Vitalik Buterin’s opinion on highly decentralized DAOs

According to Vitalik Buterin, highly decentralized DAOs will be more efficient than corporations.
DAOs, according to Vitalik, must stay extremely decentralized while embracing parts of political science and corporate governance to be more efficient.

In the presence of highly decentralized governance structures, Ethereum co-founder Vitalik Buterin presented arguments to support the belief that decentralized autonomous organizations (DAOs) might be more efficient than regular businesses.

According to ongoing discussions in the crypto world, highly decentralized DAOs have proved inefficient. Many people believe that if protocols use traditional governing systems, they will become more efficient.

Vitalik responded to the notion in a blog post on September 20th, citing instances when additional decentralization is critical for its longevity.

Vitalik emphasized that although companies tend to make convex judgments, DAOs will use decentralization to make better decisions in concave circumstances.

A concave decision allows for compromise (identifying the optimal alternative between A and B), whereas a convex decision requires either A or B. He contended that DAO-like organizations would be more efficient if they relied on crowd wisdom to gather inputs that would influence decision-making.

DAOs typically adopt decentralization in order to protect themselves from external attacks/censorship. While utilizing decentralization for censorship resistance, DAOs should perform well to deliver services that will encourage long-term investment and reliability from the community, according to Vitalik.

DAOs, according to Vitalik, have begun to perform the tasks of nation states by maintaining fundamental infrastructure. Decentralization is critical for making DAOs more effective in supervising themselves while delivering important services.

Kleros, for example, was meant to judge on arbitration matters using a decentralized arbitration system. However, a recent incident suggested that insiders were influencing decision-making. To restore efficiency and confidence in the protocol, governance should be more decentralized, reducing power concentration within a single organization.

DAOs can learn about politics and business governance.

Curtis Yarvin states in an essay cited by Vitalik that the ideal DAO models should be modeled by business governance rather than political science. Vitalik, on the other hand, contends that DAOs

Given that DAOs are deemed sovereign, political science has a lot to teach them.

Sovereign entities are thought to be inefficient in terms of decision-making, but corporations are more efficient since they can quickly adopt instruments to make timely judgments.

Corporations, on the other hand, are at a loss when it comes to succession difficulties. On the other hand, sovereigns have long created processes to ensure a seamless handover of power in order to maintain operations.

DAOs, according to Vitalik, might be created to optimize the best of both worlds.
“By far the majority of firms, even in a crypto world, will be “contractual” second-order organizations that eventually rely on these first-order giants for support, and for these organizations, much simpler and leader-driven systems of governance stressing agility will frequently make sense.”