Vitalik Buterin, co-founder of Ethereum, ignited a new debate within the cryptocurrency world with his sharp criticism of decentralized autonomous organizations (DAOs). In his latest statements, Buterin argued that while DAOs have not failed, they have strayed from their original goals. He expressed concerns that the current structures of DAOs are undermining the fundamental components of the crypto ecosystem. Initially designed to be more efficient decision-making mechanisms than states and corporations, DAOs have now largely become treasury management tools based solely on token voting. Despite this reality, Buterin called for a robust redesign, emphasizing that the quest for solutions should not be abandoned.
Buterin: DAOs Have Drifted From Their Original Intent
According to Buterin, DAOs have deviated from their initial purpose, with the primary issue being the inefficiency and susceptibility of token-based governance to manipulation. Large token holders can easily influence decision-making processes, shifting governance from a technical to a political realm. This shift complicates the development of long-term and complex decisions and shakes developers’ trust in DAO models.
Referring to Ethereum’s early vision, Buterin noted that the problem stems more from systemic design flaws than greed. He identified weaknesses in “oracle” configurations, the mechanisms that transfer external data into Blockchain. Poor data feeding into decision-making leads to fragile governance.
This scenario explains why DAOs often prove ineffective. While theoretically democratic, token voting in practice introduces issues like low participation, power concentration, and decision fatigue. Consequently, DAOs risk becoming structures that maintain the status quo rather than foster innovation.
Why DAO Designs Are Crucial for the Crypto Ecosystem
Despite his criticisms, Buterin clearly stated that DAOs are indispensable to the crypto infrastructure. He highlighted their necessity in areas such as price oracles used in stablecoins and DeFi protocols, dispute resolution in Blockchain-based insurance models, and the management of reliable application lists.
DAOs also play a critical role in the rapid implementation of projects and ensuring sustainability when founding teams step back. Without robust governance, it’s challenging for these systems to endure in the long term. Therefore, Buterin stressed the need for new models that require less voting, encourage participation, and prioritize technical accuracy.
Buterin’s recommendations include zero-knowledge proofs for privacy protection, AI-powered tools to reduce voting burdens, and new communication platforms that facilitate consensus. While some participants in the debate claimed that more centralized models, such as Chainlink, address certain issues, many developers admitted that the search for innovation in DAO design has nearly stalled.