The Ethereum DAO is a decentralized autonomous organization built on the Ethereum blockchain. It is a decentralized platform that runs smart contracts, allowing users to create and participate in decentralized applications (dApps) without having to rely on third-party intermediaries.
The DAO is intended to be a self-governing, self-funding platform that is owned and operated by the community.
The DAO was launched in April 2016 and quickly raised over $150 million worth of Ether (ETH), making it the largest crowdfunding campaign in history at that time. However, the DAO was hacked in June 2016, resulting in the loss of over $50 million worth of ETH.
The hack led to a hard fork of the Ethereum blockchain, creating two separate chains: Ethereum (ETH) and Ethereum Classic (ETC).
What Is a Decentralized Autonomous Organization
A decentralized autonomous organization (DAO) is an organization that is run by a set of rules encoded on a blockchain. A DAO is decentralized because it is not controlled by any central authority, and it is autonomous because it can operate without the need for human intervention.
DAOs are often compared to traditional corporations, but there are several key differences. First, traditional corporations are centrally controlled by a small group of individuals, whereas DAOs are decentralized and controlled by code. Second, traditional corporations have shareholders who elect a board of directors to make decisions on behalf of the company, whereas DAOs have no shareholders and no board of directors.
Rather, decision-making power is distributed among all participants in the DAO. Finally, traditional corporations are for-profit entities whose primary goal is to generate revenue for shareholders, whereas DAOs can be either for-profit or non-profit entities whose primary goal is to achieve a specific purpose or set of objectives.
What Is the Purpose of the Ethereum DAO
The purpose of the Ethereum DAO is to provide a platform for developers to create and deploy decentralized applications without having to go through a centralized intermediary. The DAO accomplishes this by holding Ether in a smart contract and using it to fund proposals submitted by developers.
Proposals that receive enough votes from participants are funded and implemented on the Ethereum blockchain.
In addition to providing funding for dApp development, the Ethereum DAO also allows participants to vote on governance decisions related to the platform. For example, participants can vote on which dApps should be funded, what changes should be made to the Ethereum protocol, or how Ether should be used to incentive good behavior on the network.
By decentralizing decision-making power, the Ethereum DAO aims to create a more democratic and transparent way of governing a decentralized platform.
What Happened During The Hack
During the hack, an attacker exploited a flaw in the code that governed how proposals were funded. This allowed the attacker to “steal” over $50 million worth of ETH from theDAO’s smart contract. In response to the hack, the Ethereum community decided to hard fork the blockchain in order to refund investors who lost money in the attack.
This resulted in two separate chains: Ethereum (ETH) and Ethereum Classic (ETC). While both chains share identical history up until the point of fork, they have since diverged due to different philosophies towards immutability and decentralization.