The 2016 DAO hack remains a pivotal moment in crypto history, highlighting smart contract vulnerabilities and resulting in the bifurcation of Ethereum into Ethereum and Ethereum Classic.
What Was 'The DAO'?
Launched in April 2016 on Ethereum, The DAO was a decentralized venture fund where investors could send ETH to receive DAO tokens, which granted voting rights on the allocation of over $150 million in ETH. It stood as one of the earliest ambitious ventures in blockchain governance.
The Exploit and Its Consequences
On June 17, 2016, a hacker exploited a recursive call vulnerability in the DAO smart contract, diverting 3.6 million ETH, valued at approximately $60 million, into a 'child DAO.' Though legally valid within the contract, it was widely perceived as an attack on the project's integrity.
Community Response and Hard Fork
Ethereum developers faced a significant choice: uphold 'code is law' or correct the exploitation. Following intense debate, a hard fork was executed to refund the stolen funds. This resulted in two separate blockchains: Ethereum with returned funds, and Ethereum Classic, adhering to immutability.
The DAO hack underscored the need for secure smart contract design, triggering the development of audit standards and innovations in Web3. It revealed the necessity of human intervention in some decentralized crises.
