#34 The DAO and the heist

The story behind the very first DAO

Story time. Two weeks ago, I wrote about a new type of organizations - DAOs. Today, I want to tell the story of the very first DAO - The DAO (a little unoriginal, I know).

The DAO was a venture capital fund with the goal of investing in promising crypto startups. Except all the decision-making was fully decentralized. Instead of relying on a handful of managers making investments, the DAO enabled stakeholders to vote on investment decisions using smart contracts. The idea was promising and exciting, and attracted a lot of attention.

In April 2016, the DAO launched via a token sale and 11,000 people invested 11.5M ETH worth $150M. But less than 2 months in, hackers attacked the DAO and took out $50M worth of ETH. Fortunately, the funds had a 28-day hold, which gave the Ethereum community time to figure out a solution.

The solution was to divide the chain into two, essentially creating a new version of Ethereum where everything was the same, except the hack never happened. Contributors were able to take their money back and the DAO token was delisted, leaving the hackers with nothing.

The Ethereum that we know today is this new version. The original chain still exists and it's called Ethereum Classic, which currectly trades at $19. Fun fact - the ETH that hackers stole would be worth $5.9 Billion today.