Ethereum Vitalik: DAOs need to upgrade to governance infrastructure, providing oracles and on-chain arbitration

Ethereum co-founder Vitalik Buterin pointed out on 1/19 via Twitter (X) that most decentralized autonomous organizations (DAO) are still in the early stage of “using token voting to manage treasuries,” which not only results in low efficiency but also makes them susceptible to control by a few large holders, and cannot truly address the long-standing issues in human politics and organizational governance. He emphasized that for DAOs to surpass traditional companies and political systems, their roles must be upgraded from simple treasury management to governance tools supporting core blockchain infrastructure, including oracles, on-chain dispute resolution, and long-term project maintenance.

Current DAOs are too much like treasuries—inefficient and dominated by a few large holders

Vitalik stated that most DAOs are essentially treasuries controlled by token holders’ votes. Although this model has been widely replicated, it faces many practical problems, including low decision-making efficiency and vulnerability to influence by large funders or organizations, and even diverging from the original goal of “reducing human political flaws.”

In his view, if a DAO only functions as a means of distributing funds and voting, it does not constitute a real advancement over traditional organizations.

DAOs should be upgraded to infrastructure roles, with oracles and dispute resolution mechanisms

Vitalik believes that future DAOs should not try to control everything but focus on solving specific and critical problems. He pointed out several directions, including building more reliable oracles to connect on-chain systems more accurately with real-world information; establishing on-chain dispute resolution mechanisms to handle subjective issues like insurance claims and contract disputes; and maintaining shared lists, such as anti-fraud blacklists.

Additionally, he mentioned that DAOs can develop standardized tools to enable rapid formation of short-term fundraising organizations and ensure ongoing operation even after the original team exits.

Different issues require different governance approaches

Vitalik explained the “concave and convex problems,” indicating that different decision-making scenarios require different governance structures.

For concave problems: where multiple parties need to compromise rather than choose an extreme option, governance mechanisms should integrate diverse opinions to enhance system stability.

For convex problems: where decisive bets and clear directions are necessary, he believes strong leaders should make decisions, with decentralized roles responsible for checks and accountability, rather than completely replacing leadership.

Voting fatigue and AI-assisted governance

Vitalik pointed out that to make new types of DAOs truly functional, two major issues must be addressed: “privacy” and “decision fatigue.” If voting is fully transparent, governance can easily devolve into social games based on relationships or trends rather than rational judgment. He suggests that zero-knowledge proofs can be used, and in some cases, secure multi-party computation or fully homomorphic encryption to protect voting privacy.

Another issue is that frequent voting requirements can cause participation rates to plummet quickly. Vitalik recommends using AI to assist analysis or allowing users to delegate their voting rights to locally controlled models, but also cautions that DAOs should not be directly governed by AI.

Low participation and influence of large holders—DAO is still in a growth and transition phase

Vitalik’s views also reflect the current reality of the DAO ecosystem. Although the total market cap of DAO-related tokens has reached at least $17.5 billion, actual voter participation remains low, and power is still highly concentrated among a few large holders.

Mature DAOs like Aave DAO and Optimism Collective can manage large DeFi protocols and fund public goods through on-chain governance, but Vitalik emphasizes that if future efforts involve creating new oracles or governance systems, DAO design and surrounding communication mechanisms should be considered core tasks. He believes that only through this approach can Ethereum’s core decentralization spirit avoid being diluted at the application layer.

(Vitalik advocates simplifying mechanisms to prevent Ethereum from becoming overly complex; Solana founder: no iteration, no elimination)

This article, Ethereum Vitalik: DAOs need to upgrade to governance infrastructure and provide oracles and on-chain arbitration, originally appeared on Chain News ABMedia.