Take a look at the LambdaMOO constitution (about halfway down the page). It confirms my belief that the most efficient and often best form of governance for an online community is essentially a benevolent dictatorship. LambdaMOO is basically an virtual online world.
In their constitution, the LambdaMOO administrators (‘Wizards’) explicitly state that they will sometimes make wide ranging decisions without the necessary consent or consultation of the user base. That said, they will endeavour to listen and respond to user input at all times.
This is exactly what I’ve done for my online communities (the New Mars forums being foremost) – I’ve said outright that the community is not run by a democracy, it is run by a dictator – me. I haven’t heard any complaints about this yet, even though the forums have had their bad times as well as good.
Taken to its extreme, digital democracy allows people to participate in any and every decision. In lieu of a decent and preferably formal constitution and decision-making structure, the whole thing descends into a shambles and nothing ever gets done. Since I don’t have the time to make up a good constitution and there aren’t any good ones that I can steal, a benevolent dictatorship will have to do for now. So far, it’s working out well.