Ethereum co-founder Vitalik Buterin defends DAOs against critics

Ethereum co-founder Vitalik Buterin has come out swinging in defense of Decentralized Autonomous Organizations (DAOs), arguing that in some circumstances they can be more efficient and fairer than a traditional corporate structure.

In theory DAOs are collectively owned and managed by their members and have no central leadership. All decisions relating to aspects such as the usage of treasury funds or protocol improvements are made via voting on proposals submitted to the community.

In the lengthy Sept.20 post on his website, Buterin outlined that critics often argue DAO governance is inefficient, that DAO idealists are naïve, and traditional corporate governance structures with boards and CEOs are the optimal methods for making key decisions.

DAOs are not corporations: where decentralization in autonomous organizations mattershttps://t.co/PDh9tIRXcm

— vitalik.eth (@VitalikButerin) September 19, 2022

However, the Ethereum co-founder believes “this position is often wrong” and argues even naive forms of compromise are on average likely to outperform centralized corporate structures in certain situations. Although, he does believe it depends on the decision type which he says fall into two categories; convex and concave.

Examples of convex decisions include pandemic response, military strategy and technology choices in crypto protocols. While concave decisions include judicial matters, public goods funding and tax rates.

“If a decision is concave, we would prefer a compromise, and if it’s convex, we would prefer a coin flip,” he wrot

According to Buterin when decisions are convex, decentralizing the decision making process can lead to “confusion and low-quality compromises,” however when they are concave, “relying on the wisdom of the crowds can give better answers.”

“In these cases, DAO-like structures with large amounts of diverse input going into decision-making can make a lot of sense.”

DAOs usually embrace decentralization to defend themselves from external attacks and censorship. Due to the nature of the space, and the remote and online nature of some projects, it can be more difficult to “do background checks and informal in-person ‘smell tests’ for character.”

Buterin argues this is exactly why DAOs are necessary, arguing the decentralized world needs to “distribute decision-making power among more deciders, so that each individual decider has less power, and so collusions are more likely to be whistleblown on and revealed.”

He does…