Home Blog The Exciting Revolution and Evolution of DAOs and NFTs

The Exciting Revolution and Evolution of DAOs and NFTs

July 26, 2022
Collage signed with NFT token. Abstract NFT collage.

Sitting at the cultural crossroads between traditional centralized markets and decentralized digital properties, blockchains are revolutionizing the entire concept of business. The Ethereum blockchain, developed as a network of smart contracts, gave birth to paradigm-shifting decentralized autonomous organizations (DAOs) radically disrupting our traditionally centralized world. DAOs are exciting new legal platforms, offering unconventional investment models for tech-savvy wunderkinder banding together to buy wildly popular and valuable digital collectibles known as non-fungible tokens (NFTs). By trading in NFTs, DAOs efficiently amass liquidity, enable profit-sharing and empower members with voting rights while maintaining an equitable collective group with no centralized leadership.1

Read on to boost your tech savvy with details about the exciting revolution and evolution of DAOs and NFTs, including complex legal issues that have challenged the existence of DAOs and sensational predictions for the future of NFTs.

Why Are NFTs so Valuable?

The concept of non-fungible tokens (NFTs) originated on the Ethereum blockchain platform, which also houses the Ethereum (ETH) cryptocurrency. The Ethereum platform was purposely designed to boost the value of digital assets by allowing developers to create NFTs via an interconnected and verifiable ledger of ownership and communications, or blockchain. This means that every NFT is a unique and verifiable token or ledger entry recorded on the blockchain. Because NFTs are created as unique, one-of-a-kind digital assets endowed with all the prestige of original works of fine art, ownership of NFTs can be as glamorous and lucrative as that of fine art originals and other premium collectibles.2

Two enterprising Canadian digital artists, Matt Hall and John Watkinson, developed the first NFTs with their creation of CryptoPunks digital images. Unique, retro-cool and highly pixelated, CryptoPunk avatar images hit the market in 2017 and generated a spectacular feeding frenzy among the rich and famous. Check out a recent list of the five most valuable CryptoPunks on the NFT Market:2, 3

  • CryptoPunk 5822: $23.7 million
  • CryptoPunk 4156: $10.26 million
  • CryptoPunk 5577: $7.7 million
  • CryptoPunk 3100: $7.58 million
  • CryptoPunk 7804: $7.57 million

The most expensive NFT sold so far is by Mike “Beeple” Winkleman of Beeple Artwork, called, “EVERYDAYS: THE FIRST 5000 DAYS.” Essentially a collage of Beeple’s early artworks, this NFT was the first token to be sold at the world-renowned Christie’s Auction House and fetched a whopping $69.3 million.3, 4

The Genesis of DAOs

Legal innovations throughout history have enabled parties to organize, devise frameworks for funding ventures, and create opportunities for profit while managing risk. In one of the earliest innovations, ancient Romans created the societas peculium and societas publicanorum. They were essentially commercial organizations providing limited liability while enabling parties to share in the profits and losses of an enterprise. These days, a vast array of written documents and legal rules govern commercial organizations, enterprises, and corporations. But with the revolutionary rise of blockchain technology, legal rules and written documents can now be digitized into smart contracts and implemented via computerized code.5

DAOs represent the most recent innovation in human organizations. Connecting disparate parties via code-based networks, DAOs rely on smart contracts to govern and automate operational activities, revolutionizing internal controls and organizational efficiency. As with many revolutions, however, the path to success is often guided by lessons learned along the way.1, 5

Some of Ethereum’s earliest adopters formed “The DAO” in 2016, the first experiment utilizing smart contracts for coordinating and managing a commercial enterprise. “The DAO,” also known as “Genesis DAO,” planned to serve as a venture capital fund for cryptocurrency-based projects. Although The DAO quickly amassed $150 million in member contributions, it promptly lost about $50 million to a hacker before making even one investment. Troubles soon mounted due to a lack of legal structure which placed The DAO in the crosshairs of the U.S. Securities and Exchange Commission (SEC). The DAO summarily disbanded, with many people seriously questioning the value of decentralized autonomous organizations.1, 5

Evolving the Legal Sustainability of DAOs

The momentum gained in the first evolution of DAOs did not wane with the legal setbacks. Developers began experimenting with new governance models and increased tooling to solve legal challenges. Aaron Wright, CEO and co-founder of Tribute Labs (previously named OpenLaw) is an Associate Professor of Clinical Law at Benjamin N. Cardozo School of Law. Launching OpenLaw DAO in 2017, Wright and David Roon, a Swiss software engineer, began advising companies on embedding legal contracts into the blockchain.1, 5

In the next evolution of DAOs, Wright and Roon formed The LAO, organized in Delaware as a limited liability entity in full compliance with U.S. law. The LAO provided a legal structure enabling members not only to offer grants but also invest in blockchain-based projects in exchange for utility tokens or tokenized stock. In one year, The LAO went from $0 to over $30M in ETH contributions and its decentralized group of members helped support more than 65 projects.1, 5, 6

“The decision-making has been pretty great,” said Wright. “Instead of having a few people in charge like in a VC fund, you have a collective group.” He added, “It’s created a hive-mind.”7

The Expansion and Evolving Value of NFTs

In October 2020, deciding to invest in NFT artwork as well as NFT projects, Wright and other members of The LAO launched Flamingo DAO and trekked deeper into decentralized space. In just one year, Wright reported, “it [Flamingo DAO] started with a contribution of about 6,000 ETH ($6M at the time) and now if new members want to join, they are valuing Flamingo DAO’s interests at over $1 billion.”7, 8

Wright, Roon and Cardozo graduate Priyanka Desai rebranded the LAO DAO Framework as Tribute Labs in 2021. Tribute Labs’ technology and systems are now powering the largest network of DAOs, including The LAO, Flamingo, Neptune, Museo, Dark Horse, Ready Player, Red, Neon, Noise, Spaceship, Punks, Unicorn, and Bright Opportunities. There are currently 634 members of Tribute Labs, supporting 258 projects. It has collected over 3,000 NFTs and contributions of 68.2k ETH (current value: $80.4M USD).1, 6, 9

Today, digital artists are being paid millions of dollars on NFT marketplaces such as OpenSea, Rarible, NBA Top Spot, Binance, Nifty Gateway, and SupeRare. NFTs are exploding with media excitement over wealth creation opportunities. In the near future, NFTs are expected to further evolve and expand into Decentralized Finance (DeFi), emerging metaverses and next-generation gaming platforms.10, 11

Recognizing a potential value mirroring the real world, FlamingoDAO predicts that “trillions of dollars of intellectual property and data rights, along with billions of dollars of art and other entertainment value could one day be managed by a blockchain.”10

Join the Revolution

If you’re interested in joining the revolution and participating in the evolution of digital property rights, DAOs and NFTs, Cardozo School of Law at Yeshiva University may offer the perfect course of action. Our Online Master of Laws (LL.M.) in Intellectual Property is ranked No. 10 in the nation and No. 2 in New York by U.S. News & World Report.12 Our Blockchain Project and Data Law Initiative are leaders at the nexus of technology and law.

Our 100% Online LLM in Intellectual Property will evolve your IP expertise and empower your future career in leading-edge industries like emerging technology, privacy, data, fashion and entertainment. For more information, contact an Admissions Advisor to schedule an appointment.

Sources
  1. Retrieved on June 28, 2022, from forbes.com/sites/jeffkauflin/2022/02/03/daos-arent-a-fad-theyre-a-platform/?sh=95237b019d01
  2. Retrieved on June 28, 2022, from moneycrashers.com/non-fungible-tokens-nfts/
  3. Retrieved on June 28, 2022, from gobankingrates.com/investing/crypto/cryptopunk/
  4. Retrieved on June 28, 2022, from decrypt.co/60971/beeples-nft-artwork-sells-for-60-3-million-in-christies-auction
  5. Retrieved on June 28, 2022, from medium.com/openlawofficial/the-lao-a-for-profit-limited-liability-autonomous-organization-9eae89c9669c
  6. Retrieved on June 28, 2022, from medium.com/@OpenLawOfficial/introducing-the-tribute-dao-framework-3f2f0ed50d62
  7. Retrieved on June 28, 2022, from boardroom-governance.com/episodes/aaron-wright
  8. Retrieved on June 28, 2022, from coindesk.com/markets/2022/02/10/flamingodaos-nft-portfolio-is-now-worth-1b/
  9. Retrieved on June 28, 2022, from tributelabs.xyz/
  10. Retrieved on June 28, 2022, from medium.com/@FLAMINGODAO/flamingo-dao-an-nft-collective-1de9c85bbe06
  11. Retrieved on June 28, 2022, from forbes.com/advisor/investing/cryptocurrency/best-nft-marketplaces/
  12. Retrieved on June 28, 2022, from usnews.com/best-graduate-schools/top-law-schools/yeshiva-university-03103