TheDAO returns with $220m to fund Ethereum security 10 years after catastrophic hack

Fade, a pseudonymous researcher at crypto market maker Wintermute, was eight years old when TheDAO was hacked, almost killing a nascent blockchain known as Ethereum.

Nearly 10 years later, his sleuthing has inspired a proposal to fund initiatives that make Ethereum safer to use. And the funds would come from an enormous amount of idle crypto that was recovered after the hack.

This week, people charged with distributing that crypto said about 75,000 Ether had gone unclaimed by its original owners. As discussed nearly 10 years ago, that Ether, now worth more than $220 million, will be put to use.

“TheDAO Security Fund will activate more than 75,000 ETH (over $220M) to strengthen Ethereum’s security, ensuring it is ready to become the backbone of the world’s financial infrastructure,” crypto entrepreneur Griff Green wrote in a blog post explaining the decision.

The hack

In 2016, TheDAO, a cooperatively-managed venture fund, became one of the largest crowdfunding initiatives in world history, attracting more than $150 million in Ether.

But it was promptly hacked, setting off a contentious debate over whether to “fork” Ethereum, effectively turning the clock back to the point just before the hack. While that would recover the stolen Ether, it would also undermine the notion the blockchain was tamper-proof and fit to serve as a neutral foundation for a new, decentralised internet.

The pro-fork camp won, and the Ether was recovered. While most of that Ether was easily claimed by its original owners, there were “edge cases,” Green wrote. A crypto wallet holding hard-to-claim Ether was created, with control distributed among a select group of people, including Green.

After January 31, 2017, any unclaimed funds would be used to fund a nonprofit “to support smart contract security,” according to a blog post that was published shortly after the hack. Apparently, this commitment was all but forgotten — until now.

Forgotten but not lost

Fade recently found the 10-year-old blog post “while looking through old contracts,” he wrote on X.

“I made the proposal to put these funds to use,” he added, a claim that Green confirmed in the more recent post.

Green said TheDAO, resurrected as a security-focused grant making organisation, would be guided, in part, by the Ethereum Foundation’s Trillion Dollar Security initiative, which identified six priorities for security-focused software developers.

But TheDAO will also be guided by Ethereum users, who will be given opportunities to vote on how to allocate the funding over multiple rounds.

The vast majority of the roughly 75,000 Ether available can still be claimed. Rather than distributing that Ether to fund security work, TheDAO will stake it, with the resulting yield used to fund security initiatives on an ongoing basis.

Ethereum co-founder Vitalik Buterin, Metamask security researcher Taylor Monahan, and four others will lead the TheDAO Security Fund, according to Green.

“TheDAO Security Fund marks the start of a new phase for Ethereum’s security story,” he wrote. “The world is ready for our tech, we want to ensure our tech is ready for the world.”

Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can contact him at aleks@dlnews.com.