Key Notes
- Vitalik Buterin claims that crypto needs better and different DAOs.
- He said that most DAOs drifted into inefficient token-voting treasuries.
- Current DAO designs leave on-chain dispute resolution exposed to manipulation.
Ethereum
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co-founder Vitalik Buterin claims that the crypto industry misunderstood decentralized autonomous organizations (DAOs).
The original vision behind Ethereum was not token voting treasuries, but autonomous systems that could manage resources better than governments or corporations.
That vision blurred over time as most DAOs today are treasuries governed by token-holder votes.
The model works mechanically, which is why it spread, but Buterin argues it fails at its core goal. It is inefficient, easy to capture, and reproduces the same political weaknesses crypto aimed to avoid.
Buterin also noted that DAOs are not just smart contracts and multisigs and communication tools matter as much as code.
Oracles and Disputes Are the Real Test
Buterin stated that DAOs are still necessary, but only if redesigned. The most urgent need is better oracles. Stablecoins, prediction markets, and DeFi protocols rely on oracle systems that break under pressure.
Token-based oracles cap their own security. The cost to attack them can never exceed their market value, making manipulation rational when enough capital is at stake.
The same problem appears in on-chain dispute resolution.
According to Buterin, insurance, arbitration, and complex smart contracts need subjective judgments but current designs either centralize decisions or expose them to economic exploitation.
In both cases, the issue is design, not bad actors. He said that DAOs also fail at maintenance and coordination, adding:
Meanwhile, short-term projects face friction as groups can raise funds easily but struggle to deploy them efficiently without forming legal entities.
Long-term maintenance is even harder because once founding teams leave, communities lack clear processes to fund new contributors.
As per Buterin, governance collapses not from lack of interest, but from exhaustion. Constant voting creates decision fatigue. Participation drops and information quality degrades.
What’s the Solution?
Buterin identified two issues: privacy and decision fatigue. Without privacy, governance turns into a social signaling game.
Votes become public alignment tools rather than honest inputs. Without relief from frequent decisions, even well-designed systems decay, said the Ethereum co-founder.
He also argued that newer tools make progress possible. Zero-knowledge proofs can protect voter privacy while AI can reduce cognitive load, but only if used carefully.
AI should assist human judgment, not replace it as fully autonomous governance systems risk recreating the same fragility they aim to solve.
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A crypto journalist with over 5 years of experience in the industry, Parth has worked with major media outlets in the crypto and finance world, gathering experience and expertise in the space after surviving bear and bull markets over the years. Parth is also an author of 4 self-published books.
Parth Dubey on LinkedIn
Source: https://www.coinspeaker.com/crypto-needs-better-not-bigger-daos-vitalik-buterin/
