Vitalik Buterin Names Four Reasons Why Ethereum Needs Better DAOs

Ethereum founder Vitalik Buterin says the network still needs decentralized autonomous organizations (DAOs), as they remain essential to the blockchain’s future. He made his position known in an article he shared on X, emphasizing the need for better DAOs, as the current ones are poorly designed.

Four key reasons DAOs are needed on Ethereum

Buterin argues that the DAO model works technically but fails at governance as it gets captured by whales. 

This loophole allows whales to manipulate the system and creates the same political problems that blockchains are meant to avoid.

He opines that DAOs are not bad in themselves, but the Ethereum network stopped innovating to improve the design. Buterin claims that the current design allows rich holders to dominate decision making, while whales can easily sway votes.

According to him, DAOs have become politically fragile, with voting processes now a social drama tainted by intense lobbying. Buterin says this has made people lose faith in the system, with claims that DAOs do not work.

In defense of the system, Buterin says, “We built the wrong kind of DAOs.”

The Ethereum founder listed notable reasons why DAOs are essential in the ecosystem. He insisted that DAOs are critical to creating better oracles. Buterin observed that token-based oracles can be manipulated, while human-curated oracles are not truly decentralized. Thus, having DAOs is necessary to coordinate things in a way that is resistant to capture.

Another area is in on-chain dispute resolution, like insurance payouts and contract disagreements. These are subjective by nature, and with DAO, it gives legitimacy to the process. The further relevance of DAOs is in maintaining shared lists and helping to coordinate short-term actions efficiently.

Buterin also believes that DAOs can act as institutional memory to ensure continuity when founding members disappear. The idea is to have them maintain the projects and fund contributors.

ZK proofs and AI could improve DAO governance on Ethereum

As a way to guarantee improvements to the current setup, Vitalik Buterin suggests zero-knowledge (ZK) proofs. He noted that this will allow private voting and participation while reducing social pressure and manipulation.

Buterin also acknowledged the role of artificial intelligence (AI) to improve things. He, however, kicked against AI being in charge of DAO. Rather, AI should serve as decision-filters and help summarize cluster opinions. Primarily, he advocated that AI should be used to scale human judgment, not replace it.

The Ethereum founder, overall, is calling for improved DAOs that truly serve as institutions with better designs. The focus should be on communication, privacy and human coordination.