We resolved that by creating a layered system, where small, local groups have frequent elections for things that have great power over their lives, and up the chain we elect national representatives much more infrequently to handle big picture things with little impact on daily lives. We also created a senate at all the levels, which is responsible for the architecture of the system itself (which is why we had the state political parties choose senators. Likewise, using this same theory, you would have local governments choose state senators).
Didn't work out that way, but that was the solution implemented at the founding of the U.S. Worked okay for several decades. But nobody wanted a democracy. In many ways that's worse than a single-person dictatorship.
So regardless of the technical issues, democracy itself is fraught with problems, even in groups as small as 100-200. Unless those problems are acknowledged and dealt with, the "online" part won't matter one way or another.