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TypeDecentralized autonomous organization
IndustryCryptocurrency software venture capital fund
Area served
Key people
Stephan Tual, Simon Jentzsch, Christoph Jentzsch
Total assetsETH 11.5 million[2]
Owners+18 000 stakeholders[3]
Number of employees
0 (automated)[4]
The DAO (software)
Written inSolidity
LicenseGNU LGPL v3+

The DAO was a digital decentralized autonomous organization[5] and a form of investor-directed venture capital fund.[6] After launching in April 2016 via a token sale, it became one of the largest crowdfunding campaigns in history,[6] but it ceased activity after much of its funds were taken in a hack in June 2016.

The DAO had an objective to provide a new decentralized business model for organizing both commercial and non-profit enterprises.[7][8] It was instantiated on the Ethereum blockchain and had no conventional management structure or board of directors.[7] The code of the DAO is open-source.[9]

Christoph Jentzsch at the Festival of the Future (Festival der Zukunft) from 1E9 and Deutsches Museum (Munich, Germany on July 22nd 2022)

In June 2016, users exploited a vulnerability in The DAO code to enable them to siphon off one-third of The DAO's funds to a subsidiary account. The Ethereum community controversially decided to hard-fork the Ethereum blockchain to restore approximately all funds to the original contract. This split the Ethereum blockchain into two branches, each with its own cryptocurrency, where the original unforked blockchain continued as Ethereum Classic.[10]

By September 2016, the value token of The DAO, known by the moniker DAO, was delisted from major cryptocurrency exchanges (such as Poloniex and Kraken). The DAO and had in effect become defunct.[11][12]


The open source computer code behind the organization was written principally by Christoph Jentzsch, and released publicly on GitHub, where other contributors added to and modified the code.[6] Simon Jentzsch, Christoph Jentzsch's brother, was also involved in the venture.[6]

The DAO was launched on 30 April 2016 with a website and a 28-day crowdsale to fund the organization.[13]

The token sale had raised more than US$34 million by 10 May 2016, and more than US$50 million-worth of Ether (ETH)—the digital value token of the Ethereum network—by 12 May, and over US$100 million by 15 May 2016.[13][14] On 17 May 2016, the largest investor in the DAO held less than 4% of all DAO tokens and the top 100 holders held just over 46% of all DAO tokens.[15] The fund's Ether value as of 21 May 2016 was more than US$150 million,[16] from more than 11,000 investors.[17]

As of May 2016, The DAO had attracted nearly 14% of all Ether tokens issued to date.[1]

On 28 May 2016 the DAO tokens became tradable on various cryptocurrency exchanges.[18][11][12]

A paper published in May 2016 noted a number of security vulnerabilities associated with The DAO and recommended that investors in The DAO hold off from directing The DAO to invest in projects until the problems had been resolved.[19] An Ethereum developer on GitHub pointed out a flaw relating to "recursive calls". On June 9 it was blogged about by Peter Vessenes, founder of the Blockchain Foundation.[20] By June 14, fixes had been proposed and were awaiting approval by members of The DAO.

On June 16, further attention was called to recursive call vulnerabilities by bloggers affiliated with the Initiative for CryptoCurrencies & Contracts (IC3).[21]

On June 17, 2016, the DAO was subjected to an attack exploiting a combination of vulnerabilities, including the one concerning recursive calls, that resulted in the transfer of 3.6 million Ether - around a third of the 11.5 million Ether that had been committed to The DAO - valued at the time at around $50M.[2][22] The funds were moved into an account subject to a 28-day holding period under the terms of the Ethereum smart contract so were not actually gone.

Members of The DAO and the Ethereum community debated what to do next, with some calling the attack unethical but valid, since it did not violate DAO rules as coded, while others called for the Ether to be re-appropriated and/or The DAO to be shut down.[22][23] The DAO community manager, Griff Green, organized a volunteer group of coders known as The White Hat Group to recoup the funds in the other 500 wallets before they could also be hacked.[24] Eventually on July 20, 2016, the Ethereum network was hard forked to move the funds in The DAO to a recovery address where they could be exchanged back to Ethereum by their original owners.[25] However, some continued to use the original unforked Ethereum blockchain, now called Ethereum Classic.

In September 2016, Poloniex de-listed DAO trading pairs, followed by Kraken in December 2016.[11][12]


The DAO was a decentralized autonomous organization[26] that exists as a set of contracts on the Ethereum blockchain,[27] with no physical address or officials with formal authority. The theory underlying the DAO was that keeping operational power directly in the hands of owners, not delegated to managers, would ensure that invested funds would be used in the owners' best interests, thus solving the principal–agent problem.[28]

As an on-chain organization, The DAO claimed to be completely transparent, since everything was done by the code which anyone could see and audit.[29] However, the complexity of the code base and the rapid deployment of the DAO meant that neither the coders, the auditors, nor the owners could ensure the intended behavior of the organization, with the eventual attacker finding an unexpected loophole.[30]

The DAO was intended to operate as "a hub that disperses funds (currently in Ether, the Ethereum value token) to projects". Investors receive voting rights by means of a digital share token;[26] they vote on proposals submitted by contractors, and a group of curator volunteer make sure the projects are legal and the contractors properly identified before whitelisting them.[6] The profits from an investment will flow back to their stakeholders as specified in an on-chain smart contract.[3]

The DAO did not hold the money of investors; instead, the investors owned DAO tokens that gave them rights to vote on potential projects.[16] Anyone could pull out their funds by the time they first voted.[3]

The DAO's reliance on Ether allowed people to send their money to it from anywhere in the world without providing any identifying information.[16]

In order to provide an interface with real-world legal structures, the founders of The DAO established a Swiss-based company, "DAO.Link", registered in Switzerland as a limited liablity corporation (Société à responsabilité limitée, SARL), apparently co-founded by and Neuchâtel-based digital currency exchange Bity SA. According to Jentzsch, DAO.Link was incorporated in Switzerland because local law allowed it to "take money from an unknown source as long as you know where it's going."[6]


In May 2016, TechCrunch described The DAO as "a paradigm shift in the very idea of economic organization. ... It offers complete transparency, total shareholder control, unprecedented flexibility, and autonomous governance."[26]

The group's logo featured a capital letter Đ.


In May 2016, the plan called for The DAO to invest Ether into ventures. It would back contractors and receive in return "clear payment terms" from contractors.[citation needed] The organizers promoted the DAO as providing investors with a return on their investment via those "clear payment terms" and they warned investors that there was a "significant risk" that the ventures funded by them may fail.

The risks included unknown attack vectors and programming errors.[27][31] Additional risks included the lack of legal precedents: it was unknown how governments and their regulatory agencies would treat The DAO's ventures and contracts. For example, legal systems might not acknowledge a corporate veil protecting investors from individual legal and financial liability for actions taken by The DAO and its contractors. It was unclear if the DAO was selling securities, which are highly regulated, and if so, what type of securities.[17]

DAO has a democratized organizational structure so that control can be spread among members, with no official leadership or regulation. Normally, there is no way to recover funds if a member mistakenly transfers cryptocurrency to the wrong wallet, including in case of fraud.[32]

Additionally, to function in the real world, contractors would likely need to convert the invested Ether into national currencies. In May 2016, attorney Andrew Hinkes said that those sales of Ether would likely depress its market value.[citation needed]

The code behind The DAO had several safeguards against anyone capturing the voting rights of shareholders to win investments.[16] However, this would not prevent fraudulent or over-optimistic proposals. A paper cited a "number of security vulnerabilities".[19]

Proposals[edit] (a German Blockchain venture), and Mobotiq (a French electric vehicle start-up) were listed as seeking potential funding on the website during the May "creation period". Both Jentzsch brothers were involved in as well.[6]


On 25 July 2017, the U.S. Securities and Exchange Commission published a report on initial coin offerings (ICOs) and The DAO, examining "whether The DAO and associated entities and individuals violated federal securities laws with unregistered offers and sales of DAO Tokens in exchange for 'Ether,' a virtual currency." The SEC concluded that DAO tokens sold on the Ethereum blockchain were securities and therefore possible violations of U.S. securities laws.[33]


  1. ^ a b Staff, The Economist. May 21st, 2016 The DAO of accrue. A new, automated investment fund has attracted stacks of digital money Archived 2017-11-18 at the Wayback Machine
  2. ^ a b Popper, Nathaniel (17 June 2016). "Hacker May Have Taken $50 Million From Cybercurrency Project". The New York Times. Archived from the original on 20 June 2017. Retrieved 3 March 2017.
  3. ^ a b c Tom Simonite for MIT Technology Review. The “Autonomous Corporation” Called the DAO Is Not a Good Way to Spend $130 Million Archived 2016-06-02 at the Wayback Machine
  4. ^ Brady Dale for The Observer. May 20, 2016 The DAO: How the Employeeless Company Has Already Made a Boatload of Money
  5. ^ The Decentralized Autonomous Organization and Governance Issues. Archived 2018-06-04 at the Wayback Machine Regulation of Financial Institutions eJournal: Social Science Research Network (SSRN). 5 December 2017.
  6. ^ a b c d e f g Waterss, Richard (2016-05-17). "Automated company raises equivalent of $120M in digital currency". Financial Times. Archived from the original on 2020-11-08. Retrieved 2016-05-17.
  7. ^ a b Rennie, Ellie (2016-05-12). "The radical DAO experiment". Swinburne News. Swinburne University of Technology. Archived from the original on 2016-05-16. Retrieved 2016-05-12. When it reaches the end of the funding phase on May 28, it will begin contracting blockchain-based start-ups to create innovative technologies. The extraordinary thing about The DAO is that no single entity owns it, and it has no conventional management structure or board of directors.
  8. ^ Allison, Ian (2016-04-30). "Ethereum reinvents companies with launch of The DAO". International Business Times. Archived from the original on 2016-05-01. Retrieved 2016-05-01.
  9. ^ "The DAO: How the Employeeless Company Has Already Made a Boatload of Money". The New York Observer. 20 May 2016. Archived from the original on 23 May 2016. Retrieved 31 May 2016.
  10. ^ "Hard Fork Completed". 20 July 2016. Archived from the original on 14 August 2016. Retrieved 21 July 2016.
  11. ^ a b c "Poloniex to delist 27 altcoins including DSH and DA". Economic Times. 24 August 2016. Archived from the original on 4 October 2016. Retrieved 17 June 2017.
  12. ^ a b c "DAO Delisting". Kraken website. 18 December 2016. Archived from the original on 12 October 2018. Retrieved 17 June 2017.
  13. ^ a b Vigna, Paul (2016-05-16). "Chiefless Company Rakes In More Than $100 Million". Wall Street Journal. Archived from the original on 2017-06-25. Retrieved 2016-05-16.
  14. ^ Morris, David Z. (2016-05-15). "Leaderless, Blockchain-Based Venture Capital Fund Raises $100 Million, And Counting". Fortune. Retrieved 2016-05-16.
  15. ^ "Virtual company may raise $200 million, largest in crowdfunding". Reuters. 17 May 2016. Archived from the original on 10 June 2017. Retrieved 20 May 2017.
  16. ^ a b c d Popper, Nathan (2016-05-21). "A Venture Fund With Plenty of Virtual Capital, but No Capitalist". New York Times. Archived from the original on 2016-05-27. Retrieved 2016-05-22.
  17. ^ a b Macheel, Tanaya (19 May 2016). "The DAO Might Be Groundbreaking, But Is It Legal?". American Banker (News). Archived from the original on 17 June 2016. Retrieved 23 May 2016.
  18. ^ "BTC Markets To Enable Trading Of The DAO Token On May 28 - EconoTimes". econotimes. 20 May 2016.
  19. ^ a b Popper N. "Paper Points Up Flaws in Venture Fund Based on Virtual Money Archived 2020-11-08 at the Wayback Machine." New York Times May 27, 2016
  20. ^ Vessenes, Peter (2016-06-09). "More Ethereum Attacks: Race-To-Empty is the Real Deal". Archived from the original on 2021-01-19. Retrieved 2021-06-10.
  21. ^ "The Initiative for Cryptocurrencies & Contracts". IC3. Archived from the original on 2017-02-14. Retrieved 2017-02-14.
  22. ^ a b Price, Rob (17 June 2016). "Digital currency Ethereum is cratering amid claims of a $50 million hack". Business Insider. Archived from the original on 11 June 2017. Retrieved 17 June 2016.
  23. ^ Klint Finley for Wired. June 18, 2016 A $50 Million Hack Just Showed That The Dao Was All Too Human Archived 2016-07-26 at the Wayback Machine
  24. ^ Pearson, Jordan (24 July 2017). How Coders Hacked Back to ‘Rescue’ $208 Million in Ethereum[1]. Wired. From the original on 2017-07-24. Retrieved 3 Oct 2023.
  25. ^ "Report of Investigation Pursuant to Section 21(a) of the Securities Exchange Act of 1934: The DAO" (PDF). Securities and Exchange Commission. July 25, 2017. Archived (PDF) from the original on 9 June 2018. Retrieved 13 June 2018.
  26. ^ a b c Bannon, Seth (2016-05-16). "The Tao of "The DAO" or: How the autonomous corporation is already here". TechCrunch. Archived from the original on 2016-05-17. Retrieved 2016-05-16.
  27. ^ a b Castillo, Andrea (2016-05-24). "Can a Bot Run a Company?". Reason. Archived from the original on 2016-05-26. Retrieved 2016-05-25.
  28. ^ "The DAO Will Soon Become The Greatest Threat Banks Have Ever Faced". 25 May 2016. Archived from the original on 24 June 2016. Retrieved 31 May 2016.
  29. ^ "Ethereum's $150-Million Blockchain-Powered Fund Opens Just as Researchers Call For a Halt". 28 May 2016. Archived from the original on 30 May 2016. Retrieved 31 May 2016.
  30. ^ Morrison, Robbie; Mazey, Natasha C. H. L.; Wingreen, Stephen C. (27 May 2020). "The DAO Controversy: The Case for a New Species of Corporate Governance?". Frontiers in Blockchain. 3. doi:10.3389/fbloc.2020.00025.
  31. ^ Peck, M. (28 May 2016). "Ethereum's $150-Million Blockchain-Powered Fund Opens Just as Researchers Call For a Halt". IEEE Spectrum. Institute of Electrical and Electronics Engineers. Archived from the original on 30 May 2016. Retrieved 2 February 2020.
  32. ^ Dhanani, Ali; Hausman, Brian J. (2022). "Decentralized Autonomous Organizations". Intellectual Property & Technology Law Journal. 34 (5): 3–9.
  33. ^ "SEC Issues Investigative Report Concluding DAO Tokens, a Digital Asset, Were Securities; U.S. Securities Laws May Apply to Offers, Sales, and Trading of Interests in Virtual Organisations. Press Release 2017-131". U.S. Securities and Exchange Commission. Archived from the original on 2017-10-10. Retrieved 2017-08-03.

Further reading[edit]