June 17, 2016, the day the DAO exploded in midair

The DAO: A look back at one of the most popular cryptocurrency hacks

They only remember old cryptocurrency veterans from the DAO hack. It took place in 2016, ancient times for the ecosystem. At the time, the domain was much smaller than it is today, and Ethereum (ETH) was a relatively new project – only launched in 2015.

In 2016, the concept decentralized autonomous organization (DAO) it was relatively unknown to a large audience. When one of them, The DAO, was created on Ethereum, it caused quite a stir. The project wanted to be inspired by venture capital funds to propose a way to bet on blockchain projects. The fundraisers were open to anyone and highlighted the decentralized aspect.

But the DAO barely had time to shine before it collapsed. Launched in April 2016, it was attacked in June of the same year. However, the public sale launched on April 30 had been a colossal success: it had almost reunited 15% of all ETH available on the market on The DAO … Raising the price of ETH in the process.

👉 To go further – What is a DAO or decentralized autonomous organization?

A hacker finds a way to steal The DAO

But one hacker managed to find a loophole in the process. He understood that it was possible to ask for the smart contract recover your ETH several times in a row, particularly the fault of the order of mechanisms. In fact, the smart contract first sent the tokens before updating the figures.

Result: About a third of the ETH sent to The DAO were stolen, for a sum which at the time represented 50 million dollars. Fortunately, under The DAO’s Terms of Service, these funds were frozen for 28 days after withdrawal, which gave the community time to decide how to address the issue.

Creation of the new version of Ethereum (ETH) from Ethereum Classic (ETC)

This has been one of the most heated debates in the crypto ecosystem. Should we go back to this hack and clear the error? Or theimmutability of transactions should it be respected, since it supported the whole ideology behind Ethereum? In the cryptosphere, opinions are still divided.

The community then split in two. A hard fork took place on the blockchain, which made it possible to recover the stolen funds and return them to their original owners. This hard fork became the Ethereum network we know today. That is, a version of the blockchain in which the theft concerning The DAO was canceled.

On the other hand, those who believed this act certainly harmful, but still valid, remained on the initial blockchain, without the stolen funds being touched. This blockchain then renamed itself Ethereum Classic (ETC), and still exists today. ETC is therefore the “old school” version of ETH, that is the original blockchain dating back to 2015.

For The DAO, however, this marked the end of a very short career. Already in September 2016 Poloniex canceled the pairs linked to the project, followed by Kraken in December of the same year. But the case has remained an often cited example of perhaps premature enthusiasm for a project.

👉Read also – Three Arrow Capital: A soon-to-be-insolvent cryptocurrency fund?

Evidence of ecosystem resilience?

In these times of uncertainty, it is good to remember the incredible resilience of the crypto ecosystem. At that time, a single project raised a sizable share of the second largest crypto asset, and its collapse did not put an end to cryptocurrencies. On the contrary, generated substantial debateand to improve practices so that this doesn’t happen again.

Riot where the DeFi sector is currently caught it can therefore be viewed in a similar way. Collapses in projects and falling prices are catastrophic for some, but often accompany key market phases … Especially when, as until recently, euphoria has dominated for months.

👉 Go deeper – Cryptocurrency market fall – Inflation influence, rate hike and global crisis

About the author: Marine Debelloir

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Deputy Director of Cryptoast, I fell into the cryptocurrency pot a few years ago. I am passionate about the innovative technologies that come from the blockchain and I love to find the crispest information to share with you.
All articles by Marine Debelloir.

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