Ethereum’s Vitalik Buterin Strikes Back: ‘DAOs Are Not Corporations’

A while ago there was a lot of criticism Decentralized Autonomous Organizations (DAOs). This form of government originated entirely in the crypto industry, but critics say it is much less decentralized than its name suggests. Ethereum (ETH) co-creator Vitalik Buterin disagrees.

Criticism of DAOs

The well-known programmer regularly writes on his blog about the most diverse topics within crypto. This time it’s DAO’s turn. In June, Elon Musk’s brother Kimbal stated that the form of government often does not lead to decentralized government at all. Instead, he says, they are often made to gain influence by the founder(s). According to the entrepreneur’s research, the concept often leads to a kind of wolf in sheep’s clothing.

Not much later, a study by Chainalysis confirmed that many DAOs are often highly centralized indeed. In fact, they would function the same as corporations, but under the guise of ‘DAO’. This also attracted the attention of governments. For example, a bill in the US had to ensure that any income from DAOs must be declared for income tax purposes. That makes sense of course, but apparently DAOs are widely used for tax avoidance.

Ethereum Founder: “DAOs Are Not Corporations”

Vitalik Buterin is standing up for the new form of government. He points out that “DAO idealists” are often seen as naive and that DAOs are in any case inefficient compared to ordinary corporations, according to some, but he disagrees.

He thinks decisions fall into two categories: one where a centralized structure is better (the military, technology choices in crypto protocols) and one where a decentralized way works better. According to Vitalik, the latter works better with social decisions, such as legal decisions, government spending and tax rates. This is because large groups know better what they want and need than a small group of people who make all decisions for the large group.

Yet the programmer also writes that some DAOs may require a corporation-like structure to deal with “unexpected uncertainties.” So we shouldn’t write off corporations yet, if it’s up to Vitalik.