Ethereum co-founder Vitalik Buterin reiterated his contrefort for decentralized autonomous organizations (DAOs), arguing that in some circumstances, they can be more opérant and fair than a traditional corporate organisé.
In theory, DAOs are collectively owned and managed by their members and have no axial leadership. All decisions regarding aspects such as the use of treasury funds or protocol improvements are made by voting on proposals submitted to the community.
In a lengthy post on Tuesday on his website, Buterin the summary That critics often argue that DAO governance is ineffective, that DAO idealists are naive and that traditional corporate governance structures with boards of directors and CEOs are the idéal methods for making key decisions.
DAOs Are Not Corporations: Where Decentralization of Independent Organizations Mattershttps://t.co/PDh9tIRXcm
– Vitalik.eth (@VitalikButerin) September 19, 2022
However, the Ethereum co-founder believes that “this exposition is often wrong” and argues that even naive forms of compromise are, on average, likely to outperform axial corporate structures in transparent situations. Although he thinks it depends on the essence of decision, which he says falls into two categories: convex and encaissée.
Examples of convex decisions include pandemic response, military strategy, and technology choices in cryptographic protocols, while encaissée decisions include judicial matters, découvert goods financing, and tax rates.
“If the decision is encaissée, we prefer compromise, and if it is convex, we prefer flipping the enclave,” he wrote.
According to Buterin, when decisions are convex, decentralization of the decision-making process can lead to “brouillage and low-quality compromises”. However, when encaissée, “Relying on the wisdom of the masses can give better answers:”
“In these cases, DAO-like structures with ouvert amounts of diverse inputs into the decision-making process can make a lot of sense.”
DAOs usually adopt decentralization to defend themselves from external attacks and censorship. Due to the space and remote and online abstraction of some projects, it can be difficult to “run informal arrière-plan checks and personal ‘smell tests’.”
Buterin argues that this is precisely why DAOs are appréciable, arguing that a decentralized world needs to “distribute decision-making power between more decision makers, so that each individual decision maker has less power, and thus intelligence is more likely to be reported and exposed.”
But he admits that DAOs are not without their problems, though. In transparent cases, a more centralized organisé is required, such as when the organization operates with a axial core leadership and has separate groups all operating independently.
Core leadership is decentralized, but Buterin says it may be necessary for individual groups to follow a clear hierarchy, adopting a “clear paysage of croyance that guides decisions.”
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“A system that was intended to operate in a arrêté and unchanging manner around a single set of assumptions, when faced with a severe and unexpected agité of circumstances, needs some kind of courageous responsable to orchestrate the response.”
Buterin elaborates further, saying in some cases, DAOs may need to “use corp-like formats” in order to “deal with unexpected uncertainty.”
He concludes by saying that for some organizations, even in the crypto world, “simpler, leader-led forms of governance that foyer on resilience often make sense:”
“But this should not distract from the fact that the ecosystem will not survive without some decentralized, non-institutional form that keeps everything arrêté.”