The following is a guest blog post written by danner.eth
The following is NOT investment advice. This post covers investment concepts but is meant to be educational and informative. Please consult with a certified financial planner before making any investment decisions.
In this post, we are going to cover a wide array of topics from NFTs, the metaverse, and Decentralized Autonomous Organizations (DAOs).
I may not be an art collector but I love to follow technological developments and I am interested in investing in the future of NFTs. In a traditional public market investment strategy, you may diversify your investments by picking a number of stocks or positions across an array of companies, or a diversified bucket of ETFs.
ETFs are managed by fund managers who make determinations or follow protocols with regard to rebalancing. For example, if you buy a basket of tech stocks that has an allocation of 30% Apple, 30% Microsoft, 10% Nvidia, etc. the allocations will change over time depending on the volatility and price movement of the underlying assets – resulting in a rebalancing. If a new tech stock comes into play (e.g. Coinbase), these fund managers will make a determination around whether or not to include that stock in the basket.
Enter DAOs. Decentralized Autonomous Organizations are governance structures wherein individuals who hold the governance token are able to propose changes to and vote on proposals as to the future of the DAO.
How does this have anything to do with NFTs?
The simple NFTs that most folks are aware of are digital art. CryptoPunks are an early example of this. If we go a step beyond that, we have NFTs with defi utility. Zed Run horses are a good example of this. Individuals can buy a Zed Run horse and use that horse to compete in races and breed new horses. The owner of the horse that wins the race receives a reward. The NFTs have utility because they provide function beyond being a tradable JPG, PNG, MP4, etc. In this ecosystem, there are ways to financially benefit beyond simple speculation in asset appreciation.
There has been discussion that in the future, individuals could even own the tracks where the races occur. We can envision or conceive of a situation where individuals can find various ways to engage in the Zed Run ecosystem and reap rewards through a variety of incentive programs.
Decentraland is a digital world where individuals can engage in a virtual reality environment by building experiences for others. Imagine a virtual art museum that shows CryptoPunks. Someone may own the land that the museum sits on in Decentraland, the proprietor of the museum may charge individuals to visit the museum and pay rent to the owner of the land. The metaverse has an economy and individuals spend their assets to participate.
If we go back to where we started this conversation, how do we possibly determine where to allocate capital to gain exposure to this new space?
We can buy things that we like or we can take a note from traditional financial markets and buy a basket of assets.
PLAY by PieDAO is one of these baskets.
If you don’t want to throw down $30,000 USD on a CryptoPunk, but like the idea of investing in CryptoPunks as a whole. PLAY holds PUNK-BASIC, an NFT index fund backed by CryptoPunks. By holding PUNK-BASIC, one gets exposure to CryptoPunks.
Let’s circle back to DAOs vs. traditional baskets. Let’s think about our tech ETF again, the ETF is a 30% allocation to Apple, 30% to Microsoft, etc. If Apple goes up in value and Microsoft goes down in value, the ETF will sell Apple shares to buy more Microsoft shares. This ensures that the allocation stays consistent but it is also “selling the winner to buy the loser”.
In the PieDAO ecosystem, Pies do not auto-rebalance. The rebalancing of Pies can be proposed by holders of the PieDAO governance token and voted on by holders of the PieDAO governance token.
PieDAO’s governance token is called DOUGH. Yes, the names are cute and goofy — but also easy to remember!
A DOUGH holder may notice that PUNK-BASIC has exploded in value and they believe that the PLAY holders would be best served by lowering their allocation in PUNK-BASIC in favor of another token, such as MANA. They can make this proposal to the other holders and those holders can use their DOUGH positions to vote on the proposal. Some holders may agree and some may disagree but the decision will be automatically made upon sufficient voting volume.
With that said, if the DAO concept is beyond the type of engagement one may be looking for, they can simply buy and hold PLAY to get the exposure to the NFT space and trust that the DOUGH holders will act as responsible fund managers. If one is looking to further engage with the future of PLAY, however, they can acquire DOUGH and use their DOUGH to vote on proposals related to PieDAO and the various Pies managed by the DAO.
At the time of writing, there are very few automated market makers or liquidity pools that provide access to PLAY. The only one I am aware of is on SushiSwap and requires swapping DOUGH for PLAY.
Let’s assume that this is all new and the individual looking to acquire PLAY does not have any DOUGH. You can use ETH to acquire DOUGH by baking your own Pie in an Oven.
PieDAO offers Ovens here: https://www.piedao.org/#/oven
One may deposit ETH into the Oven and wait for the Oven to bake the Pie. The Oven bakes once the minimum (10 ETH) has been contributed and gas prices are below 100 gwei.
By holding PLAY, an individual gets exposure to a variety of ethereum based NFTs and NFT protocols without having to determine which projects may be the most successful.
Page Last Updated: 2021-04-18 (5 months ago)