The DAO: The $60M Hack That Split Ethereum in Two

On the morning of 17 June 2016, people watching The DAO saw its balance falling in chunks. Someone was taking ether out of it, the same small amount again and again, faster than anyone could explain. By the time it stopped, about 3.6 million ether, the currency of the Ethereum network, had gone. At the prices of that week it was worth roughly $60 million.

The DAO was not a company. It was a pot of money run by a computer program. Its name stood for "decentralised autonomous organisation", which in plain terms meant an investment fund with no manager, no board and no office: investors put in ether, received DAO tokens (a bit like units in a unit trust), and voted on which projects the pot should back. The rules lived in a smart contract, a program on the Ethereum blockchain that moves money by itself when its conditions are met, with nobody able to override it.

It had been built by Slock.it, a German start-up run by the brothers Christoph and Simon Jentzsch with Stephan Tual, and its fundraising, which ran from 30 April to 28 May 2016, was the biggest crowdfunding the world had seen. About 12.7 million ether went in, worth around $150 million and more than a tenth of all the ether that existed. Then a stranger took about a third of it.

How the money walked out

The flaw sat in the code that let an investor withdraw. When someone asked for their money back, the contract sent the ether first and only afterwards wrote down that the balance had been paid. The attacker used a contract of their own that, the moment it received a payment, asked for another one. Each time the request came back, the books still showed the old balance, so the contract paid again. Security researchers call this reentrancy. The everyday version is a cash machine that hands out notes and only updates the account after the customer walks away, and a customer who never walks away.

The DAO had one design quirk that saved the day. Money taken out did not go straight to the taker. It went into a "child DAO", a copy of the fund, where it was locked for 28 days before anyone could spend it. The attacker had the money, in a sense, but could not move it until mid-July.

The price of ether fell from about $20 to about $13 within days. On 21 June a group of volunteers who called themselves the Robin Hood Group used the same bug to drain most of what was left into a child DAO of their own, so the attacker could not come back for it.

The vote that rewrote history

The 28-day lock turned a theft into an argument. Ethereum's developers first proposed a soft fork, a software update in which the computers that process transactions would simply refuse to move the stolen coins. Think of it as every bank agreeing not to honour one account. Researchers found that the proposal would let attackers jam the network with free, endless requests, a denial-of-service hole, and it was dropped days before it was due.

That left the bigger option: a hard fork. A hard fork is a change to the rules that every computer on the network must accept. Anyone who refuses ends up on a separate network. Here it meant writing a new rule that took the ether out of The DAO and its child DAOs and put it in a refund contract, where investors could swap 100 DAO tokens for 1 ether, exactly what they had paid. In stock market terms, it was the exchange cancelling a trade after it had settled, by rewriting the ledger.

Vitalik Buterin, Ethereum's co-founder, supported it. Opinion was taken through CarbonVote, an informal poll where one ether equalled one vote. Pro-fork holders cast about 3.96 million votes against about 0.57 million, roughly 87 percent in favour, though only a small slice of all ether took part. At block 1,920,000, on 20 July 2016, the fork went live. Investors got their money back.

Ethereum Classic: the chain that said no

Not everyone upgraded. Miners and node operators (the people whose computers check and record transactions) who believed "code is law", that a contract's outcome stands even when it is ugly, kept running the old rules. Their version, with the theft left in place, became Ethereum Classic, which still trades today under the ticker ETC.

Because both chains shared a history up to the fork, every ether holder suddenly owned the same amount on each. That included the attacker. On the Classic chain the stolen coins were never taken back, so the attacker kept them there and later cashed them out.

The man named as the attacker

For six years nobody knew who it was. In February 2022 the journalist Laura Shin, writing in Forbes alongside her book The Cryptopians, named Toby Hoenisch, an Austrian programmer and former chief executive of the crypto card company TenX, as the likely attacker. Her case, built with the analytics firm Chainalysis, rested on tracing the Classic coins through the exchange ShapeShift and a Bitcoin privacy wallet to a server labelled "grin.toby.ai", and on emails Hoenisch had exchanged with Slock.it about weaknesses in The DAO's code before the attack. Hoenisch told Shin her conclusion was "factually inaccurate". He has never been charged with any crime, and no authority has taken action against him.

What it left behind

The hack shaped the rules that came later. In July 2017 the US Securities and Exchange Commission published its DAO Report, finding that DAO tokens were securities, the first time the regulator said that kind of token sale could fall under securities law. The disaster also created smart contract auditing as a trade: before June 2016 there was barely such a thing as paying an outside firm to read code for holes like this one.

Ten years on the story is still not finished. On 29 January 2026 Griff Green, a co-founder of the charity platform Giveth and one of the original curators who held leftover DAO funds, announced TheDAO Security Fund. About 75,000 ether that was never claimed after the fork, roughly 70,500 in a contract called ExtraBalance and about 4,600 in the curators' wallet, worth more than $220 million in early 2026, will be staked to earn a return, with the income paying for Ethereum security work. Its board of curators includes Buterin, the MetaMask security researcher Taylor Monahan and Alex Van de Sande of the Ethereum Name Service. Money lost to a bug in 2016 is now being spent on catching the next one.