The DAO

Bitcoin and Markets edited this page Aug 27, 2018 · 4 revisions

The DAO played a primary role in the overall trajectory of the Ethereum project. Before the DAO, Ethereum was "the world computer" and full of childish imagination. After the DAO, Ethereum was a platform for Initial Coin Offerings (ICO) and tokens. The DAO shattered the idea of decentralized and immutable smart contracts and paved the way for the complete centralization of apps and the Ethereum project.

Background

A Decentralized Autonomous Organization (DAO) was first theorized in 2013 by Dan Larimer, where he explained his concept behind Bitshares being a DAC (decentralized autonomous corporation). It didn't work either. The idea did capture the imagination of libertarians not well versed in economics. Companies are security holes for libertarians, central points of failure and open to regulation by governments. From the beginning however, it was apparent that Larimer and others wanted to move the central planning process from external State regulations to internal "code is law" structure. What these people failed to understand is that human society and behavior, the essence of a wild efficient market, can't be captured planned for in code. This mistake leads to central planning hubris, which ultimately took down the DAO.

The DAO's story starts in 2015 when a small group of scammers began designing its business model and writing code. These people were Christoph Jentzsch, Simon Jentzsch and Stephan Tual. More on them later. The DAO was a form of investor-directed venture capital fund, and had an objective to provide a new decentralized business model for organizing both commercial and non-profit enterprises.

What Happened

The 28-day crowdsale of DAO tokens began in May 2016 and quickly accumulated 14% of all ETH, with a significant portion coming from insiders of the Ethereum project. A few weeks after the crowdsale ended, the experiment came to a humiliating end on June 17, 2016 when the DAO contract was maliciously drained of a large percentage of its ETH holdings. All hell broke loose. Vitalik and other Ethereum whales quickly ordered exchanges to halt all trading and withdraws of Ethereum and a group of "white hat hackers" working for the Ethereum Foundation quickly used the same exploit to safeguard the remaining ETH. It was not a "hack" of the DAO. This was a known exploit written about weeks earlier. Ethereum's central marketing slogan at the time was "Code is Law" and the person that attacked the DAO used the code against itself.

Who Was Involved

Still working

Christoph Jentzsch linkedin

Tual linkedin

Involving everyone from slockit blog

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