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We analyze deals, track performance and find arbitrage opportunities across the NFT space.
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Today we’re looking at Head DAO.
It’s early days for DAOs
If the NFT space is moving beyond .jpegs and virtual communities, its natural progression is already underway in the form of decentralized autonomous organizations (DAOs).
While NFTs have greatly promoted the individual within a community, DAOs promote the group with the help of its individuals.
One such DAO, PleasrDAO, flexed its muscles and best exemplified the power of the group when it purchased the Wu Tang Clan’s 1/1 LP Once Upon a Time in Shaolin for $4 million. We’re graduating from apes, robots, and potatoes.
DAOs are working to disrupt the traditional avenues of investing in blue chip assets. Instead of going through auction houses or painstakingly building and incorporating an investment club, these DAOs are coordinating across the world using blockchain technology.
Syndicate Protocol is attempting to build the leading platform for DAOs. Think of it like “Facebook for DAOs,” with different groups across different industries working and socializing together online, bound together by smart contracts and treasuries on the blockchain.
The legal paperwork, social network, background checks, and treasuries – among other infrastructure needed for utility and functionality – will all be systematized under the Syndicate umbrella; all you need is the money to contribute or even just your time as a community contributor. Syndicate will be a streamlined version of how DAOs currently operate.
These rails, however, are still being defined. For all the talk of DAOs changing the way communities leverage their power for investment purposes, the future is still tethered to the past.
The laws and procedures that exist in the physical world still need to lend their longstanding procedures in the virtual world even if it takes a different form and function. `
Today we’ll be exploring Head DAO, another DAO focused on accumulating blue-chip NFTs, if not at PleasrDAO’s level, still at a pace worth looking at.
What is Head DAO?
HeadDAO is on a mission to accrue a collection of blue chip NFTs.
It was launched on Oct. 17 when the project’s NFTs were minting for .055 ETH. The project sold out in 2 hours.
It turns out the lead is a 16-year-old who goes by the Twitter name of Shamdoo — which has raised a lot of eyebrows. (Yes, you can see where the HEAD name came from and its many uses in jokes for a teenager. Har har har.)
Very little is known about Shamdoo’s two other collaborators, but they also seem to be quite young. Can a DAO holding blue-chip NFTs trust a group of teenagers with a multi-million dollar treasury?
Weeks after launch, the project appears stable, and Shamdoo has been a reliable and knowledgeable presence in the community’s Discord. Much of the DAO is still sorting itself out as future utility and procedures on voting for future purchases get ironed out.
The project put 80% of proceeds from its mint into the DAO treasury and the very next day HeadDAO bought CryptoPunk #2888 for 100 ETH. The next day, Bored Ape #2504 was purchased for 39 ETH.
As of this writing, HeadDAO owns the following blue-chip NFTs:
- 1 CrypToadz
- 2 CryptoPunks
- 1 Cool Cat
- 1 CyberKongz
- 1 Bored Ape
- 1 GutterCat
- 1 Fidenza
- 1 VeeFriends – Polished Poodle
The current reserve price for a buyout of the entire vault stands at $4 million.
How do you become a member of Head DAO?
Entry into the DAO is established by purchasing a HeadDAO NFT. At the moment, these NFTs are for sale on OpenSea. There are 10,000 of these NFTs in existence. The current floor price sits at 0.29 ETH.
These NFTs have taken on the same shape and characteristics as Nouns DAO. This was purposely done to emphasize the DAO and take away from the art aspect. In no way is HeadDAO associated with Nouns DAO other than in its similar NFT characters.
Can tying your project’s image to an already existing project backfire? For the creators, that was the point. The lack of originality goes away from talk about the rarities or special attributes of PFP (profile pictures) and leads to a greater focus on the purpose of the DAO.
The traits on Head DAO NFTs are unimportant. All owners have the same voting power and earn the same amount in staking. Of course, the more NFTs you own, the more you can stake and the greater number of votes you’ll have.
How does HeadDAO build its treasury?
Aside from the 80% the DAO set aside from minting, it also puts 7.5% of all profits from secondary sales back into the project’s treasury.
The DAO has also been able to increase its liquidity by fractionalizing its vault on fractional.art. An investor can exchange a given amount of ETH for the equivalent value of $HEAD.
One of the biggest risks for this project is that it will derive all of its profits from future sales on the secondary market. The creators and stakeholders are projecting that as the value of the NFTs increase, enough holders will sell and the profits will be put back into the treasury.
The DAO can also sell its assets. But as its mission is to accrue a collection of blue chip NFTs, selling one of its assets too soon may be harmful to the perception others may have of the project.
What Utility does HeadDAO offer?
Members of the DAO get voting rights to determine future purchases. They also receive $HEAD (yes, I know) tokens that represent fractional shares of the NFTs in the DAO’s vault. The vault is currently on view on fractional.art where it houses 11 NFTs.
Here’s the kicker — if you stake your NFT, meaning that you freeze it so that you cannot sell it for a certain period, then you get 5 $HEAD tokens per day.
The tokens represent a utility of value of the NFTs in the vault. The number of tokens you hold determines the percentage of the vault that you own.
The creators have been very careful to note that $HEAD tokens are not meant to provide passive income and thus should not be considered a security. They instead describe it as a utility token that can be used to gain access to whitelists and to purchase merchandise.
To a large extent, DAOs exist in a legal gray area. Many of the rules for DAOs have not been legally defined, in the same way that cryptocurrencies have not been fully defined by the federal government.
Still, the $HEAD token is available on the SushiSwap exchange, where outside of its utility within the community, people can give it value. At the moment, these tokens are trading at about a dollar but the price has been dropping — a normal occurrence for a new token.
In addition, by accruing 5 tokens every day, an investor further solidifies their fractional ownership of the NFTs in the vault.
“It’s going to be a really, really large focus of ours as the project goes, of bringing as much utility and value to the token,” Shamdoo recently said in an interview with @dGenNetwork.
Taken at face value from the above quote, one can infer that the $HEAD token is meant to do more than simply create passive income (shh, don’t say that aloud). The social tokens that many NFT projects have developed will be the way that DAOs interact with each other.
The tokens are new-age club cards, giving you special access to new projects or drops, but in the future can act as a currency for what the metaverse will become.
HeadDAO Tokenomics: Is it worth it?
What are the risks?
DAOTurtles and ZombieCats were delisted from OpenSea because they were promising passive income through their respective tokens. OpenSea wanted no part in projects that may be open to SEC regulation, especially those that are explicit in touting passive income.
As previously mentioned, HeadDAO is steering clear from any promise of passive income and is instead focused on developing the utility of its coin. The creators have been careful to tout that 1 HEAD = 1 HEAD, and nothing more.
There is always the risk, however, that the idea 1 HEAD = 1 HEAD doesn’t pass the test with OpenSea. There are no rules or regulations to give HeadDAO clarity and the power that OpenSea wields in the secondary market is formidable.
Another risk is that with DAOs lacking legal recognition, there can be member liability exposure. Whereas certain businesses can file to become limited liability companies (LLC) that limit their liability if sued, DAOs cannot legally offer that protection to its members.