Vitalik Buterin criticises the monetary-governance model of DAOs

Ethereum cofounder Vitalik Buterin has again criticised the governance model of DAOs based on transferable governance tokens. In his view, it runs counter to the very purpose of decentralised organisations.

Agreeing with the proverb “those who most want to rule people are those least suited to do it” and supporting DAOs being run by transferable governance tokens is a contradiction.

Transferable governance tokens are all about giving more power to “those who most want to rule”.

— vitalik.eth (@VitalikButerin) July 28, 2022

The proverb reads: “those who most want to rule people are least suited to do it.” This holds for DAOs governed by transferable governance tokens. Such tokens exist only to grant greater power to “those who most want to rule.”

Not all commentators agreed with the Ethereum cofounder. Some указали to the inevitability of consolidation in decision-making and described the notion of universal participant involvement as a pipe dream. Others отметили that token ownership should not be equated with a desire to rule people.

Earlier, Buterin has repeatedly criticised the DAO governance model based on monetary voting. In March 2022 he stated that such an approach is “a new version of plutocracy”.

In 2021, Ethereum published a paper, in which he proposed several ways to solve the problems associated with such a governance system. For instance, instead of tokens, reputational metrics recorded on the blockchain could be used.

As noted, in the ten largest DAOs in the industry 90% of votes go to fewer than 1% of governance-token holders, according to Chainalysis.

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