What lies beyond DAOs and NFTs? Decentralized thinking holds the potential to create entirely new value.

Recently, terms like "DAO" and "NFT" have become increasingly common in business circles. These approaches, born from decentralized thinking, are gaining attention as mechanisms that function without specific administrators, operating under flat relationships between users. This article explains DAOs and NFTs, which are predicted to spread rapidly in the future. Furthermore, we consider their potential impact on business and societal structures from the perspective: "Can NFTs and DAOs serve as triggers for realizing a flat society?"

NFTs are a technology enabling a flat relationship where "value is shared and owned collectively"

Have you heard of "Bowie Bonds"? These were asset-backed securities issued by rock musician David Bowie himself in the 1990s, representing the world's first attempt to securitize future profits generated by his music. Bowie sold these securities to American financial institutions, raising $55 million (approximately ¥6.5 billion).

Rather than receiving royalty income generated from sales over many years in small increments, this method involved securing a large lump-sum payment upfront by pledging future profits as collateral. This approach was groundbreaking at the time. This approach allowed artists to raise funds without waiting long periods for royalties to come in, enabling them to invest in new creative projects. Subsequently, other artists followed Bowie's lead and issued similar securities. However, as CD and record sales declined, this practice gradually faded.

In terms of raising funds by presenting the value and potential of one's own activities, Bowie's bonds could be seen as a precursor to crowdfunding. Furthermore, the fact that the work itself influences the value of the security, and that many people can collectively own the value of an individual's work as an "asset," shares similarities with NFTs (Non-Fungible Tokens).

NFTs are a technology that can prove the uniqueness of digital content. Until now, information on the internet and digitally created works, while easily accessible to anyone, were also simple to copy or alter, making it difficult to distinguish originals from fakes. Consequently, digital works like illustrations or music were considered harder to evaluate for asset value compared to physical works. NFTs solve this problem. By linking digital content to an NFT and issuing a unique ID, the content's uniqueness and scarcity are guaranteed. It also makes clear who owns the content, who created it, and even the entire transaction history.

Recently, their adoption has accelerated, particularly in the entertainment industry. Artists are increasingly using NFTs to sell ownership of their digital works directly to fans. In the sports industry, services attaching NFTs to digital data like player photos and videos are also expanding. Fans can collect these, view them whenever they like, share them with others, or trade them among themselves, essentially enjoying them like digital trading cards. In this way, NFTs have enabled a new framework where users don't just passively consume content; by owning it as a digital asset, they can engage with it more actively. NFTs truly represent a flat ownership model where value can be shared and owned collectively.

DAOs: A Decision-Making Approach Born from the Same Philosophy as NFTs

DAOs (Decentralized Autonomous Organizations) were born from the same philosophy as NFTs, which represent a flat ownership model. DAOs are generally known as communities where people involved with crypto assets (cryptocurrencies) collectively hold and manage assets.

Typically, organizations operate projects through a centralized control structure where leaders (administrators) at the top of a hierarchical structure make decisions. In contrast, DAOs are characterized by a flat organizational structure without a centralized command chain. Anyone can freely participate, and the organization functions through the collective management of all participants. The aforementioned Bowie bond creditors also share a commonality in that rights to the work are not held by a single individual, but rather are collectively owned by many participants.

So, how exactly are decisions made? Users can participate in a DAO by purchasing and owning a cryptocurrency called a "governance token," issued by the DAO. Using these tokens, participants vote together to make decisions, determining the direction of the organization or project. It can be understood as an organizational structure akin to a shareholders' meeting.

Supporting this highly democratic decision-making method is blockchain technology. All transaction histories within the DAO are recorded on the blockchain, where anyone can verify them. Furthermore, the rules governing the DAO are also automatically executed on the blockchain. This means that even without a central administrator, there is no need to worry about external interference or fraud, allowing projects to proceed autonomously.

If a DAO project generates profits, participants can receive a portion as rewards. Furthermore, if the DAO succeeds and the value of its assets increases, participants can sell them to realize capital gains. This serves as an incentive for users to join the DAO.

The key to understanding DAOs and NFTs lies in "open spaces" and "everyone being the protagonist"

So far, we've explained the basics of DAOs and NFTs. Now, let's examine their commonalities in greater detail.

Underpinning both DAOs and NFTs is blockchain technology, as mentioned earlier. This system divides encrypted data into blocks, linking them like a chain, and manages them in a decentralized manner worldwide. Without a central server for management, all network participants share the latest data and update history, collectively monitoring consistency. This makes data rewriting difficult and eliminates concerns about deletion. The unique IDs issued with NFTs leverage this characteristic to ensure reliability. Similarly, in DAOs, it is precisely because blockchain enables the disclosure and sharing of all information that fully participatory decision-making through voting becomes possible.

The emergence of blockchain is part of the broader trend toward "Web3.0," currently driving excitement in the tech industry. In "Web1.0," users primarily consumed information from websites; it was a fixed, one-way flow between senders and receivers. Subsequent "Web 2.0" saw the proliferation of SNS, enabling users to exchange information more freely and bidirectionally. However, Web 2.0 remains heavily centralized, with major SNS and platforms controlling numerous services. Web 3.0 aims to break free from such centralized services, pursuing the democratization of the internet independent of specific corporations. Blockchain, as a decentralized technology, is what makes this possible.

In essence, the core of DAOs and NFTs is a "non-centralized" philosophy, sharing the common characteristics of being "open spaces" and "places where everyone is a protagonist." By realizing trustworthy, secure digital spaces without administrators, it moves significantly closer to the inherent democracy the internet originally aimed for, marking a major departure from traditional models.

Expanding DAOs and NFTs across virtual and real worlds leads to a truly flat society

So, what possibilities does the future created by DAOs and NFTs, characterized by "decentralization," hold? Drawing inspiration from DAOs and NFTs to reimagine the nature of new services and organizational relationships may open the door to a new era.

As mentioned earlier, DAOs originally emerged as communities related to cryptocurrency. However, the form of "autonomous organizations without central administrators," like DAOs, is likely to expand into other fields going forward. For example, we might see more instances of businesses like investments or new product development being jointly managed by organizations without central administrators, or startups being launched by large, undefined groups of members gathered via the internet.

Regarding NFTs, they may also develop in more multifaceted ways. Consider the business of used goods. Traditionally, when books, DVDs, or other works were sold secondhand, the original creator rarely received any portion of the sales revenue. In fact, the proliferation of used goods in the market was often viewed negatively, as it potentially reduced demand for new purchases. However, using blockchain technology, it becomes possible to attach NFTs to digital works for sale. Even when these are traded between users, the entire transaction history can be recorded. This enables a system where a portion of the proceeds is returned to the creator, the copyright holder, each time the work is sold. In other words, the sale of used goods, which previously offered no benefit to the copyright holder, now holds the potential to become a viable business model through the use of NFTs.

DAOs and NFTs have the potential to bring about a fundamental shift away from centralization in business practices and how people build relationships. If DAOs and NFTs become commonplace in virtual spaces going forward, this could open the door for similar concepts and technologies to permeate not just the internet world, but also real-world settings. DAOs and NFTs might just be the "sprouts of hope" capable of transforming social structures into something flatter, bridging the virtual and the real.