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Ethereum co-founder Vitalik Buterin supports the view that decentralized autonomous organizations (DAOs) can be more efficient than traditional corporations in the presence of highly decentralized governance models expanded the discussion.
An ongoing conversation in the crypto community suggests that highly decentralized DAOs are inefficient. Many believe that the protocol could be more efficient if it adopted a traditional governance structure.
on September 20th blog postAt , Vitalik countered the proposal, highlighting an example where more decentralization is important for DAO sustainability.
As a decision rationale, Vitalik explained that while firms lean towards convex decisions, DAOs leverage decentralization to make better decisions in concave environments.
If the decision is concave, a compromise is possible (find the best option between A and B), whereas if convex, the choice must be either A or B. Wisdom of crowds to aggregate input to guide the decision-making process.
DAOs typically employ decentralization to protect themselves from external attacks and censorship. Vitalik added that the DAO should do well to provide services that encourage long-term investment and trust from the community while leveraging decentralization for censorship resistance.
According to Vitalik, the DAO assumes state functions by maintaining basic infrastructure. Decentralization is essential for DAOs to be able to more efficiently supervise themselves while providing essential services.
For example, a decentralized arbitration protocol Cleros Designed to adjudicate arbitration cases. But a recent scandal claimed insiders were sabotaging the decision-making process. Governance must become more decentralized to restore efficiency and trust in the protocol. This reduces the concentration of power within a single entity.
Curtis Yarvin paper The best DAO models, emphasized by Vitalik, should be designed after corporate governance, not political science. On the contrary, Vitalik argues that the DAO has a lot to learn from political science because it is seen as a sovereign entity.
When it comes to decision-making, sovereigns are said to be inefficient, but businesses tend to be efficient because they can easily adopt the tools to make timely decisions.
But when it comes to succession issues, the company is stuck. Meanwhile, sovereigns have developed longstanding systems to ensure a smooth transition of power to maintain operations.
According to Vitalik, DAOs can be designed to optimize the best of the two worlds.
Even in the world of cryptocurrencies, by far the largest number of organizations that is Ultimately we will end up with contractual secondary organizations that look to these primary giants for support, and for these organizations a much simpler, leader-driven form of governance that emphasizes agility makes sense. It often happens. “
