Ethereum founder Vitalik Buterin has sparked a significant discussion within the cryptocurrency community by declaring that the current model of Decentralized Autonomous Organizations (DAOs) is broken and in need of a major redesign. In a detailed post on X (formerly Twitter), Buterin argued that while DAOs have not failed, they have lost their original focus, which is now weakening some of crypto's most important systems.
"We need more DAOs – but different and better DAOs," Buterin wrote, harkening back to Ethereum's early vision. He explained that DAOs were originally conceived as systems of code and rules on decentralized networks designed to manage resources and coordinate activity more efficiently than traditional governments or corporations. Instead, he contends, most have devolved into simple token-voting treasuries.
Buterin identified the core flaw as token-based governance, which he describes as inefficient and easily manipulated. He stated that large token holders (whales) can dominate outcomes, turning decision-making into a political exercise rather than a practical one. This has eroded builder confidence in DAO governance. "The problem here is not greed. The problem is that we have bad oracle designs," Buterin said, suggesting that flawed system designs are the primary obstacle.
Despite the criticism, Buterin emphasized that DAOs remain essential to Ethereum's future. He outlined four critical areas where improved DAO designs are urgently needed: creating better and more resistant price oracles for DeFi and stablecoins; facilitating on-chain dispute resolution for use cases like insurance; maintaining trusted shared lists (e.g., verified apps); and acting as an "institutional memory" to ensure project continuity after founding teams depart.
To address the issues of low participation and manipulation, Buterin proposed technological solutions. He highlighted zero-knowledge (ZK) proofs to enable private voting and reduce social pressure, and artificial intelligence (AI) to act as decision-filters and summarize opinions, thereby scaling human judgment without replacing it. He warned that without privacy, "governance becomes a social game," and frequent votes lead to decision fatigue.
The crypto community reaction was mixed, with some questioning if existing structures like Chainlink's oracle model already address these concerns, while others agreed that experimentation with new DAO designs has stagnated. Buterin's overarching message is a clear call for the Ethereum ecosystem to rethink and innovate on DAO governance to build more robust and legitimate decentralized institutions.
