The DAO is the first decentralized autonomous organization, which was created by a group of developers in April 2016.
The DAO is the first-ever
decentralized autonomous organization. It launched in April 2016 after an initial token crowdsale worth USD 150 million. A group of developers created the DAO to serve as a decentralized venture capital fund, which could self-govern. The main idea for the creators of the DAO was to eliminate the human error factor in fund management on a high level.
The DAO focused on capitalizing
Ether, and at some point, held about fourteen percent of the total supply of the cryptocurrency. The DAO did not have the traditional management structure you expect to see in a venture capital fund as it was a completely decentralized organization. The organization was based on a completely open-source code, which meant that anyone could contribute to the way it functioned. In addition, as a decentralized organization, the DAO was not affiliated with any particular nation or state. This posed significant regulatory hurdles and queries and led to numerous precedents.
One of the main ideas behind the DAO was to be a self-governing organization where anyone could participate, regardless of their location. Thanks to the innate decentralization powers of
blockchain technology, the DAO became the first fully decentralized venture capital fund.
Unfortunately, in June 2016, only a couple of months after the DAO was launched, vulnerabilities in the code were published in an anonymous paper. The paper warned investors to hold off on voting on any other investment decisions before the developer team addressed these vulnerabilities. At this point, the DAO held about 14% of all ETH available on the market. After the paper was published, hackers got hold of it and started exploiting the vulnerabilities described in the document. This led to one of the greatest hacks in the history of cryptocurrencies and decentralized organizations.
The hackers managed to take off with more than 3.6 million ETH, which at the time was worth around USD 50 million. Because of the huge amount of stolen funds, investors in the DAO started arguing, and some started calling for the complete shutdown of the project. Additionally, Ethereum was forced to go through a hard fork.
Following the hack, several of the largest cryptocurrency exchanges decided to delist the
DAO token. This decision effectively led to the crash and imminent death of the DAO as an organization. While the DAO as an organization is now in history, DAOs are gaining more popularity by the minute. The technology and organization behind them have improved significantly, mainly thanks to the lessons developers learned from the DAO hack scandal.