Ethereum co-founder Vitalik Buterin is calling for a rethink of decentralized autonomous organizations, arguing that the DAO structures widely used today are not strong enough for the next stage of blockchain development. In his view, the standard model built around token-holder voting has become a default, but it still suffers from low efficiency, weak decision processes, and exposure to manipulation.
Buterin’s criticism is aimed at the gap between what DAOs were supposed to solve and what they can currently handle in practice. He says token-based governance works to a point, yet remains vulnerable to capture by large stakeholders and does not resolve deeper coordination problems. That leaves DAOs less capable than many early advocates expected.
Why token voting falls short in high-stakes blockchain systems
A central problem, according to Buterin, is the lack of reliable decentralized oracles. These systems are essential for stablecoins, prediction markets, and DeFi applications, but building them through token-weighted governance creates its own risks. Large holders can influence outcomes, while systems curated by humans can drift away from decentralization.
His argument is not limited to software design. He says the challenge is also social, which means stronger oracle systems and governance frameworks will require more than technical iteration. The structure itself has to become more resilient.
DAOs as tools for dispute resolution and critical record-keeping
Buterin also outlined where DAOs could become more useful if redesigned with clearer purposes. One example is on-chain dispute resolution, including smart-contract settings such as insurance. Another is the management of critical lists that support the wider ecosystem, such as trusted applications, canonical interfaces, and token contract addresses.
These are not abstract governance exercises. They involve operational decisions that affect how blockchain systems function day to day. He also pointed to project formation as another area where DAOs can help, especially when a group wants to pool funds for a short-term initiative. In that setting, a DAO can offer a decentralized structure that is more flexible than a traditional legal entity. He added that DAOs may also help communities keep projects alive over the long run even after the original team disappears.
Privacy and decision fatigue sit at the center of the redesign
For DAOs to work better, Buterin said two issues need immediate attention: privacy and decision fatigue. Without privacy, governance can turn into a social contest, which weakens the integrity of the process. Public signaling can start to matter more than honest judgment.
He also warned that asking participants to make constant decisions leads to fatigue, which reduces both engagement and the quality of governance over time. To address these problems, Buterin pointed to Zero-Knowledge proofs and artificial intelligence. ZK systems could improve privacy protections, while AI could help process information and reduce the burden of repeated decisions. He drew a line here as well: AI should support human judgment, not replace it.
Better governance and oracle design should come first
Buterin’s message to developers and project teams is direct. Building better DAOs should be treated as a priority, and effective oracle design and governance systems should sit near the center of new blockchain initiatives rather than being left for later.
His broader case is that DAOs need to evolve beyond the simple token-voting template. If privacy remains weak, if decision systems keep exhausting participants, and if oracle design stays fragile, decentralized governance will struggle to support more demanding blockchain use cases. If those pieces improve, DAOs could take on a much larger role across the ecosystem.