The DAO incident is one of the most important and far-reaching black swan events in Ethereum's history.
It not only caused massive financial losses but also directly led to the split of the Ethereum community, giving birth to today's ETH and ETC two chains.

🔥 Event Background: What is The DAO?

  • The DAO was the largest DAO investment fund on Ethereum born in 2016
  • Raised 12 million ETH (about $150 million) through crowdfunding
  • It was the largest crypto crowdfunding project in the world at the time
  • The goal was to create a "decentralized venture capital fund"

The DAO's code was run by smart contracts, but there was a security vulnerability in its key call logic.

⚠️ Hacker Exploits Vulnerability to Launch Attack

Event Time: June 17, 2016

The hacker exploited the re-entrancy vulnerability (Re-entrancy Bug) in the contract:

  1. The attacker repeatedly calls the withdraw function
  2. Continuously withdraws ETH before the balance is updated
  3. Ultimately successfully transfers out 3.6 million ETH (worth about $50 million at the time)

The stolen ETH was temporarily locked in the attacker's sub-DAO and could only be used after 28 days, buying time for the community to "discuss solutions."

⚖️ Community Controversy: Should We Hard Fork?

The Ethereum community immediately split into two factions:

⭕ Pro-Hard Fork

  • Believes the funds belong to investors and should be recovered
  • The DAO vulnerability is not the user's responsibility
  • Forking can restore to the state before the attack

❌ Anti-Hard Fork

  • "Code is Law"
  • Smart contracts should be irreversible
  • Should not modify on-chain history through human intervention

The debate was extremely intense and lasted for weeks.

🔥 Final Decision: Hard Fork

July 20, 2016
Ethereum executed a hard fork, returning the stolen 3.6 million ETH to a refund contract.

However, the opposing faction that insisted on "not altering history" continued to use the original chain and named it:

  • Old Chain → Ethereum Classic (ETC)
  • New Chain → Ethereum (ETH)

This is the origin of the ETH and ETC fork.

📌 Event Impact

  • Accelerated the rise of the smart contract auditing industry
  • Enhanced security awareness for DeFi projects
  • The DAO model, after lying dormant for many years, revived in 2020
  • ETH/ETC became the most famous chain split case in Web3 history

The DAO incident also became the most typical teaching case for "blockchain governance."