proposal idea wherever it’s relevant, you’ll be able to refine it and get it just right before sending it off to vote. Keep in mind, if you fail on the first vote, you can always refine more with community feedback, then propose it again.

Create a Proposal

Proposals from community members are how DAOs decide how to allocate their funds. One NFT equals one vote, and the entire community can vote on a proposal, on-chain.

Each DAO has their own rules and regulations about who can create a proposal, and what information they need with the submission. Some proposal creation processes are extremely in-depth, while others have less criteria. A general rule is that you need to own at least one NFT to submit a proposal.

The TriWizzy Tournament proposal posted to the Doodlebank — the Doodles treasury.

The basic needs are: a summary of the proposal, why it benefits the community, approximate budget, time duration, who is involved and why they are passionate about it. It’s somewhat similar to a business plan in Web2, or preparing a new strategy document for your boss — except the entire community will vote to approve it.

For example, projects like CryptoCitizens utilize proposals for community votes on which city they will do IRL mints in next. The more CryptoCitizen tokens one owns, the more weight their vote has. 1 NFT equals one vote.

Vote on Proposals

Participating is not just about getting your own proposals to pass; it’s about contributing to existing ideas and proposals in the community as well.

An owner of an NFT which has a DAO can use their token to vote on proposals for the future of the organization. Regular DAOs are for people who own fungible tokens, but NFT DAOs are for those who own ERC-721 (or sometimes ERC-1155) tokens.

Nouns DAO Proposal Voting
Nouns DAO Proposal Voting

There is no need to have an additional governance token; the NFTs themselves can suffice for voting power. However, sometimes DAOs create a token so that those outside of the NFT holders may also participate. A DAO is governed by code, not by people, so there is no way to cheat an on-chain vote.

By voting, you signal the types of ideas you support. With a platform like House of Nouns, you can validate your votes with a comment on why you voted how you did.

Connect with Community Members

Get to know who is submitting proposals by finding their username, ETH address, and social profiles. Many DAO voting operations platforms convert ETH addresses into ENS names, so that it’s more clear who exactly is writing the proposal. This allows holders to reach out and connect with other community members if they can also help bring the proposal to life.

Additionally, you can Etherscan token tracker to find the biggest holders in any project, and message to them for direct feedback on your idea or proposal.

NFT DAOs likely have a huge pool of talent right within their holders. DAO proposals help publicly surface and apply these skills in order to move the NFT community forward.

TL;DR: Contributing to NFT DAOs

It is said that up to 90 percent of eligible DAO participants are passive. They don’t engage in voting, creating proposals, or building a name for themself within the DAO.

For an NFT DAO to be successful in accomplishing its goals, it needs wide representation across its holders. Contributing isn’t only fun, but it allows NFT holders to directly affect the future of the collection.

Getting involved is a win for the builders within a project’s community, but also for the project itself.

For creators: Collective can help keep your most active collectors engaged. Reach out today to set up your community and NFT DAO governance on Collective.

Follow Corporate Trash on Twitter: @corporatetrash1