From 2016 Breach to $150M Fund: DAO’s New Phase Emphasizes Ethereum Security

A decade following the notable hack, the DAO Security Fund has opted to stake the unspent ETH and utilize the yields to support Ethereum security projects, indefinitely honor claims, and enhance governance and key management.

Key Points:

• During the summer of 2016, the Decentralized Autonomous Organization, referred to as the DAO, marked a significant crisis in Ethereum’s formative years.
• Now, almost ten years later, that narrative has taken an unforeseen direction. What was lost, or more accurately, left untouched, is being transformed into a security endowment for the Ethereum ecosystem valued at approximately $150 million (based on current prices).
• The fund will allocate resources via decentralized methods such as quadratic funding, retroactive public goods funding, and ranked-choice voting for proposals.

In the summer of 2016, the Decentralized Autonomous Organization, known as the DAO, became the defining crisis of Ethereum’s early years. A smart contract exploit siphoned millions of dollars’ worth of ether (ETH) from that initial project, and the community’s response — a contentious hard fork to recover those funds, splintered the original chain from the current one, leaving the old chain behind, known as Ethereum Classic.

The DAO was once the largest crowdfunding effort in crypto’s history, but faded into a cautionary tale of governance, security, and the limits of “code is law.”

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Now, nearly a decade later, that story has taken an unexpected turn. What was lost, or rather, left untouched, is being repurposed as a ~$150 million (at today’s prices) security endowment for the Ethereum ecosystem.

The endowment, now referred to as the DAO Security Fund, will stake some of the 75,000 dormant ether (ETH) and allocate the yield through community-driven funding rounds to support Ethereum security research, tooling, and rapid-response initiatives, while keeping claims open for any remaining eligible token holders.

Central to this narrative is Griff Green, one of the original DAO curators and an experienced figure in Ethereum decentralized governance.

“When the DAO hack happened [in 2016], obviously, I jumped into action and basically led everything but the hard fork,” Green stated regarding his organization of the white hat group that rescued funds on the original Ethereum chain. “We hacked all these hackers. It was straight up DAO wars.”

This initiative, along with others, helped recover funds that might have otherwise been permanently lost.

At that time, the hard fork restored approximately 97% of the DAO’s funds to token holders, but left a small portion, around 3%, unresolved. These “edge case” funds originated from peculiarities of the original smart contracts: individuals who paid more than anticipated, those who burned tokens to establish sub-DAOs, and other anomalies that did not easily revert.

Over time, that remaining balance, once valued at a few million, surged into a considerably larger amount due to ether’s [ETH] appreciation. “The value of the funds we control has grown dramatically… well over 75,000 ETH,” a blog post for the new DAO fund states.

Green and his fellow curators have dedicated the past decade to discreetly assisting individuals in retrieving funds and overseeing these residual balances. However, as he notes, the situation has evolved. “Six volunteers were securing $300 million with decade keys. It didn’t make sense,” he told CoinDesk in an interview. “With all these AI hacks and stuff, we just got kind of scared.” Their previous security model simply is no longer adequate for safeguarding nine-figure sums, Green explained.

Rather than allow these funds to remain inactive indefinitely, the team has chosen to stake the ETH and utilize the yield to fund Ethereum security initiatives, indefinitely honor claims, and enhance governance and key management. “We can stake these funds, keep claims open forever, and use the staking rewards to fund Ethereum security projects,” Green clarified.

The fund will allocate resources through decentralized methods such as quadratic funding, retroactive public goods funding, and ranked-choice voting for proposals.

‘Financial backbone of the world’

For Green, this revival is also of personal significance.

The DAO hack represented Ethereum’s first significant challenge, revealing the experimental nature of the ecosystem at that time. Nearly a decade later, he asserts that the industry remains susceptible in various ways.

“MetaMask, hot wallet keys, just any kind of private keys on your daily driver computer is probably the main fuel for a whole cyber crime industry,” Green remarked. “The fact that we have hot keys with billions of dollars sitting on like 10,000 laptops spread out throughout the world has an industry of cybercrime.”

The ongoing prevalence of hacks, phishing schemes, and smart contract exploits frustrates him. “Not only amazes me, it disappoints me and frustrates me,” he expressed, reflecting on the current state of Ethereum security.

This urgency is influencing how the new fund will function. Unlike the Ethereum Foundation’s more centralized grantmaking approach, the DAO Security Fund is structured as a grassroots experiment, permitting DAO participants to determine fund distribution. Round operators will apply for fund allocation, security experts will assist in establishing eligibility criteria, and staking rewards will create a sustainable capital pool.

If Ethereum is to realize its potential as the foundational infrastructure for global finance, Green asserts that security must take precedence.

“Ethereum is at the cusp of being the financial backbone of the world, if it fixes security,” he emphasized.

Thus, in Green’s perspective, the DAO Security Fund represents both a continuation of unfinished business and a forward-looking mechanism for protecting Ethereum as it scales.

Read more: Ethereum OGs revive the DAO with $220 million security fund, Unchained reports