Vitalik Buterin argued that the crypto industry has lost sight of what DAOs were meant to be, adding that crypto needs better and different DAOs.
By Parth Dubey
Editor Hamza Tariq
Updated
3 mins read
Ethereum ETH $3 220 24h volatility: 3.0% Market cap: $389.00 B Vol. 24h: $27.69 B co-founder Vitalik Buterin claims that the crypto industry misunderstood decentralized autonomous organizations (DAOs).
The original vision behind Ethereum was not token voting treasuries, but autonomous systems that could manage resources better than governments or corporations.
That vision blurred over time as most DAOs today are treasuries governed by token-holder votes.
The model works mechanically, which is why it spread, but Buterin argues it fails at its core goal. It is inefficient, easy to capture, and reproduces the same political weaknesses crypto aimed to avoid.
We need more DAOs – but different and better DAOs.
The original drive to build Ethereum was heavily inspired by decentralized autonomous organizations: systems of code and rules that lived on decentralized networks that could manage resources and direct activity, more…
— vitalik.eth (@VitalikButerin) January 19, 2026
Buterin also noted that DAOs are not just smart contracts and multisigs and communication tools matter as much as code.
Buterin stated that DAOs are still necessary, but only if redesigned. The most urgent need is better oracles. Stablecoins, prediction markets, and DeFi protocols rely on oracle systems that break under pressure.
Token-based oracles cap their own security. The cost to attack them can never exceed their market value, making manipulation rational when enough capital is at stake.
The same problem appears in on-chain dispute resolution.
According to Buterin, insurance, arbitration, and complex smart contracts need subjective judgments but current designs either centralize decisions or expose them to economic exploitation.
In both cases, the issue is design, not bad actors. He said that DAOs also fail at maintenance and coordination, adding:
“If the original team of a project disappears, how can a community keep going, and how can new people coming in get the funding they need?”
Meanwhile, short-term projects face friction as groups can raise funds easily but struggle to deploy them efficiently without forming legal entities.
Long-term maintenance is even harder because once founding teams leave, communities lack clear processes to fund new contributors.
As per Buterin, governance collapses not from lack of interest, but from exhaustion. Constant voting creates decision fatigue. Participation drops and information quality degrades.
Buterin identified two issues: privacy and decision fatigue. Without privacy, governance turns into a social signaling game.
Votes become public alignment tools rather than honest inputs. Without relief from frequent decisions, even well-designed systems decay, said the Ethereum co-founder.
He also argued that newer tools make progress possible. Zero-knowledge proofs can protect voter privacy while AI can reduce cognitive load, but only if used carefully.
AI should assist human judgment, not replace it as fully autonomous governance systems risk recreating the same fragility they aim to solve.
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A crypto journalist with over 5 years of experience in the industry, Parth has worked with major media outlets in the crypto and finance world, gathering experience and expertise in the space after surviving bear and bull markets over the years. Parth is also an author of 4 self-published books.