The dArtFlex Clan System and DAO Opportunities for Users
Users in the dArtFlex ecosystem can unite into clans to trade NFTs. Clan member represents its clan and makes deals on their behalf. These mechanics of cooperation in clans are based on DAOs.
What is DAO?
“DAO” stands for Decentralized Autonomous Organization, a smart-contract-based structure of asset governance that is particularly suited for crypto assets and virtual items.
DAO is based on the blockchain, and stores all its governance rules and transactions in the blockchain. DAO rules are constructed by founders, who cannot change these rules or approve new ones without a vote by DAO members. To launch the voting process DAO members need to make a proposal; this process is regulated by smart contracts. Proposals that are confirmed by a majority of DAO members or satisfy the consensus rules can progress to realization.
Probably still the most popular case of DAO is an organization called “The DAO”, launched in 2016. Its idea was to create an automatic venture fund, which collected about $150 million before the crypto hype in 2017. Unfortunately, The DAO had vulnerabilities as a result of not being properly tested and became a victim of a $53 million hack that effectively stopped the progress of DAO projects. The positive outcome was that it made developers check DAO governance mechanisms and smart contracts to prevent similar situations in the future, as a result of which DAO hacks are now extremely rare.
DAO is an inseparable part of decentralized finance (DeFi): the new wave of DAO is represented by such popular DeFi projects as Maker DAO, Compound DAO and DEX Uniswap, all of which became key projects during the DeFi market expansion in 2020. They use voting as DAO governance mechanisms and are governed by token holders (UNI, COMP, MAKER), but they don’t venture funds. DAOs have also gained popularity this year as asset management solutions. You can see the most popular investment funds that work as DAOs today in the diagram below:
DAOs are strengthening the DeFi community, as more and more people discover opportunities that use this type of blockchain infrastructure. Even legislators in the US are trying to include DAOs in the legal field. In April, Wyoming became the first region in the world that lets entities launch DAOs with the status of liability limited companies.
Another functionality that DAOs can realize is the governance of digital collectables, including joint ownership. We have chosen Aragon for our implementation of DAO governance mechanisms into dArtFlex clans, as Aragon has an elaborate user experience and a long history since it was launched on the Ethereum mainnet in 2018.
Implementation of DAO on the dArtFlex platform
Our development team’s technical solution for implementing clans on the dArtFlex platform is using a single Aragon DAO for each clan. At the point of sale, an NFT dArtFlex user can choose their entity: as an individual or as a clan. Clan sales increase the clan’s public rating and, at the same time, the user’s rating inside their clan.
If the user chooses a clan sale, part of the resulting funds goes to the clan balance and is distributed between clan members. Anybody can create their own clan and set up its rules, including defining the price of joining the clan. Inside each clan, there is a flexible system of rights.
Rating system and user rewards
For each purchase or sale of an NFT, the clan receives a rating. This rating accumulates throughout the season, at the end of which the top three clans (with the highest ratings) receive a reward from the platform. Part of this reward goes to the clan's balance and the rest is distributed among the clan’s members. Winning clans also receive special medals in the form of unique season NFTs.
As mentioned above, there is a member rating system inside the clan, too. The more a member brings to DAF, by selling their NFTs on behalf of the clan, the higher their in-clan rating. This rating accumulates over a month. At the end of each month, clan members are rewarded from the clan's balance, based on their position in the ratings.
By default, the number of clan members is limited. The clan leader can purchase an increase in the maximum number of members through the platform. With each increase in membership, the required payment from the clan’s balance increases. The maximum number of clan members is capped. This is a good investment for clans as the more active members they have, the more NFT sales they can make on behalf of the clan. Then the clan earns more and increases its rating, which increases the chances of winning the season.
By implementing DAO in our clan ecosystem, we hope to make clan structure transparent and comfortable for users and reflect their interests. At the same time, DAO is a growing trend in the crypto community - technology that can change the global asset management industry, as exemplified by our implementation in the area of NFTs.
