Over the last few weeks, we've seen the explosion of a new digital gold rush, with people spending thousands of dollars, sometimes millions, for the latest NFT or non-fungible token. NFTs have grown in popularity due to their implementation across different media markets like art, music, and gaming, but what's most exciting is their potential when used by DAOs, decentralized autonomous organizations. This combination of blockchain technology has the power to solve many of the problems facing humanity today, which is critical given the rise of new existential risks facing our species.
But first, Linda Xie explains NFTs best:
"Non-fungible token (NFT) is a term used to describe a unique digital asset whose ownership is tracked on a blockchain, such as Ethereum. Assets that can be represented as NFTs range from digital goods, such as items that exist within virtual worlds, to claims on physical assets such as clothing items or real estate."
The NFT movement has struck a cultural chord in recent weeks, with many essays and articles examining the implications for NFTs in today's new digital ecosystem. Much of the discussion currently resides in the economics behind the technology, asking why someone is willing to pay so much money for something that can be so easily replicated. Although this is an interesting conversation, let's put NFTs aside for a moment and dig into DAOs.
DAOS are organizations built on top of the blockchain. They are a popular part of new cryptocurrency projects, with ownership of a coin or token granting you governance or voting rights in the project's future direction. This innovation enables a form of democracy on the blockchain. With the blockchain creating a system of decentralized trust, strangers around the world can work together with full faith in the distributed ledger, without the need for centralized institutions. In an essay Why Decentralization Matters, Chris Dixon succinctly explains why cryptonetworks, i.e., DAOs, are so important:
"In short, cryptonetworks align network participants to work together toward a common goal — the growth of the network and the appreciation of the token."
Consider a DAO created for research in artificial intelligence. Members of the organization can vote on the ethical guidelines, project imperatives, and other codes of conduct tied to the research. Instead of private companies dictating the path forward, the people can. Now, this isn't an argument against capitalism or for socialism; it's one for technological governance.
To be part of this AI DAO, you must own the cryptocurrency associated with it, allowing the organization to raise funds and participants for their research. The DAO creators can do this according to their priorities, such as giving it away to AI developers worldwide or selling it on the open market. If the token is expensive, other DAOs may vote to use their treasury to buy some of the cryptocurrency, giving them a form of meta-governance, a voting stake in the AI one.
The future of society is one with many DAOs, and DAO partnerships, some exclusive with people priced out, others fully global with anyone being able to claim a seat at the table. In a DAO world, towns, cities, or countries may no longer define society's organizational structure because these DAOs will empower people to find their kin across the globe through shared passions, interests, causes, or skillsets. Imagine a DAO committed to saving the planet from environmental catastrophe. One that wants to go to Mars. Another that wants to end world hunger. The possibilities are endless and the result is more imaginative solutions to the problems facing humanity.
This is not to say DAOs are a perfect solution to all the complex issues facing our species. Still, the blockchain's nature means that most DAOs are likely to be fully public entities, with all governance decisions recorded on the public ledger, ensuring anyone can see the decision-making process. To borrow language from AI, this means fewer black boxes, fewer organizations making decisions without the oversight of humanity at large.
Back to NFTs. Many believe this is a booming market that's bound to crash, and that's not unreasonable to believe. Some of the art selling for so much now will one day be worth much less. Some will become far more valuable. Regardless of a future crash in the collectible side of NFTs, the technology is here to stay, especially when paired with the power of DAOs.
Although the NFT headlines right now are highlighting individual sellers, consider NFTS created by DAOs. Our AI DAO may create an NFT of a robot, which then provides special privileges, such as using the robot remotely for research. The environment DAO can make an NFT that represents wildlife preserved, with the funds being used to further preservation. A DAO for space travel can create NFTs for different rocks collected from the moon, with the money being used to develop commercial rockets that bring space travel to the masses.
These two blockchain technologies can work in harmony, creating an economic ecosystem that promotes democratic ideals and virtuous ideas. We're on the verge of "Web 3.0," and despite some of the challenges that may come our way, it's exciting to know that this new technology may be able to help us solve many of the issues looming in the coming decades.
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🧠Bonus Brain Bits🧠
Blockchain, NFTs, and DAOs are all part of a new language. Below are some essays that add more detail on these topics.
A Beginner's Guide to NFTs by Linda Xie
NFTs and a Thousand True Fans by Chris Dixon
Why Decentralization Matters by Chris Dixon
The Ownership Economy by Jesse Walden
NFTs Make the Internet Ownable by Jesse Walden
The Slow Death of the Firm by Nick Tomaino
Decentralizing the Minting of Non-fungible Tokens by Brian Flynn