A Privacy-Preserving DAO Model Using NFT Authentication for the Punishment not Reward Blockchain Architecture

This paper presents a decentralised autonomous organisation (DAO) model that uses non-fungible tokens (NFTs) for identity management and privacy-preserving interactions within a Punishment not Reward (PnR) blockchain mechanism. The proposed model introduces a dual NFT architecture deployed on Layer 2 networks: Membership NFTs ($NFT_{auth}$) for authentication and access control and interaction NFTs ($NFT_{priv}$) for private interactions among participants. Our Layer 2 implementation achieves 97\% gas cost reduction while maintaining security through cross-chain mechanisms. The identity management system incorporates decentralised KYC processes and Sybil attack resistance using soulbound token characteristics. Governance operates through smart contracts that manage reputation and administer punitive measures, including conditional identity disclosure for forensic purposes. Governance operates through smart contracts that manage reputation and administer punitive measures, including conditional identity disclosure when misconduct is detected.