By now, you’ve seen enough of your timeline transform into cartoon animals and 8-bit Punks to ask yourself “What the hell is going on?” I did too.
So you’re curious. But once you jump in everything has its own code. Its own language it seems. Even worse, everything has acronyms! Nothing is worse than the “industry-speak” that is acronyms. I’m in advertising, it’s horrible.
I wanted to talk myself, and you, through what these acronyms mean to the larger ecosystem, from an outsider’s perspective. How each one connects to the other.
This is my understanding of the acronyms that you see flying around Twitter, and my first-hand account of how it works. With these kinds of things, I think it’s best to stay curious, jump into the rabbit hole, and play around a little bit. Learning the functionality of it, and the culture behind it, goes a long way.
DAO (Decentralized Autonomous Organization)
A DAO is a team without a captain. What the acronym stands for is less important than what it is. Simply, there is a collection of skilled people who have agreed to work together on a certain product, goal, or business venture. Within this team, members will work with other members on X function of the overall goal, and then work with a different group of members on Y function of the overall goal. All the while, function A-Z is being worked on simultaneously by other members of the group. It is fluid by nature, without the traditional Coordinator, Manager, Executive, or C-Suite titles to be applied.
There is, however, a formal sense of governance that naturally emerges. Emerges, not imposed. The governance is established from the bottom up, not top down. As processes for voting mechanisms and product-suggestions emerge, the DAO becomes more efficient as the individuals become more organized.
It is a fluid, informal system. We are, after all, at the very beginning of a completely new organizational structure. The first inning, the one yard line, season one episode one of Grey’s Anatomy.
DAO’s communicate through multiple forms. Some of which I’m not aware of. One of the most popular methods, though, is through Discord. Here, the DAO can build a community.
I’ll come back to this.
NFT (Non-Fungible Token)
The most popular NFT projects to date are avatar-based collections. It’s important to separate the two aspects of the “NFT”. First, right now you have the art itself, which is the commodity. You can right-click and download the image no problem, as you could off of google images for the past decade plus.
This is where the “NFT” portion comes into play. To notify owners that their ownership is in fact verified. There is a “token” appended to the piece of art which is etched into the underlying blockchain that verifies each piece. The token is the identifier. This is how you can trace exactly when and where this item originated. You know immediately whether or not the piece of art you are buying is from the collection, or artist, it says it is. In the majority of cases, the underlying blockchain is Ethereum.
NFT stands for Non-Fungible Token. That, of course, is not art. For the stage of adoption we’re at right now though, that is what it means for 99% of people watching the space. So, for now, they can be used interchangeably.
These collections have generated a perceived value through scarcity, age, and a hard-to-identify, Jacobellis v. Ellis-esque, insanely subjective metric know as a “cool factor.”
Scarcity. When focusing on a specific project, there just isn’t a lot out there to own. Supply and demand drives the price up. A common cap on collections is 10,000. After that, good luck.
Age. The concept of minting (creating; placing a piece of art onto the blockchain and making it an NFT) is not as new as many believe. Early projects date back to 2017. This is in part why EtherRocks and CryptoPunks are selling for millions of dollars.
Cool factor. Sometimes, you like the art. It’s cool. Some may agree, and you hope they do. Some may not, but that’s art in a nutshell, so it is what it is. Bored Apes look pretty cool. Generative art is pretty cool. It’s very subjective, and fickle.
Community
After a DAO has created an NFT collection, they need to distribute these pieces of art to buyers. This is where a rabid community becomes important. Remember the Discord mention above?
It’s very common for these NFT projects to have their own Discord server. This is where outsiders can join the community and see what the teams are working on. Roadmaps, help desks, web-3 chats, and suggestions all live here. People can enter as a newcomer and become a known community member and contributor rather quickly. Then, as the community grows, the attachment to the project increases.
But, certain sub-channels of these Discord communities can be locked. Verifying ownership of the collection can be the only way for people to gain access. In my experience, this was done through an extension called Collab.Land.
Collab.Land asks you to connect your digital wallet, most commonly MetaMask, which is where your NFT art is stored, and verifies that you own the piece necessary to unlock access. From there, the Discord can update your status and you are granted permission to this brave new world.
A great way to gate-keep trolling or lack of contribution is to require a monetary investment. Skin in the game. Weed out bad actors.
Verifying ownership, community access, special membership. This will be used in sports with season ticket holders. This will be used for Country Clubs. This will be used.
If you need more convincing, Chris Dixon lays it out best right here.
The next big thing will start out looking like a toy.
PFP (Profile Picture)
Right now a popular way to signal that you’re a member of a certain community, a man/woman of status per se, is to change your profile picture to the image that you own. That is why you see so many 8-bit Punks and sleepy Apes on your timeline. This means something to a lot of people outside of just monetary value. Us humans love status signaling and “belonging” to something bigger than ourselves.
Discord channels across the world are organizing meetups, plotting future investments, making friends, and changing the world through communities that are enabled by these profile pictures and the underlying meaning.
It will, of course, become so much more than this soon.
Fractional Ownership, sub-DAO’s, and new IP
My knowledge of this comes mainly from testing it out myself. This thread is the exact experience I had. We both own a fraction of CryptoPunk #8271.
Now, fractional ownership is interesting enough. Luckily, people around my age have been introduced to fractional ownership through things like Bitcoin, Robin Hood, or Masterworks so the concept is easy to grasp. To recap the process from the Twitter thread, our journey looked like this:
A DAO called PartyBid created a product that allows random strangers to collectively pool their ETH, and bid on an NFT.
Packy sounded the alarm, and over 300 people chipped in to buy this Punk.
After the group’s bid had won, those who supplied ETH were awarded tokens. These tokens are specifically tied to the Punk that we bought. Signaling ownership.
The tokens were sent to our MetaMask wallets.
Then, we joined a Discord. Collab.Land was used to verify ownership and we were off to the races.
But what is so cool, and so new, is what the fractional ownership unlocks.
I am now in a Discord channel with roughly 100 people. We’re operating as some kind of sub-DAO, calling ourselves PipeFam. We voted on the name through a poll, conducted directly on the Discord channel. We’re building out a structure for the discord for all of us to contribute. We’re building a framework for this Punk’s future.
We collectively own 1 Punk out of 10,000. Commercial rights to 1 out of 10,000. We are free to deploy this little guy in any way we see fit.
We’re creating our own IP. We’re like little hornets, buzzing around on Discord, jumping into Google Docs, making live edits and suggestions on everything from what his name should be, to how he got his pipe. This backstory matters because as we build out IP, this can become its own comic strip. It can become its own franchise. The IP can come to represent something more than it already does. Blue skies, baby.
I am quite obviously intoxicated by this space, so you can call me a capital B-Bull. As with most things that have unlimited ceilings at their conception, this will change as time goes on. But right now, when everything resembles a playground and there are no rules – the opportunities are endless.
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If you want to learn more, here are two great places to start:
Read: Not Boring – The Cooperation Economy
Listen: Chris Dixon – The Potential of Blockchain Technology
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If you liked this, and are interested in more thoughts from my smooth brain, hit the button below and let me know what you’re interested in. The more crazy shit to follow, the better.