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DAO Differences? Ethereum Co-Founder Vitalik vs. Binance CEO CZ

Here's what Ethereum Co-Founder Vitalik Buterin and Binance CEO CZ have to say on the controversial but fundamentally important topic of DAO governance.

Ethereum’s Vitalik, Binance CEO CZ Comment on DAOs

Decentralized Autonomous Organizations (DAOs) were created as a substitute for centralized, top-down corporate governance. DAOs can be hard to define -- some say Bitcoin is the only “true” DAO, others say Etherum’s The DAO was one of the first practical DAOs, and others hold diverse viewpoints on the potential benefits and drawbacks of DAOs in theory and in reality.

Here’s what two prominent crypto figures, Ethereum Co-Founder Vitalik Buterin and Binance CEO Changpeng Zhao (CZ) have to say on this fundamental issue.

Buterin was an early vocal advocate for DAO-based governance, and remains so to this day. Recently, he posted a blog entry on the topic, titled, “DAOs are not corporations: where decentralization in autonomous organizations matters.”

From Buterin’s Twitter feed

In his blog, Buterin refers to three types of situations where decentralization is key. They are:

  • Decentralization for making better decisions in concave environments: This is where pluralism and even naive forms of compromise are on average likely to outperform the kinds of coherency and focus that come from centralization.
  • Decentralization for censorship resistance: Applications that need to continue functioning while resisting attacks from powerful external actors.
  • Decentralization as credible fairness: Applications where DAOs are taking on nation-state-like functions like basic infrastructure provision, and so traits like predictability, robustness and neutrality are valued above efficiency.
Buterin said, “When decisions are convex, decentralizing the decision-making process can lead to confusion and low-quality compromises. However, when they are concave, relying on the wisdom of the crowds can give better answers and in these cases, DAO-like structures with large amounts of diverse input going into decision-making can make a lot of sense.”

Does the entire crypto ecosystem subscribe to Buterin’s thought process? Unsurprisingly, no.

A Forbes contributor, while overall bullish on DAOs, said that many DAOs “fall flat in coordination, efficiency, governance and scaling — not surprisingly. Change of this magnitude is difficult to institute quickly.”

He said, “The DAO dilemma considers this gray area between centralization and decentralization; instead of rushing development or hastily unseating existing frameworks, we can approach DAOs through the lens of progressive decentralization — methodically transitioning from centralized to decentralized governance.”

CZ a DAO Bear?

In an interview last year, Binance CEO Zhao said that DAOs are a great concept, but frankly, there have hardly been any big or successful DAOs.

He added that decentralized organizations are great in concept but a critical flaw is their rules must be set from Day One: Those rules must take all the business implications into consideration; that must be built into the protocol; and it must be bulletproof so that competitors cannot attack the structure easily.

More recently, he expanded further on that view on Twitter:

As the world’s largest crypto exchange with the third-largest coin by market cap (excluding stablecoins), Binance continues to grow as an organization.

A contributor to Seeking Alpha said this growth could make Binance “dangerously big” due to Binance being a centralized entity and blockchain.

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