TheDAO Reborn: $220 Million Security Fund Launched to Fortify Ethereum's Future

Nearly a decade after a catastrophic hack nearly crippled the nascent Ethereum network, a significant portion of the unclaimed funds from the infamous "TheDAO" incident is being repurposed. A new initiative, "TheDAO Security Fund," has emerged, wielding over $220 million in Ether to bolster Ethereum's security infrastructure and ensure its readiness for global financial applications.

Key Takeaways

• Revival of Dormant Funds: Over 70,000 ETH, untouched since the 2016 DAO hack, will be utilized.

• Security Focus: The primary goal is to enhance smart contract security, incident response, and overall network resilience.

• Endowment Model: The funds will be staked to generate ongoing yield, creating a permanent security budget rather than a one-time grant.

• Community Governance: Allocation will involve decentralized mechanisms, with input from prominent Ethereum figures.

The Genesis of TheDAO Security Fund

The original "TheDAO" was a groundbreaking decentralized autonomous organization launched in 2016, attracting over $150 million in Ether. However, a critical vulnerability in its smart contract led to a massive hack, resulting in the loss of millions of dollars worth of Ether and forcing a contentious hard fork of the Ethereum blockchain.

While most of the stolen funds were recovered through the hard fork, a small percentage remained unclaimed due to complex "edge cases." These funds, initially set aside to manage such situations, have remained dormant for nearly ten years. A proposal, reignited by researchers and supported by Ethereum veterans like Griff Green and Vitalik Buterin, aims to put this capital to productive use.

A Permanent Security Budget

TheDAO Security Fund will steward approximately 70,500 ETH from various recovery contracts. Instead of direct distribution, the majority of this ETH will be staked to generate an annual yield. This yield will serve as a continuous funding stream for security initiatives across the Ethereum ecosystem, including layer-2 solutions. Conservative estimates suggest this could generate between $7.8 million and $11.1 million annually, providing a stable and sustainable security budget.

Governance and Allocation

The fund's operations will be guided by principles aligned with the Ethereum Foundation's "Trillion Dollar Security" initiative. Allocation of funds will employ decentralized methods such as quadratic funding, retroactive public goods funding, and ranked-choice voting. Oversight will be provided by a curated group of prominent figures in the Ethereum security space, including Vitalik Buterin, Taylor Monahan (MetaMask), Jordi Baylina, and others. Giveth, a public goods funding platform, will also play a role in administering allocations.

Lessons Learned and Future Implications

The revival of TheDAO's legacy in a security-focused capacity is seen as a maturation of the Ethereum ecosystem. The original hack served as a harsh lesson, spurring the growth of the smart contract audit industry. This new fund represents a proactive approach to scaling Ethereum's security to meet the demands of its growing role as a backbone for global finance. While the "TheDAO" brand carries historical baggage, its repurposing aims to transform a past crisis into a foundational element for future security and resilience.

Sources

• TheDAO returns with $220m to fund Ethereum security 10 years after catastrophic hack – DL News, DL News.

• Ethereum OGs revive the DAO with $220 million security fund, Unchained reports, CoinDesk.

• Ethereum’s $100M Ghost Fund Rises From the 2016 DAO Collapse — This Time Different?, Yahoo Finance.

• TheDAO’s leftover rescue money sat for a decade now it’s becoming Ethereum’s permanent $220M security budget, CryptoSlate.

• 'The DAO is back!’: Ethereum dev Griff Green to use unclaimed hack funds for new security fund, The Block.