Blockchain technology applications have been a catalyst for the advancement of the Web3 landscape across a wide array of digital and analog business functions. As blockchain technology permeates supply chains, e-commerce, finance, and business operations, there are a few key uses emerging as indispensable functionalities.

The three applications garnering the most attention right now are bots, nonfungible tokens (or NFTs), and decentralized autonomous organizations (DAOs). The intersections of these technologies are becoming increasingly complex, as the technologies themselves weave into the functions of the others. To clear things up, let’s cover a few key details and counterbalance their uses with the downsides of each.

Bots

Bots operate as digital “workers” that perform autonomous processes in an analog entity. Typically, bots are built internally and operated within companies’ operations and workflows, but they can also be outsourced through process automation providers. Most often, the goal of bots is to streamline operations so that human workers can spend their resources on other analytical or strategic activities.

NFTs

Currently analogous to original fine art, NFTs are original digital entities purchased and owned by humans. NFTs often come in the form of an image, video, meme, or other digital entity. You’ve likely seen NFTs grabbing headlines lately — and especially when it comes to the high price tags associated with these items.

Blockchain facilitates the ownership system of NFT tokens, wherein a person can purchase unique digital art identified through a digital signature. Much like stocks, NFTs can be traded on NFT marketplaces such as OpenSea, LooksRare, and Magic Eden.

DAOs

DAOs are a relatively new type of entity wherein analog humans run processes in exchange for ownership of a collective digital organization. For instance, DAO blockchain operations can be an online coordination system for groups of contributors and/or participants.

Because the entities are decentralized, no single person owns or leads the organization. Instead, ownership and leadership are distributed among community participants via tokens, which can also be traded like stocks on NFT marketplaces. These borderless organizations are considered autonomous because they operate outside of the authority of the countries in which their parts are based. Utopia Labs, one of Ascend’s Web3 investments, built a modern system for managing payment requests, payroll, and reporting for DAOs.

Now, here’s where it can get challenging to track, as these respective technologies weave into the functions of the others. For example:

• Bots can trade NFTs

• DAOs can invest in NFTs

• DAO ownership tokens can be in the form of NFTs

• DAOs can use bots to distribute NFTs

It’s no wonder how the applications for blockchain technology can become confounded or misunderstood. Nonetheless, the strategic applications of these disruptive solutions could become a key factor in pulling ahead of the competition in many business landscapes. As such, Ascend Venture Capital is maintaining an appetite to learn about opportunities for VC investment in blockchain applications.

Myths and Misunderstandings Surrounding Bots, NFTs, and DAOs

Blockchain technology is one of the most secure processes available — “trustlessness” is one reason why cryptocurrencies soared so quickly in popularity — but that doesn’t mean these technologies are 100% safe from corruption or misuse.

Despite existing virtually autonomously, bots are not all-knowing. They must be maintained and monitored by humans. As with any technology, there are places where the input/output channels can break down, code could be corrupted, or connections could be lost. As such, bots still need human touch and supervision.

Further, NFTs might be nonfungible, but they aren’t incorruptible. In some cases, surreptitious activity in NFT trading has led to artificially inflated pricing and volume for sales. Although high prices are common in marketplaces, some NFT markets seem to be getting caught in a bubble. For example, the digital avatar “CryptoPunk 5217“ was originally bid on for around $16 in 2017. It was recently sold for more than $5 million, making it one of the most expensive NFTs to date. 

And finally, though DAOs are meant to run autonomously, they can still be manipulated. In some instances, it might be more appropriate to refer to these entities as oligopolies rather than democracies. The users who are most active or hold the most tokens can move the market in their favor. In the end, DAO markets face similar challenges to many other marketplaces; users’ access to resources or funding ultimately determines their influence, and a minority of users can control the majority of decisions.

It stands to reason that bots, NFTs, and DAOs are disrupting the competitive landscape for digitally enabled companies, which presents an opportunity for VC investment in blockchain applications. Because the technologies deployed can be quite advanced, it is easy to confuse the applications and potential of each. However, understanding the potential will make a difference in efficiently solving business challenges moving forward across many industries.