What Was the DAO?

What Was the DAO?

The DAO was somewhat of an experiment in corporate governance and structure built on the open-source Ethereum platform, and the ripples of its fall are still felt in the Ethereum world.

DAO stands for Decentralized Autonomous Organization, and it was a crowdfunded business or venture capital fund that raised $150 million in a month-- in fact, it was the single-largest crowdfunding campaign ever. It was so big that about 14% of the total Ether in existence at that point was invested in the project, and it was listed on all the major cryptocurrency exchanges.

The DAO was meant to create a new model for blockchain-based companies that would have no centralized management or governance, instead relying on democratic governance from its users and stakeholders, which could be anyone. The idea of the venture was that the funds raised by the crowdfunding could be used by anyone who’s idea was deemed worthy by the network, and that a portion of the profits from the venture would flow back into the DAO. It was coded and released by Christoph Jentzsch of Slock.it and supported by other developers in the cryptocurrency community.

Unfortunately, as happens with new projects on a public blockchain, vulnerabilities were discovered and exploited before anything was done to prevent them. The vulnerabilities were described in blogs by members of the community in the days prior to the anonymous attack. Whoever it was that used the exploit must have known that they would not actually be able to access the funds due to a 28-day hold required by the network and the fact that every Ether has a unique code, so that spending any of the stolen Ether would be extremely difficult on the transparent Ethereum network, where the blockchain ledger history can be downloaded by anyone. Even so, they managed to displace $50 million worth of Ether by transferring it to a particular account, which had repercussions in the Ethereum community. Battle lines were drawn and a hard fork was implemented, in which half of the community stayed on board with Ethereum Classic and it’s locked-up $50 million worth of Ether, and the other half joined the new fork with the missing Ether duplicated and put back into circulation.

The DAO was subsequently delisted from the major cryptocurrency exchanges like Poloniex and Kraken and users began to redeem the funds which hadn’t been committed to any ventures. The structure and code for the DAO project can still be accessed, modified, and used by anyone, since it was open-source and built on the Ethereum platform. Many are still hoping that the DAO, or a new version of it, can still have its day in the sun, and in all likelihood it will.