Addressing Weaknesses in Current DAO Governance
Ethereum co-founder Vitalik Buterin has called for fundamental redesigns of decentralized autonomous organizations (DAOs), arguing that current token-holder voting structures fail to address core weaknesses in human governance.
Buterin posted on X that the crypto community needs more DAOs, but emphasized they must be fundamentally different and superior to existing models. He said Ethereum's original development was heavily inspired by DAO concepts, envisioning systems where decentralized network rules manage resources more efficiently than traditional governments and corporations.
The dominant treasury model controlled by token-holder voting remains functional but inefficient, according to Buterin. He said the design fails to solve inherent problems in human politics, leading many to become cynical about DAO potential.
Critical Areas for Improved DAO Architectures
Buterin identified several critical areas requiring improved DAO architectures. Decentralized finance needs better oracle designs, he said, as current systems for stablecoins and prediction markets rely on structures he considers unsatisfactory.
He explained that token-based oracles cannot maintain attack costs higher than their market capitalization. This limitation means they cannot secure assets without extracting rent exceeding the discount rate, creating fundamental economic constraints.
Other urgent DAO use cases include on-chain dispute resolution for advanced smart contracts like insurance products; maintaining curated lists of secure applications and verified token addresses; rapidly pooling funds from motivated contributors for short-term projects; and enabling long-term project maintenance after original team departures.
Barriers to Progress and Potential Solutions
Buterin highlighted two primary barriers blocking progress: privacy concerns and decision fatigue. Without privacy protections, governance devolves into social gaming rather than substantive decision-making, he said.
He also noted that frequent voting requirements initially generate enthusiastic participation, but willingness to engage and stay informed declines over time. The pattern creates unsustainable governance models that fail as community attention wanes.
Recent technological advances offer potential solutions, according to Buterin. Zero-knowledge proofs can address privacy needs, while artificial intelligence could reduce decision fatigue without fully automating governance processes. He suggested AI should enhance human intention and judgment rather than replace it entirely.
Integrating Communication, Zero-Knowledge, and AI
Buterin emphasized incorporating communication layers into DAO infrastructure as part of the governance process itself. Projects building new oracles should treat communication and coordination as 50% of their work rather than a minor consideration, he said.
Similarly, governance-focused projects should integrate zero-knowledge and AI technologies from initial design stages. He said this approach ensures that the decentralization and robustness at Ethereum's base layer extend to applications built on top of the network.
Broader Implications for DAO Effectiveness
The post reflects broader discussions about DAO effectiveness as organizations control billions in treasury assets. Critics argue that token-voting models concentrate power among large holders and fail to incentivize informed participation, while supporters see them as essential tools for decentralized coordination.