Vitalik Buterin Warns Current DAO Governance Is Inefficient
- Vitalik Buterin says Ethereum needs DAO governance beyond token voting to restore ideals.
- Current DAO models face manipulation risks, low participation, and weak governance.
- Privacy tools, AI support, and better communication can strengthen future DAO governance.
Ethereum co-founder Vitalik Buterin said the network needs to return to its early ideals after years of trade-offs. He argued that Ethereum “sacrificed too many core values” while chasing scale and mainstream adoption.
Buterin wrote on X that the original push to build Ethereum drew heavy inspiration from decentralised autonomous organisations (DAOs). He said the industry now needs “more DAOs, but different and better DAOs.”
Vitalik Buterin urges a rethink of DAO governance models
A decentralised autonomous organisation (DAO) lets a community coordinate decisions through on-chain rules and voting. In decentralised finance (DeFi), governance token holders often propose upgrades and vote on spending.
However, Buterin said the dominant model, in which treasuries are controlled by token-holder voting, works but remains inefficient. He added that the model stays vulnerable to capture and manipulation, and it does not address the weaknesses of human politics.
In addition, he said many people have grown cynical about DAOs because the structure has not evolved. He argued that new DAO designs should aim for stronger security, better incentives, and more resilient decision-making.
Oracle design flaws renew calls for better DAO systems now
Buterin said better oracles should rank as a top priority for improved DAO design. Oracles feed blockchains off-chain information, including asset prices, and many DeFi building blocks depend on them.
He argued that current oracle designs remain easy to manipulate under common governance structures. Token-based voting can let large holders push outcomes, while human-controlled inputs can reduce decentralisation.
“Today, decentralised stablecoins, prediction markets, and other basic building blocks of DeFi are built on oracle designs that we are not satisfied with,” Buterin said. He also argued that token-based oracles face structural limits against high-value attacks.
Related: Vitalik Warns Ethereum Risks From Growing Protocol Complexity
Onchain dispute resolution emerges as a key DAO use case
Some applications, including DeFi insurance and prediction tools, require judgment calls when disputes arise. Buterin said Ethereum does not handle those disputes well today, and many processes still move off-chain.
He argued that DAOs can manage disputes onchain without handing power to a single authority. He described onchain dispute resolution as necessary for more advanced smart contract use cases.
“We need DAOs for on-chain dispute resolution,” Buterin said, calling it a harder version of the oracle problem. He added that the subjectivity of disputes makes the design challenge even greater.
Curated lists and funding needs push DAO innovation forward
Buterin said Ethereum depends on shared lists that influence user safety and interoperability. These include verified token addresses, canonical interfaces, recognised standards, and lists of safe applications.
He argued that small teams often run these lists today, which can create opaque control. He said DAOs can manage these resources more openly and make decisions through community governance.
Meanwhile, Buterin said DAOs can help groups raise funds and execute short-duration projects. He also said DAOs can keep projects alive after founders leave by allowing new contributors to maintain and fund essential tools.
Privacy and fatigue concerns reshape DAO governance design
Buterin said privacy and decision fatigue remain major barriers to effective governance. He warned that governance without privacy can become a social game and discourage honest participation.
He suggested using zero-knowledge proofs (ZK) to support privacy in DAO voting and coordination. He also suggested using artificial intelligence (AI) to reduce decision fatigue, while warning against handing full control to AI systems.
In addition, he said governance needs a strong communication layer that includes forums and dedicated platforms. He argued that teams should treat governance tooling and communication as core work from the start.
Looking ahead, Buterin said stronger DAO designs can support more robust infrastructure for DeFi and other on-chain systems. He also discussed Ethereum layer-2 (L2) rollups and synchronous composability as important for efficient operations.
