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In the first article, we started questioning whether the term “minting” appropriately captures the necessary considerations of layer five, as it may be prematurely prioritizing certain aspects. It is clear that there are multiple factors at play. What is certain is that layer five represents a transitional phase where Creator DAO members disseminate some type of artifact, marking the start of a Collector DAO community. This community is envisioned to both receive and steward these artifacts. We acknowledged the need to explore layers six and seven to provide more context. Furthermore, we began to delve into the uncertainties surrounding our overarching prompt of reciprocity networks, whose definition remains speculative and open-ended for now.
Layer five involves a series of concerns about how the artifact created by the Creator DAO is formalized into an on-chain object. We start with the assumption that it's an NFT, though we are uncertain about the specific standard to use due to numerous questions about the required utility for token-gated content or the distribution of governance shares, among other aspects. Additionally, we face questions regarding the parameters of the mint, such as the edition size—whether it’s a one-of-one, an edition of three, or an open mint that might be exclusive to Collector DAO members—or perhaps a time-boxed mint, or some claim and burn mechanic. Essentially, everything is on the table, but our starting point suggests it could be three NFTs, which is a unique and irregular approach that could establish a new reciprocal relationship between collectors, creators, and the general public yet to engage.
The decisions made in layer five will shape the social and cultural relationships that are central to layer six. Layer six focuses on the formation of the Collector DAO, determining when and where this occurs, as well as defining the parameters of governance and what their stewardship over the artifact will look like. Following that, layer seven encompasses a range of considerations on how the general public interacts with the artifact, facilitating their integration into the Collector DAO and closing the distribution loop of the artifact. This includes addressing economic considerations, such as the flow of value or capital through the system.
Layer six presents a particular concern considering the bootstrapping of a community versus the iterative aspects of a developed group. For bootstrapping, the minting process determines how the Creator DAO initiates the formation of the Collector DAO. This community might deploy a mechanism like Yeeter to facilitate DAO formation around this singular purpose. After both entities are formed, ongoing iteration involves the Creator DAO minting the NFT in conjunction with the Collector DAO, based on their feedback. Since the collectors are likely to have a greater awareness of the broader market, they can provide insights on whether the NFT should be a one-of-one or part of an open series, among other options. This is where the decision becomes complex because we want the bootstrapping NFT to resemble the iterative NFT, even though they serve different purposes. The initial flow is based on the idea of minting three NFTs corresponding to three unique entities, as initially outlined in our proposal.
The second flow we are considering involves using Story Protocol, Seed Protocol, or something similar to manage the licensing of intellectual property (IP) as the artifact that is stewarded. This would be distinct from an NFT of the content itself, which is composed of DUCEs (atomic units of on-chain IP that compose the content of the artifact, discussed in the previous article). There's some cognitive dissonance here as we question whether a DUCE is a representation of that IP or merely a container of data. We need to determine if the IP is attached to the DUCE through metadata, or if these are separate objects. This means the DUCE exists in one place, and the IP mint, with whatever data it carries, exists in another, creating a reference between these two on-chain objects.
The third flow focuses on how the distribution of the artifact transitions from the Creator community to the Collector community. We begin with the concept of fractionalized ownership, examining how the Collector DAO can collectively own a single artifact and how that correlates to the shares of its members. There is a challenge with correlating the voting and non-voting share representation of Moloch DAOs with the fractionalized ownership of a single or editioned artifact. For example, if a member decides to leave the community, how will the DAO provide exit liquidity without sacrificing the holdings of the other members? Will that rage quitting individual take a piece of the artifact or the IP with them, or be able to receive an equivalent value of tokens from a liquidity pool sustained by the collective?
Flow four focuses on a unique strategy of fractionalized stewardship called Partial Common Ownership (PCO) and flow five adds considerations of the Harberger tax on top of this schema. We need to address questions of price discovery, who sets the price, the psychology behind pricing, and maybe refresh our understanding of how Harberger mechanics operate in what might be considered a marketplace or a different field of exchange.
Layer six involves the formation of the Collector DAO, encompassing the operations of both DAOs, such as decision-making processes and the mechanisms through which people can join or leave the communities. The Collector DAO has two primary responsibilities. The first is how it supports the Creator DAO, dedicated in patronage to the amplification of economic and cultural exchanges between the two. There are various methods for returning feedback on content, helping form the north star of the combined communities while iterating upon the operations that support those efforts. The second responsibility is handling dissemination to the general public. This is less of a marketing effort and more akin to the nurturing of the narrative or in emanating from the artifact, thereby expanding the number of people either joining the Collector DAO or becoming general collectors in the public sphere.
Our first flow starts with the Creator DAO and its contributors minting an artifact in three editions. The first NFT goes directly into the Creator DAO's treasury. However, its price hasn't been validated by any external entity, so it's essentially considered valueless within the DAO. The second NFT is sent to the Collector DAO's treasury, and the questions about how this transaction occurs define the design space we are exploring. This could involve a predetermined set price, where they simply pay and receive the NFT, or through a more formalized on-chain smart contract escrow intermediary, where the NFT transfer from the creator's side and the funds from the collector's side is mediated by a neutral party.
A key aspect here is that the Collector DAO sets the price. They are motivated to set the price in relation to their evaluation of the object's quality and content alongside its speculative potential—separating these aspects feels nearly impossible. By setting the price, the Collector DAO aims to keep it low enough to facilitate onboarding the general public, yet high enough to acknowledge the value of the reciprocal exchange with the Creator DAO.
At this point, we might remind ourselves of the meditations on attributions and royalties inherited from the first four layers of the stack. Let's consider an example, of a hypothetical 70/30 split.
When the first NFT goes into the Creator DAO, no money changes hands; the DAO simply receives the NFT, and the contributors aren't paid. When the Collector DAO acquires the second artifact, let's say they set the price at 1 ETH: 30% (0.3 ETH) goes directly to the contributors who worked on the artifact, while 70% (0.7 ETH) goes back into the Collector DAO's treasury. So, in essence, the Collector DAO has paid 0.3 ETH for that artifact.
The third step involves distributing the third NFT to a public buyer. Imagine a scenario where there is a shared multisig safe, perhaps with the Creator DAO and the Collector DAO as 50/50 signers or some proportionate arrangement, to create accountability. This third NFT artifact is then deposited into the safe, and the Collector DAO takes responsibility for stewarding the artifact on behalf of both entities. We initially imagine this involves setting up an auction, perhaps a Nouns-style auction, although it doesn’t necessarily need to be limited to this specific mechanic. It could involve various auction types or even a fixed price or a reverse Dutch auction. The Collector DAO oversees this sale, ensuring that the artifact deposited in the safe is the one up for auction.
When the auction closes, and the sale is formalized, 30% of the proceeds go back to the original contributors. Assuming the auction price is the same as what the Collector DAO paid, 1 ETH, we would see 0.3 ETH returning to the Creators and 0.7 ETH going into the Collector DAO's treasury. Additionally, the buyer receives the third artifact and pays 1 ETH. They receive shares in the Collector DAO, giving them a ragequit-eligible position in the DAO's treasury, which now includes the 1.4 ETH, 0.7 of which came from their wallet.
The intent here is to establish some constraints on the supply of the artifact and the influx of new members and capital. We can imagine this as a kind of culturally regulated bonding curve. This is designed to allow collectors and creators to determine the community's growth pace and scale through their reciprocal interaction. It forces the creators to demonstrate the cultural value they can offer and compels the collectors to show their dedication towards stewarding those artifacts, thereby aligning with that cultural value. The goal is to prioritize cultural value over economic concerns, yet also allowing for real financial upside for all members.
The idealism of this scheme is that everyone will benefit: the creators, the collectors, and the general public coming in. This approach is akin to a faith-based practice rooted in the belief that the cultural value will continually be recognized as valuable, continuously improve, and be validated by being purchased at increasingly higher prices, attracting an endless stream of new people willing to invest in it. This suggests a slow but steady and infinite growth, which, despite perhaps occurring through a few cycles, seems overly optimistic and not sustainable. We are making assumptions about inflating the value and expecting the market to view it similarly. The assumptions upon which this is built may not withstand the market test, except in the form of inflationary speculative meme-driven bubbles, as are currently proliferating throughout the web3 ecosystem. Augmented bonding curves and similar automated experiments are deserving of investigation for this design space, but beyond the scope of our current discussion.
The Creator DAO is motivated to maintain a certain cadence of releases, though volume is perhaps more crucial for maintaining a continuous flow. Following the Nouns model, every third NFT could go to the Creator DAO, and maybe every other one could be directed into the Collector DAO's treasury, followed by an auction. This approach mimics Nouns-style mechanics but instead of featuring randomly generated SVG layers, it would involve the Creator DAO output from layers one through four. Each item would be unique, which is crucial because having three of each item makes it difficult to determine the value of one compared to another. In this setup, we're dealing with one-of-ones, but we are structuring it so that the Creator DAO has ownership in both the collection and some shared treasury.
The key difference here is not having multiples of one artifact, but ensuring each artifact is unique. In the bootstrapping phase, the first artifact still goes to the Creator DAO, the second to the Collector DAO, and the third is auctioned publicly to facilitate onboarding. Then, in a manner similar to a Nouns DAO style, periodically, one artifact returns to the Collector DAO as a store of value, providing financial and governance rewards.
In the bootstrapping phase, the Collector DAO uses Yeeter to raise a primary store of capital to pay for the first artifact. In the interation phase, there's no need for another Yeeter since there is already a store of capital established. To use the first example, they pay 1 ETH and 0.7 ETH comes back in. Then, with the sale of the third artifact, an additional 0.7 ETH comes in from the general public. From the Collector DAO's perspective, they're spending 0.3 ETH and turning it into 1.4 ETH. The treasury grows by onboarding new members.
The Yeeter-funded Collector DAO acts as the mechanism for price discovery for the first NFT sale. There are two sides for the collectors to consider: the price needs to be set at a level that will actually sell to the public and be low enough to facilitate continuous sales across iterations. They're looking for the maximum price that will perpetually sell. Since the collectors are setting the price and also stand to benefit from it, they need to balance making it accessible enough for onboarding new members while ensuring it remains high enough to serve as a valuable asset in their treasury. This creates a complex dynamic, where collectors balance optimistic cultural alignment with a degenerate "number go up" mentality, resulting in a unique and somewhat paradoxical market-setting entity. This blend of rational and irrational decision-making underscores the absurdity and experimentalism of the situation.
Nouns price discovery is more coherent and has numerous functional use cases. It starts with a floor price that initiates bidding wars through an auction. When some Nouns are returned to the Nouns DAO, they are either financially incentivized or burned if not sold. This system incorporates inherent price discovery. Given this foundation, let's transition towards examining some additional layers.
Typically, when a DAO pools capital to purchase an NFT, it's clear that the DAO's treasury address holds ownership of that NFT. What is less clear is how individual members can retain or remove their portion of the fractionalized ownership.
To state the obvious, the NFT could be collectively sold by the DAO, and the tokens received from the sale could then be distributed to the members, who might choose to rage quit with their share of the profits. Since the DAO treasury acts as a collective store of value, and the DAO is motivated to continue collecting without necessarily converting the NFT into liquid ERC-20 tokens or similar, we encounter friction in maintaining individual members’ rights to exit.
This is a problem that plagues the broader ecosystem of NFT creator and collector DAOs. Generally, the way to exit involves selling one's shares, which represent their percentage of partial ownership. If shares are transferable, members can sell them back to the community or through liquidity pools on the open market, facilitating fungibility and transferability among DAO members.
To avoid the social and economic complexity of liquidity pools, one could simply find a buyer and execute an over-the-counter (OTC) deal. Either way, exiting involves selling one's share either back to the DAO, to another member within the DAO, or potentially to an outside party, which would then bring them into the DAO. Moloch v3 allows for the toggling on and off of transferability for both voting and non-voting shares, a crucial feature for unlocking the social dynamics we are considering.
The next concept we should discuss is on-chain intellectual property (IP) that is standardized into a mintable license. Story Protocol attempts to address the problem of representing the necessary data corresponding to different types of media, which often adhere to unique and sometimes conflicting standards. For instance, licensing music has historically followed a different standard than licensing texts, and scientific journal texts differ from literary texts in terms of copyright, Library of Congress numbers, ISBN numbers, and music catalog numbers, among other aspects. So, let's generally consider all these elements under the umbrella of IP minted on-chain.
Because there is a single or a collection of intellectual properties that we want to track together, encapsulating it in a single object—namely, the license—bundles it neatly. However, for distribution purposes, we might want to do something like create three NFTs that would be collectible derivatives. Alternatively, it could be an open edition where the license allows someone to mint and sell in a format similar to an open edition.
This could result in a variety of products or derivatives based on the original IP. In this model, the Collector effectively becomes more like a producer or a publisher, purchasing the rights to manage the next phase of the project. In buying the IP license, the collector takes over the distribution aspect from the creator.
The artifact is also minted and exists autonomously. For simplicity in this discussion, let's assume that the artifact is a one-of-one. So, in this scenario, the artifact is minted, and there is just one of them. The stewardship over this artifact is held by the collectors in the form of a license. This license represents the transactional exchange between the creators and the collectors; the collectors pay, and the resulting value flows to the creators. What the collectors receive in return is the license, which grants them rights to possess, exhibit, and possibly other utilities.
Story Protocol is attempting to establish a marketplace for licensed elements, somewhat akin to JSTOR, where users pay a fee to access a repository of academic articles, or like Unsplash and other image archives, where users pay to use licensed photography for private or business purposes, depending on the purchased license.
The license itself is an NFT, serving both as the license and as a reference to all the material being licensed, including the final composition of what the creator intends as the distributable item. It encompasses the entire collection of content. We propose that it is the responsibility of the Collector DAO to decide how to manage these assets.
Creators might even consider creating sub-licenses, where one primary license has the right to grant limited licenses for certain uses. However, when it comes to a DAO holding a license, it likely needs to be a single entity because the logistics of a license that is chartered or held by multiple parties and how to execute on it remain unclear.
Let’s consider the stewardship of this license. Here, we have two ideas that we might consider in tandem to understand their similarities, overlaps, and distinctions. The first concept is Partial Common Ownership (PCO), specifically referring to how this PCO license could be applied in a web3-centric approach to artwork stewardship.
The idea is that there's a creator community that produces some artwork, and then the license is transferred to the collector community. The collectors purchase the license, which significantly includes a time limit. They pay a recurring fee to maintain it. We are questioning how that fee is set, whether it is determined by the creators, the collectors, or both in negotiation, and whether the recurring fee remains consistent or varies. For example, the upfront price could be higher, and the recurring fee lower.
Collectors have the option to renew the ownership of the license, and if they choose not to, it becomes available for others to purchase on a relatively open market. Using DAO shares for token gating utility, we might consider if specific permissions are required to purchase the license, whether during the bootstrapping phase of a new collector community or while onboarding new collectors into the DAO from the general public.
The main characteristic of a Harberger tax is that the asset is always up for sale. There is a renewal period that is flexible, guaranteeing that the buyer has the ability to use the item for a set period. After this period, a window opens where a new price can be set. The price is only changeable at specific intervals.
To apply this idea towards our thought experiment, once the collector receives the artifact, they then set the price. There's a psychology at play where they aim to set it high enough to deter it from being immediately taken from another entity, likely another collector or collector DAO. Essentially, their motivation is to set the price high when they don't want it sold because they can't make it not for sale. Conversely, if they want to unload it quickly, they set the price so low that it becomes irresistible, which has repercussions.
Harberger taxes are often used in relation to territorial divisions, be they digital or physical lands. What intrigues us is how this might affect the local cultural landscape. Instead of considering a territorial grid of land partitions, each represented as an NFT on a grid influencing each other's prices, we are now considering a grid populated by cultural artifacts in dynamic relation so that the price of one impacts the evaluation of the next.
The price discovery mechanism operates on the principle that all items are always for sale, allowing anyone to see the price. Changes in ownership demonstrate that the price set is generally seen as the equilibrium price; someone believed it was worth enough to buy it from the previous owner. There is reciprocal incentive to avoid dumping the artifact, instead setting a price that reflects its inherent value store. If it is no longer desired, rather than setting a super low price immediately, one would gradually decrease the price until someone else decides to buy it.
We imagine the Collector DAO receives the money from the sale. There's also a tax component—the titular Harberger tax—which involves a percentage of the value going to another party, in this case the Creator DAO.
The primary use case for Harberger taxes is typically for productive assets—assets that can be used to produce something else, which is why licensing fits well into this model. By holding the license, a community can generate derivative works that they can sell, and the valuation of the license is essentially based on their ability to utilize it effectively. The community that purchases a Harberger taxed NFT license does so because they have a plan to utilize it effectively, believing they can mobilize significant cultural and economic value from it. They set the price slightly below what they expect to earn from it, but higher than what others might perceive its worth to be.
This schema raises some ambiguous questions about whether this artifact offers something functionally productive. This might be in a familiar web3 form such as token gating access to a community, additional content, economic interactions, governance, or other privileges. With a physical artwork, the utility suggests a collector holding the license maintains exclusive right to display it. The collector thus acts somewhat like a curator, aiming to exhibit the work while intending to form a market around its reception.
The Harberger tax could synergize with the mechanism we explored in part one, where individual members of the Creator DAO are compensated based on their contributions to the creation of the artifact. The royalties would exist in the licensing that the Collector DAO manages externally, while the Harberger tax compensates the Creator DAO directly as a percentage of the value of the object. They benefit from the initial sale and also from the ongoing tax collected from the NFT.
In this scenario, the Harberger tax is directed to the Creator DAO treasury. Additional participation in the creation of the artifact might amount to receiving additional shares, thereby receiving a higher share of the incoming flows based on shared attribution. Alternatively, the tax collected could be distributed per NFT. This aligns somewhat with Story Protocol's approach, where the Harberger tax would flow in reverse down the lineage. Holding a "royalty NFT" could entitle the holder to a share of the Harberger tax, creating a continuous inflow in that direction.
Most licenses currently are perpetual; you buy it once and you have the license indefinitely, or sometimes there are terms that modify this. However, a depreciating license would mean that when one buys it, they initially own 100% of the license, but that ownership gradually diminishes over time. Incorporating a depreciating PCO license, the Creator DAO would start to receive back an increasing share of the ownership. Collectors are incentivized to actively promote and utilize the license, but they don't receive perpetual revenue from it—it completely degrades over time, so eventually the creators reclaim full ownership of the IP.
We still have questions about how to motivate creators to produce a quality artifact, what motivates collectors to acquire either the artifact itself or the license, and how these motivations set the foundation for onboarding new people into this flow of value. We need to consider what motivates the general public to engage in this relational exchange. We continue to wonder how these designs might illustrate relatively anti-fragile reciprocal relations between our creator and collector personas. How might these communities become resilient enough to incorporate dissensus and disagreement as a generative function for whatever their underlying purpose may be?
In our third and final article in this unruly series, we will explore how and why a community forms around an emergent purpose that isn't fully articulated. How might this design facilitate the gradual realization of that purpose, increasingly formalizing it, and how might that result in the formation of new generative articulations of purpose? Is this a flywheel where every cycle creates a new iteration of the entire scheme, or where the entities remain relatively stable as they flow iteratively through the reciprocal architecture? Next time we will try to pick up this thread and move towards some possible conclusions.
This research has been made possible by the vital support of DAOhaus.
