The Limitations of Current DAO Models
Ethereum co-founder Vitalik Buterin has argued that the dominant DAO model — treasuries controlled by token-holder voting — is failing to deliver on its original promise. In a post published Monday on X, Buterin said current designs are inefficient, vulnerable to capture, and unable to overcome the same political weaknesses seen in traditional institutions.
“We need more DAOs — but different and better DAOs,” Buterin wrote, recalling that Ethereum itself was “heavily inspired” by early DAO ideas. He said the prevailing structure has led many participants to grow cynical, as governance often devolves into low participation, whale dominance, and shallow decision-making rather than collective intelligence. While token-voting treasuries can function at a basic level, Buterin said they rarely solve real coordination problems. Instead, they often replicate the same power dynamics they were meant to replace.
Next-Generation DAOs: Solving Concrete Challenges
Rather than acting as generalized voting clubs, Buterin argued that DAOs should be purpose-built to handle concrete infrastructure challenges. He highlighted several areas where better designs are urgently needed, starting with oracles.
“Today, decentralized stablecoins, prediction markets, and other basic building blocks of DeFi are built on oracle designs that we are not satisfied with,” he wrote. Buterin warned that token-based oracles face a hard ceiling on security, since “a token-based oracle cannot have a cost of attack higher than its market cap.”
Other use cases he cited include onchain dispute resolution for complex contracts such as insurance, maintaining shared registries like verified token lists or trusted interfaces, pooling funds quickly for short-term initiatives, and ensuring long-term project upkeep after original contributors leave. In each case, Buterin argued that governance should be treated as a core system component, not an afterthought bolted onto a treasury.
Overcoming DAO Progress Blockers: Privacy and Decision Fatigue
Buterin identified two structural barriers holding DAOs back: lack of privacy and decision fatigue. Without privacy, he said, governance turns into a social signaling exercise rather than a search for truth or good outcomes.
“Without privacy, governance becomes a social game,” he wrote. Constant voting also erodes engagement. “If people have to make decisions every week, for the first month you see excited participation, but over time willingness to participate, and even to stay informed, declines.”
To address these issues, Buterin pointed to zero-knowledge proofs and related cryptographic tools as ways to enable private participation. He also suggested limited use of artificial intelligence to assist with analysis or delegated decision-making, stressing that AI should support human intent rather than replace it.
Buterin's Vision for Effective Governance
Buterin framed governance choices through his earlier “convex versus concave” lens. For problems where compromise improves outcomes — such as standards, registries, or shared infrastructure — DAOs should aggregate input from many sources to increase robustness. For problems that require decisive action, he said it can make sense to allow stronger leadership, with decentralization acting as a check rather than a replacement.
In those cases, governance should hold leaders accountable instead of attempting to simulate full collective control. He also stressed the importance of communication layers. Governance forums, discussion platforms, and coordination tools should be built into DAO design from the start. Projects working on oracles or governance systems, he wrote, should treat these components as “50% of their job, not 10%.”
“This is how we can ensure the decentralization and robustness of the Ethereum base layer also applies to the world that gets built on top,” Buterin said.
Implications for Ethereum and DeFi
DAO tokens now represent tens of billions of dollars in market value, and major protocols rely on onchain governance to manage treasuries, upgrades, and public-goods funding. Yet turnout remains low, voting power is concentrated, and outcomes are often driven by a small minority of holders.
Buterin’s message is less about rejecting DAOs and more about demanding higher standards. If DAOs are to manage oracles, courts, insurance systems, and long-lived protocols, governance must be treated as engineering work, not ideology. His call suggests the next phase of DAO development will focus less on token mechanics and more on privacy, coordination, and practical decision systems — especially for infrastructure that Ethereum and DeFi increasingly depend on.