While Decentralized Autonomous Organizations (DAOs) were initially envisioned to embody the promise of decentralized governance, Vitalik Buterin has delivered a critical assessment, stating that their current model is exhausted. In a widely shared post, the Ethereum co-founder denounced rigid structures that are dominated by large holders and are unable to effectively address complex coordination challenges. His call for a new design marks a pivotal moment for DAOs, urging them to move beyond simple voting logic and evolve into true on-chain infrastructures.
In brief
- •Vitalik Buterin has criticized the current DAO model, describing it as rigid, overly dependent on tokenized voting, and susceptible to centralization.
- •He notes a significant loss of vision, with DAOs no longer fulfilling their initial purpose of effective and fair decentralized coordination.
- •Several systemic flaws have been identified, including voter fatigue, the lack of correction mechanisms, and frozen governance processes.
- •Buterin proposes concrete tools such as confidential voting, advanced cryptography, and artificial intelligence to streamline DAO operations.
Decentralized Governance Running Out of Steam
In a message published on January 19, Vitalik Buterin expressed strong criticism of the evolution of DAOs. He denounced a model that he considers "rigid, excessively tokenized, and vulnerable to the perverse effects of large holders," a sentiment echoed as a controversial vote stirred the Aave protocol community.
In his view, the initial promise of decentralized coordination has been overshadowed by an almost exclusive focus on token-based voting, which has come at the expense of building resilient institutions. Buterin writes, "Many DAOs today are treasuries managed by snapshot and a few multisigs," pointing to a significant loss of substance compared to their original ambitions.
To illustrate this drift, Buterin highlights several systemic flaws observed in many prominent DAOs:
- •Limited participation in decision-making processes, characterized by increasing voter fatigue and de facto centralization.
- •Power capture by large token holders, which generates conflicts of interest and democratic imbalance.
- •Absence of robust correction mechanisms, preventing DAOs from effectively adjusting in case of errors or crises.
- •Excessive dependence on a fixed vision of governance, reduced to a sequence of votes lacking context or long-term strategy.
This severe diagnosis is accompanied by a clear warning: without structural transformation, DAOs risk losing their relevance and their ability to represent a genuine alternative to centralized models.
Rethinking DAOs as Infrastructure Systems
To escape this deadlock, Vitalik Buterin has put forward several proposals that sharply differ from the dominant model. He advocates for DAOs to move away from purely financial logic and instead play a role as technical infrastructure within the ecosystem.
According to him, these organizations should focus on functions such as acting as oracles, providing on-chain dispute resolution, or coordinating time-limited projects. He summarizes his vision on X by stating, "We need more DAOs, but different and better DAOs."
Among his proposals, Buterin emphasizes the importance of privacy technologies to reform governance, including encrypted voting, zero-knowledge proofs, and secure multiparty computation.
He also mentions the potential use of artificial intelligence, not to replace human decisions, but to reduce the complexity of internal processes. By introducing "lenses of governance" adapted to the specific decision-making context, he proposes a modular governance system capable of adapting to the nature of decisions, whether they are technical or political, urgent or deliberated.
These proposals are not solely aimed at improving the technical efficiency of DAOs. They represent a conceptual shift towards structures capable of outliving their creators and taking on key roles in areas such as DeFi, insurance, or decentralized identity management. If these ideas resonate with developers and founders, they could inspire a new generation of DAOs that are better equipped to meet the political, economic, and social challenges looming in Web3.