The DAO

What happened

The DAO was an investor-directed fund written entirely as Ethereum smart contracts: token holders would vote on which proposals received funding, with no manager in between. Its 2016 token sale gathered a large fraction of all circulating ether. In June 2016 an attacker exploited a reentrancy flaw in the code that let a participant withdraw their share: the contract sent ether out before it updated the sender's balance, so a malicious contract could call back into the withdrawal repeatedly and be paid again each time on a balance that had not yet been reduced. Roughly 3.6 million ETH was moved into a child contract subject to a holding period written into The DAO's own rules, which is what gave the community weeks to argue about a response. Ethereum's participants ultimately adopted a hard fork that moved the funds to a recovery contract. A minority rejected the fork on the grounds that the ledger should not be rewritten, and continued the original chain as Ethereum Classic.

What to take from it

Code that holds funds is only as good as its ordering. The flaw was not exotic cryptography but a sequence — pay first, update the record after — and that pattern is still what auditors look for first. The aftermath matters as much as the bug: a chain can only reverse a theft if enough of its participants agree to, and that agreement is a political fact about a community, not a technical guarantee you can rely on in advance.

Dates and figures are widely reported public estimates from coverage at the time, not KripZen's own audited data.