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Yield Guild Games
September 12, 2022

What is a DAO NFT and How Do They Work?

In our opinion, the name sounds semi-religious, it’s important to note that this is not the case. DAO is actually an acronym for decentralized autonomous organizations (DAOs). There are various types of DAOs, each looking to accomplish a specific purpose. Should you belong to a DAO and can anyone join? Let’s understand the ins and outs of what is a DAO in NFT.  

All About DAO

As we said, DAOs are decentralized autonomous organizations governed by NFT community members and not a central government body. How do the community members lead these groups? With tokens and NFTs that offer voting rights. The tokens or NFTs or both are similar to stocks and stakes in a company. So, token holders can be likened to shareholders – the larger stake you own, the more control you have.

Decentralized autonomous organizations are safer because they operate via smart contracts. Smart contracts automatically carry out predetermined conditions and execute certain commands when these conditions are met.

The rules of each DAO are public and stored on blockchain technology. This gives 100% transparency to the inner workings of how the DAOs operate. The purpose of a DAO is to offer transparency and decentralized governance democratically to token and NFT holders.

There are several types of decentralized autonomous organizations, and you don’t even have to join one that’s established because you can create your own!

How Did They Come About in the Crypto World

So, what does a decentralized autonomous organization have to do with NFT projects? As we mentioned, there are several types of DAOs, and one type involves NFT projects. This type of decentralized autonomous organization would pool assets together to acquire rare and expensive tokens from NFT projects that each member wouldn’t otherwise be able to afford.

DAOs can also create their own NFT projects through community governance and create a roadmap in which each member of the NFT project can contribute ideas and have a hand in the outcome and future. DAOs can also give a leg up to smaller NFT projects by building a supportive community. These DAOS can also help raise funds for projects and help push them towards the goal.

How Do They Function?

How exactly does a decentralized autonomous organization work? Simply put, the DAOs have a set of rules which they abide by, and these regulations are established within smart contracts, which are built on blockchain technology for all to see. When criteria are satisfied, the smart contract executes the results. 

The fact that the conditions are made public has many benefits. In the NFT world, many NFT creators have to spend time ensuring the community that their project is legit and not just a money grab. NFT owners and supports are afraid of one common thing – rug pulls. 

So, being able to view the conditions of the smart contract brings a level of transparency to the decentralized organization as opposed to a traditional organization, which may not list everything publicly. 

Decisions are made through members’ voting power, and there is no higher authority that could intervene with voting results. This is why the control lies solely within the community members. 

In order to be a part of the DAO, a person would need to own the tokens, whether it’s an NFT or a crypto token. The rules of each DAO varies, because the creators have complete control and can dictate the terms.

What can you vote on? Many things, from how to spend your pool of funds to what the future of the organization will be.

How Do NFTs and DAOs Work Together?

How does a DAO work with NFTs? Let’s find out.

• Governance

We know that DAOs create governance in the NFT space, which is largely unregulated. NFT creators, fans, supporters, collectors, and people of all roles can come together and have a say in how things are done. It’s similar to businesses in the real world but offers more control and transparency to the people. 

• Ownership

You also get collective ownership of valuable assets that you may not have the funds for on your own. Some NFTs can be very pricey, just as Decentraland land parcel owners and BAYC holders. 

• Collectives

A decentralized organization can also offer plenty of support to NFT creators wouldn’t otherwise get. They can also raise funds to help the creator of an NFT project realize long-term goals on their roadmap. It’s a win-win “business” for all!

What is the Relevance of DAO NFTs in Business Today

Why would a traditional business care about what a DAO is in NFT? The decentralized governance concept is relatively new in the business world. Understanding how DAOs are run can potentially offer new opportunities for governance in an existing organization.

The business models of old operated from top to bottom with a founder, CEO and maybe a board of directors up top and the power trickles down from there. Basically, the few (central authority) controlled the interest of the many, which saw almost no control in the hands of the community (employees).

NFT DAOs focus on community governance and power equalization that large corporations didn’t have before. Some may be taking steps towards this new model of community governance as it has seen some success. 

What to Consider When Creating a DAO

We said before that token holders don’t have to join a DAO, they can create their own decentralized governing body. To do so demands a lot of your own research so we have done the legwork for you.

Setting a Roadmap for Your NFT

DAOs are usually tied to an NFT project. In order to entice and appeal to your DAO members, you need a clear roadmap of what your NFT project plans to do. The roadmap is your “vision”, if you will, and should be clear and concise. Nothing turns off those in your DAO as convoluted and murky outlines.

It would help if you break up the end goal into more achievable and measurable milestones by which your community can see real results. Your long-term plan is one of the key pillars of successful projects. 

NFTs + DAO + Vaults: How Do They Work?

We know NFTs (non-fungible tokens), and now DAOs, but what are vaults? A vault in this case is very similar to a vault in the real world. A DAO vault is where your pooled digital assets are “locked up”, kind of like if your community put cash into a bank vault.

The future of the assets in the vault would be decided via member voting rights. Is the purpose to grow what’s in the vault over a number of years? Or is the DAO looking to invest the amount right away and acquire rare NFTs on the Ethereum blockchain?

Different Types of DAOs

When establishing your DAO, it’s important to decide which type of DAO you want to create, and this is based on what you plan to achieve.

• #1: Social DAOs

First up are social DAOs. As the name suggests, these DAOs are all about community. The NFT community can seek out this type of DAO for collaborations, unification, and connecting with like-minded people.

• #2: Investment DAOs

An investment DAO is largely for fundraising for DeFi. People who join this type of DAO could be looking for some crypto/NFT-related trading and investment advice and together with the other DAO members, people would vote on how to invest the assets. Investment DAOs may not require you to hold a certain NFT or token to join. 

• #3: Entertainment DAOs

If you are a fan or holder of BAYC (Bored Ape Yacht Club) NFTs, then you may have heard that they want to create their own entertainment DAO. The members of an entertainment DAO get together and brainstorm ideas on how to lead projects.  

• #4: Protocol DAOs

What you can find in protocol DAOs is decentralized finance. Through a smart contract, one could enlist the help of protocol DAOs for financial services. Sushiswap is a good example of a protocol DAO.

• #5: Collector DAOs

A Collector DAO is the one that seeks out blue chip NFTs, and expensive and rare ones to own collectively. You would lock up your assets in a vault shared in the collector DAO to buy a valuable NFT. A collector DAO works to help you obtain NFTs you wouldn’t be able to on your own.

• #6: Grant DAOs

Lastly, a grant DAO is exactly what it sounds like, a DAO similar to collector DAOs in the sense that they also pool assets together, but instead of purchasing NFTs, the members would vote on how to allocate the funds. 

Which DAO is for you? We have listed out the most commonly seen ones. It’s up to you to decide the role you want to play in an NFT community. Are you largely a collector of rare pieces? Then a collector DAO is a great option. If you want to fund worthy initiatives, then a grand DAO is where you should be.

Examples of Popular and Successful NFT DAOs

Are there some examples of NFT DAOs that have proven to be successful? Of course, there are! Below are some examples that operate with more success than a traditional organization.

• Ape DAO


First up is the Ape DAO. We assume it is named as such since it was established by famous BAYC holder, Kylo.eth. BAYC and Cryptopunk NFTs were fractionalized to launch this DAO. It can be classified as a type of collector DAO because if you are a part of its community, you will own a part of these valuable NFTs.

• DAOhaus


DAOhaus is a unique platform that helps launch DAOs or helps you find one that matches what you’re looking for. You can choose to explore DAOs, and the platform will then list out options with data such as the number of assets it has, the number of members, and the number of tokens. You can also get vital information about the type of DAO it is. 

Once you click on it the DAO of your choosing, you will be able to see the its proposals and white papers. 

• SharkDAO


SharkDAO is one part of collector DAOs, where the community comes together to purchase rare and sought-after NFTs. It is on the Ethereum blockchain, but you can find collector DAOs on any blockchain of your choice. 


Yield Guild Games

The YGG DAO’s purpose is to focus on in-game NFTs. Community members would acquire YGG tokens, with which they have voting rights, and participate in events and activities. 

• Decentraland DAO

Decentraland DAO

Decentraland is one of the first metaverses (digital worlds) and has some of the most expensive land parcels on the blockchain Ethereum. By belonging to the Decentraland DAO, you can vote on the future of the metaverse and help govern it. Despite the land within being worth a ton (some millions), the metaverse is still governed by the DAO.

The Future of DAOs

So, what does the future look like for DAOs? It is clear that they serve many purposes, and some even have vital information about important NFT drops. We see the benefit of belonging to an organization that is decentralized, but can it prevent or spot a potential rug pull (quick money grabs)? What do industry experts see happening in the future?

It is our opinion that blockchain technology is here to stay, and while no one can say for sure, we do believe that there is a big chance that DAOs through the use of smart contracts could possibly replace the business structures of old.

However, before you invest in any projects or DAO, it’s important to do your own research. This can help you avoid fraud and rug pulls. Also, keep in mind that all NFT trading advice you receive from DAOs is just that – advice. The end decision is still your own.

If you find a DAO that suits you, remember to always use your voice. Your opinions and vote matter a lot in a DAO, especially within collector DAOs where you decide what projects to invest in. 


• How do I start my own DAO?

You can start your own DAO by deciding the purpose and goal of your projects and using execution via smart contracts. Have a clear roadmap in place, preferably with milestones. If you are thinking about collector DAOs, make sure every member’s voice is heard in the decision-making.


What is a DAO in NFT? It’s an organization that gives control to its people and not a central authority. Whether you’re looking to join one or to create one, make sure your DAO is a place of comfort, community, and fairness. This can be guaranteed through the use of smart contracts, which outline the conditions publicly.

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