Vitalik Buterin believes that collusion and corruption will be reduced if the decision-making power is in the hands of the entire group rather than an individual or small minority. Vitalik Buterin, believes that autonomous organisations (DAOs) can sometimes be more efficient and fairer than a traditional corporate structure.
DAOs are managed and owned democratically by their members and do not have a central leadership. All decisions about how to spend treasury funds, as well as protocol modifications, are decided by the community by proposals put forth by the community. According to Buterin, DAO governance is inefficient and naïve, as well as traditional corporate governance structures with boards and CEOs that make key choices.
Ethereum co-founder Vitalik Buterin believes that naive forms of conciliation are, on average, likely to outperform centralised corporate structures in certain situations. He believes that even when deciding between two categories: concave and convex. Convex decisions include pandemic response, military strategy, and crypto protocol technology choices, while concave decisions include judicial actions, funding for public goods, 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 wrote.
According to Buterin, decentralising decision-making can lead to “confusion and low-quality compromises” in convex decisions. However, in concave decisions, “the wisdom of the masses can lead to better answers:”
“In these cases, DAO-like structures with large amounts of diverse input going into decision-making can make a lot of sense.”
An organisation that operates in a decentralised way is more prone to be attacked or censored, and as a result, DAOs often favour decentralisation. Because of the unique nature of the blockchain and some projects' remote and online nature, character screening and informal in-person 'smell tests' can be more difficult.
This is why DAOs are needed, according to Buterin, who argues that the decentralised world 'needs to distribute the decision-making power among more deciders so that the decision-making power of each decider is decreased and so that potential collisions are more likely to be exposed and revealed.' However, Buterin admits that DAOs may have issues.
In certain conditions, a more centralised structure is required, such as when a company operates with a centralised core leadership and has separate teams working independently. The company's decentralised core leadership is complemented by a clear hierarchy, according to Buterin, that may be needed for the groups to follow a strict opinionated perspective to make decisions.
“A system that was intended to function in a stable and unchanging way around one set of assumptions, when faced with an extreme and unexpected change to those circumstances, does need some kind of brave leader to coordinate a response.”
Buterin elaborates further, saying in some cases, DAOs may need the “use of corporate-like forms” to “handle unexpected uncertainty.“
In addition, he concludes that for some organisations, even in a crypto world where “much simpler and leader-driven forms of governance emphasising agility are often going to make sense,” much simpler and leader-driven forms of governance emphasising agility will often make sense:
“But this should not distract from the fact that the ecosystem would not survive without some non-corporate decentralised forms keeping the whole thing stable.”