Ethereum co-founder Vitalik Buterin is calling for a major rethink of how decentralized autonomous organizations (DAOs) work, warning that today’s popular token-voting model has drifted far from Ethereum’s original vision of decentralized governance.
In a recent statement, Buterin argued that while Ethereum needs more DAOs, it also needs better ones. According to him, most current DAOs have effectively become token-controlled treasuries, where decisions are made mainly by whoever holds the most tokens. This setup, he says, is not only inefficient but also makes DAOs vulnerable to “whales” — large token holders who can dominate outcomes.
From vision to reality: what went wrong?
When Ethereum was first being developed, DAOs were imagined as code-driven organizations running on decentralized networks. These systems were supposed to manage funds and make decisions automatically and fairly, without relying on centralized control.
But in practice, many DAOs now depend heavily on token-holder voting. While this model looks democratic on paper, Buterin believes it has created new problems, including governance capture, low participation, and decisions driven more by popularity than by what’s best for the protocol.
This has led many in the crypto community to question whether current DAO governance is really working as intended.
Where DAOs are still needed
Despite the criticism, Buterin made it clear that collective decision-making is still essential in several parts of the decentralized finance (DeFi) world.
One major area is oracles, which feed real-world data into blockchains. Oracles are critical for stablecoins, prediction markets, and many DeFi applications. However, Buterin pointed out that token-based oracle systems are vulnerable — especially when large token holders can sway outcomes on subjective questions. Even worse, the cost of attacking such systems is often limited by their market value, making it hard to secure large sums without charging high fees.
Human-curated oracles reduce some of these risks, but they also compromise decentralization, creating another tough trade-off.
Another challenge lies in on-chain dispute resolution, particularly for complex smart contracts like insurance products that require human judgment. DAOs are also used to maintain shared “safe lists” of trusted apps and verified contracts — something that can easily become fragmented without proper coordination.
Five key use cases for better DAOs
Buterin outlined five core areas where improved DAO systems are most needed:
- Stronger oracle systems for stablecoins and prediction markets
- On-chain dispute resolution for complex smart contracts
- Shared lists to protect users from fraudulent apps
- Rapid coordination for short-term, community-funded projects
- Long-term maintenance when original teams step away
A new framework: convex vs concave
To help design better DAOs, Buterin introduced a “convex versus concave” framework.
- Concave problems benefit from compromise and averaging — these require governance systems that are resistant to capture and financial attacks.
- Convex problems reward clear direction and decisive action — here, leadership can work well, as long as there is decentralized oversight to prevent abuse.
Privacy, fatigue, and the role of AI
Buterin also highlighted major structural issues in today’s governance systems. Lack of privacy can turn voting into a popularity contest, while frequent voting leads to decision fatigue and declining participation over time.
To fix this, he suggested exploring tools like:
- Zero-knowledge proofs for private voting
- Limited use of multi-party computation and fully homomorphic encryption
- Software to reduce how often users need to vote
- AI systems that assist human decision-making
- Better communication platforms to build consensus
However, he strongly warned against giving full control to AI. According to Buterin, AI should support humans, not replace them — either at the organizational level or through user-controlled tools that can execute votes on someone’s behalf.
A core priority, not a side feature
Finally, Buterin stressed that governance and oracle systems should be treated as core infrastructure, not optional extras. For Ethereum to remain truly decentralized, these systems must be built with as much care as the applications that rely on them.
In short, Vitalik’s message is clear: DAOs aren’t broken beyond repair — but without serious redesign, they risk becoming the very centralized systems they were meant to replace.
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