Maybe you'll work for a DAO next! Over $1 Billion in NFTs in the Flamingo DAO Another DAO tried to buy the NFL team Denver Broncos. The UkraineDAO raised over $7 Million for Ukraine. The PleasrDAO paid $4m for a Wu-Tang Clan album that belonged to the “pharma bro.”
DAOs move billions and employ thousands. So learn what a DAO is, how it works, and how to create one!

DAO? So, what? Why is it better?

A Decentralized Autonomous Organization (DAO). Some people like to also refer to it as Digital Autonomous Organization, but I prefer the former.
They are virtual organizations. In the real world, you have organizations or companies right? These firms have shareholders and a board. Usually, anyone with authority makes decisions. It could be the CEO, the Board, or the HIPPO. If you own stock in that company, you may also be able to influence decisions. It's now possible to do something similar but much better and more equitable in the cryptocurrency world.

This article informs you:

DAOs- What are the most common DAOs, their advantages and disadvantages over traditional companies? What are they if any?
Is a DAO legally recognized?
How secure is a DAO?
I’m ready whenever you are!

A DAO is a type of company that is operated by smart contracts on the blockchain. Smart contracts are computer code that self-executes our commands. Those contracts can be any. Most second-generation blockchains support smart contracts. Examples are Ethereum, Solana, Polygon, Binance Smart Chain, EOS, etc. I think I've gone off topic. Back on track.   Now let's go!
Unlike traditional corporations, DAOs are governed by smart contracts. Unlike traditional company governance, DAO governance is fully transparent and auditable. That's one of the things that sets it apart. The clarity!
A DAO, like a traditional company, has one major difference. In other words, it is decentralized. DAOs are more ‘democratic' than traditional companies because anyone can vote on decisions. Anyone! In a DAO, we (you and I) make the decisions, not the top-shots. We are the CEO and investors. A DAO gives its community members power. We get to decide.
As long as you are a stakeholder, i.e. own a portion of the DAO tokens, you can participate in the DAO. Tokens are open to all. It's just a matter of exchanging it. Ownership of DAO tokens entitles you to exclusive benefits such as governance, voting, and so on. You can vote for a move, a plan, or the DAO's next investment. You can even pitch for funding. Any ‘big' decision in a DAO requires a vote from all stakeholders. In this case, ‘token-holders'! In other words, they function like stock.

What are the 5 DAO types?

Different DAOs exist. We will categorize decentralized autonomous organizations based on their mode of operation, structure, and even technology. Here are a few. You've probably heard of them:

1. DeFi DAO

These DAOs offer DeFi (decentralized financial) services via smart contract protocols. They use tokens to vote protocol and financial changes. Uniswap, Aave, Maker DAO, and Olympus DAO are some examples. Most DAOs manage billions.

Maker DAO was one of the first protocols ever created. It is a decentralized organization on the Ethereum blockchain that allows cryptocurrency lending and borrowing without a middleman.
Maker DAO issues DAI, a stable coin. DAI is a top-rated USD-pegged stable coin.
Maker DAO has an MKR token. These token holders are in charge of adjusting the Dai stable coin policy. Simply put, MKR tokens represent DAO “shares”.

2. Investment DAO

Investors pool their funds and make investment decisions. Investing in new businesses or art is one example. Investment DAOs help DeFi operations pool capital. The Meta Cartel DAO is a community of people who want to invest in new projects built on the Ethereum blockchain. Instead of investing one by one, they want to pool their resources and share ideas on how to make better financial decisions.

Other investment DAOs include the LAO and Friends with Benefits.

3. DAO Grant/Launchpad

In a grant DAO, community members contribute funds to a grant pool and vote on how to allocate and distribute them. These DAOs fund new DeFi projects. Those in need only need to apply. The Moloch DAO is a great Grant DAO. The tokens are used to allocate capital. Also see Gitcoin and Seedify.

4. DAO Collector

I debated whether to put it under ‘Investment DAO' or leave it alone. It's a subset of investment DAOs. This group buys non-fungible tokens, artwork, and collectibles. The market for NFTs has recently exploded, and it's time to investigate. The Pleasr DAO is a collector DAO. One copy of Wu-Tang Clan's "Once Upon a Time in Shaolin" cost the Pleasr DAO $4 million. Pleasr DAO is known for buying Doge meme NFT. Collector DAOs include the Flamingo, Mutant Cats DAO, and Constitution DAOs. Don't underestimate their websites' "childish" style. They have millions.

5. Social DAO

These are social networking and interaction platforms. For example, Decentraland DAO and Friends With Benefits DAO.

What are the DAO Benefits?

Here are some of the benefits of a decentralized autonomous organization:

• They are trustless. You don’t need to trust a CEO or management team
• It can’t be shut down unless a majority of the token holders agree. The government can't shut - It down because it isn't centralized.
• It's fully democratic
• It is open-source and fully transparent.

What about DAO drawbacks?

We've been saying DAOs are the bomb? But are they really the shit? What could go wrong with DAO?
DAOs may contain bugs. If they are hacked, the results can be catastrophic.
No trade secrets exist. Because the smart contract is transparent and coded on the blockchain, it can be copied. It may be used by another organization without credit. Maybe DAOs should use Secret, Oasis, or Horizen blockchain networks.

Are DAOs legally recognized??

In most counties, DAO regulation is inexistent. It's unclear. Most DAOs don’t have a legal personality. The Howey Test and the Securities Act of 1933 determine whether DAO tokens are securities. Although most countries follow the US, this is only considered for the US. Wyoming became the first state to recognize DAOs as legal entities in July 2021 after passing a DAO bill. DAOs registered in Wyoming are thus legally recognized as business entities in the US and thus receive the same legal protections as a Limited Liability Company.

In terms of cyber-security, how secure is a DAO?

Blockchains are secure. However, smart contracts may have security flaws or bugs. This can be avoided by third-party smart contract reviews, testing, and auditing

Finally, Decentralized Autonomous Organizations are timeless. Let us examine the current situation: Ukraine's invasion. A DAO was formed to help Ukrainian troops fighting the Russians. It was named Ukraine DAO. Pleasr DAO, NFT studio Trippy Labs, and Russian art collective Pussy Riot organized this fundraiser. Coindesk reports that over $3 million has been raised in Ethereum-based tokens. AidForUkraine, a DAO aimed at supporting Ukraine's defense efforts, has launched. Accepting Solana token donations. They are fully transparent, uncensorable, and can’t be shut down or sanctioned.
DAOs are undeniably the future of blockchain. Everyone is paying attention. Personally, I believe traditional companies will soon have to choose between adapting or being left behind.

What Is the Howey Test?

To determine whether a transaction qualifies as a "investment contract" and thus qualifies as a security, the Howey Test refers to the U.S. Supreme Court cass: the Securities Act of 1933 and the Securities Exchange Act of 1934. According to the Howey Test, an investment contract exists when "money is invested in a common enterprise with a reasonable expectation of profits from others' efforts." 

The test applies to any contract, scheme, or transaction. The Howey Test helps investors and project backers understand blockchain and digital currency projects. ICOs and certain cryptocurrencies may be found to be "investment contracts" under the test.

Understanding the Howey Test

The Howey Test comes from the 1946 Supreme Court case SEC v. W.J. Howey Co. The Howey Company sold citrus groves to Florida buyers who leased them back to Howey. The company would maintain the groves and sell the fruit for the owners. Both parties benefited. Most buyers had no farming experience and were not required to farm the land. 

The SEC intervened because Howey failed to register the transactions. The court ruled that the leaseback agreements were investment contracts.

This established four criteria for determining an investment contract. Investing contract:

1. An investment of money
2. n a common enterprise
3. With the expectation of profit
4. To be derived from the efforts of others

In the case of Howey, the buyers saw the transactions as valuable because others provided the labor and expertise. An income stream was obtained by only investing capital. As a result of the Howey Test, the transaction had to be registered with the SEC.

Howey Test and Cryptocurrencies

Bitcoin is notoriously difficult to categorize. Decentralized, they evade regulation in many ways. Regardless, the SEC is looking into digital assets and determining when their sale qualifies as an investment contract.

The SEC claims that selling digital assets meets the "investment of money" test because fiat money or other digital assets are being exchanged. Like the "common enterprise" test. 

Whether a digital asset qualifies as an investment contract depends on whether there is a "expectation of profit from others' efforts."

For example, buyers of digital assets may be relying on others' efforts if they expect the project's backers to build and maintain the digital network, rather than a dispersed community of unaffiliated users. Also, if the project's backers create scarcity by burning tokens, the test is met. Another way the "efforts of others" test is met is if the project's backers continue to act in a managerial role.

These are just a few examples given by the SEC. If a project's success is dependent on ongoing support from backers, the buyer of the digital asset is likely relying on "others' efforts."

Special Considerations

If the SEC determines a cryptocurrency token is a security, many issues arise. It means the SEC can decide whether a token can be sold to US investors and forces the project to register. 

In 2017, the SEC ruled that selling DAO tokens for Ether violated federal securities laws. Instead of enforcing securities laws, the SEC issued a warning to the cryptocurrency industry. 

Due to the Howey Test, most ICOs today are likely inaccessible to US investors. After a year of ICOs, then-SEC Chair Jay Clayton declared them all securities. 

Howey Test FAQs

How Do You Determine If Something Is a Security?

The Howey Test determines whether certain transactions are "investment contracts." Securities are transactions that qualify as "investment contracts" under the Securities Act of 1933 and the Securities Exchange Act of 1934.

The Howey Test looks for a "investment of money in a common enterprise with a reasonable expectation of profits from others' efforts." If so, the Securities Act of 1933 and the Securities Exchange Act of 1934 require disclosure and registration.

Why Is Bitcoin Not a Security?

Former SEC Chair Jay Clayton clarified in June 2018 that bitcoin is not a security: "Cryptocurrencies: Replace the dollar, euro, and yen with bitcoin. That type of currency is not a security," said Clayton.

Bitcoin, which has never sought public funding to develop its technology, fails the SEC's Howey Test. However, according to Clayton, ICO tokens are securities. 

A Security Defined by the SEC

In the public and private markets, securities are fungible and tradeable financial instruments. The SEC regulates public securities sales.

The Supreme Court defined a security offering in SEC v. W.J. Howey Co. In its judgment, the court defines a security using four criteria:

• An investment contract's existence
• The formation of a common enterprise
• The issuer's profit promise
• Third-party promotion of the offering

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So you've finished your NFT collection and are ready to sell it. Except you can't figure out how to mint them! Not sure about smart contracts or want to avoid rising gas prices. You've tried and failed with apps like Mini mouse macro, and you're not familiar with Selenium/Python. Worry no more, NodeJS and Puppeteer have arrived!

Learn how to automatically post and sell all 1000 of my AI-generated word NFTs (Nakahana) on OpenSea for FREE!

My NFT project — Nakahana |

NOTE: Only NFTs on the Polygon blockchain can be sold for free; Ethereum requires an initiation charge. NFTs can still be bought with (wrapped) ETH.

If you want to go right into the code, here's the GitHub link: https://github.com/Yusu-f/nftuploader

Let's start with the knowledge and tools you'll need.

What you should know

You must be able to write and run simple NodeJS programs. You must also know how to utilize a Metamask wallet.

Tools needed

• NodeJS. You'll need NodeJs to run the script and NPM to install the dependencies.
• Puppeteer – Use Puppeteer to automate your browser and go to sleep while your computer works.
• Metamask – Create a crypto wallet and sign transactions using Metamask (free). You may learn how to utilize Metamask here.
• Chrome – Puppeteer supports Chrome.

Let's get started now!

Starting Out

Clone Github Repo to your local machine. Make sure that NodeJS, Chrome, and Metamask are all installed and working. Navigate to the project folder and execute npm install. This installs all requirements.

Replace the “extension path” variable with the Metamask chrome extension path. Read this tutorial to find the path.

Substitute an array containing your NFT names and metadata for the “arr” variable and the “collection_name” variable with your collection’s name.

Run the script.

After that, run node nftuploader.js.

Open a new chrome instance (not chromium) and Metamask in it. Import your Opensea wallet using your Secret Recovery Phrase or create a new one and link it. The script will be unable to continue after this but don’t worry, it’s all part of the plan.

Next steps

Open your terminal again and copy the route that starts with “ws”, e.g. “ws:/localhost:53634/devtools/browser/c07cb303-c84d-430d-af06-dd599cf2a94f”. Replace the path in the connect function of the nftuploader.js script.

Rerun node nftuploader.js. A second tab should open in THE SAME chrome instance, navigating to your Opensea collection. Your NFTs should now start uploading one after the other! If any errors occur, the NFTs and errors are logged in an errors.log file.

Error Handling

The errors.log file should show the name of the NFTs and the error type. The script has been changed to allow you to simply check if an NFT has already been posted. Simply set the “searchBeforeUpload” setting to true.

We're done!

If you liked it, you can buy one of my NFTs! If you have any concerns or would need a feature added, please let me know.

Thank you to everyone who has read and liked. I never expected it to be so popular.