Vitalik Buterin, the co-founder of Ethereum defends Decentralized Autonomous Organizations (DAOs) against critics saying it’s inefficient, he said that they can be more efficient and fair when compared to traditional corporate structures in some circumstances.
Theoretically, DAOs are collectively owned and managed by their members and have no central administration.
By voting on proposals submitted to the community, decisions are made regarding aspects such as how to use treasury funds or how to improve protocols.
Buterin explained in his long post on his website on September 20 that critics often contend DAO governance is inefficient, DAO idealists are naive, and traditional corporate governance structures with boards and CEOs are the best means of governing a company.
“DAOs are not corporations: where decentralization in autonomous organizations matters,” tweeted Buterin.
DAOs are not corporations: where decentralization in autonomous organizations mattershttps://t.co/PDh9tIRXcm
— vitalik.eth (@VitalikButerin) September 19, 2022
Ethereum’s co-founder, however, sees this as “often wrong” and contends even naive forms of compromise can outperform centralized corporate structures in some situations.
However, he does believe it is determined by the decision type. There are two types of decisions, convex and concave.
Vitalik Says DAOs are Necessary Since It Can Distribute decision-making Power
A DAO typically embraces decentralization as a defense against external attacks and censorship.
Depending on the project, the type of space, and whether the work is remote or online, it may be more difficult to conduct “background checks and informal in-person “smell tests.”
Buterin said that is exactly the reason why DAOs are needed, saying that the decentralized worlds need 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.”
Despite this, he admits that DAOs do not come without their shortcomings, including the need for a centralized leadership structure, which is required when separate groups work independently.