Ethereum co-founder Vitalik Buterin has reignited debate around decentralized autonomous organizations by arguing that the ecosystem needs more DAOs, but with entirely new designs.
He argues that early DAOs aimed to manage resources better than states or companies, but over time, they turned into simple token-voting systems focused on treasuries. While easy to copy, he says this model fails to address real governance and political challenges.
He points out that token voting is often inefficient and exposed to capture. Large holders can sway outcomes, especially in subjective decisions, and smaller participants lose faith.
This shift has led to growing cynicism around DAOs, even though Buterin argues they remain essential to Ethereum’s future.
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Why Ethereum Still Needs DAOs
Buterin says that most oracles that are related to DAOs are weak. Oracles that rely on tokens can be hacked, and the fact that they are operated by human beings is a problem that leads to a lack of decentralization.
He also highlights that the dispute resolution on-chain is a weakness. Smart contracts, especially complex ones such as insurance, require systems that can evaluate the subjective outcome. These are harder than price feeds and need new DAO designs that ensure fairness while preventing cheating.
In addition to this, DAOs have to maintain trusted lists throughout the ecosystem. These lists comprise trusted apps, known scams, standard interfaces, and verified contract addresses. Without this, users are at a higher risk of fragmentation.
DAOs assist with fast teamwork in the current situation and survival in the future. If a group of people wants to begin a small project, creating a legal entity is not necessary in most cases. A DAO can finance and manage the project quickly. However, if the project creators abandon the project, a DAO can sustain the project and compensate contributors.
Privacy, AI, and the Next DAO Model
Buterin describes governance issues related to concave and convex problems. Some problems are better solved by compromise and averaging, while others require leadership and rapid decision-making. A good DAO has to solve both types without falling apart.
Two large issues are in the way: privacy and decision fatigue. Without privacy, governance will be a social game that is full of pressure and signaling. Without a limit on participation, voters will be tired and won’t pay attention.
Buterin believes that modern technology can solve this issue. Zero-knowledge technology can solve the privacy issue, and AI can solve the decision fatigue issue by assisting people in processing information and stating what they mean.
He says AI should not replace humans. Rather, AI should assist with decision-making, either on a DAO level or for individuals who make normal decisions. Communication is also important.
Good communication platforms, such as consensus platforms together with multisig systems, can perform better than sophisticated funding systems fueled by social media buzz.
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