When TheDAO was hacked in 2016, it was the worst thing to ever happen to Ethereum during its then-short life. 

It also completely upended the lives of everyone who worked on TheDAO and was seen by some as the moment that matured Vitalik from an idealistic boy to someone who was more measured with his words. 

And now, the remaining funds will be used to create a $220 million security fund for Ethereum, turning its worst hack into a benefit for the ecosystem.

EXCLUSIVE: TheDAO to Become New $220 Million Ethereum Security Fund

For almost a decade, over 75,000 ETH involved in TheDAO has remained unclaimed. Now, Ethereum OGs and Vitalik are using it to create an ecosystem security fund. 

The 2016 DAO hack, in which a hacker obtained 4.5% of what was then all ETH in existence, was Ethereum’s defining moment. It caused an existential crisis for the fledgling network, led to a hard fork that spawned an evil twin, Ethereum Classic, and became a turning point for the community. 

And now, the most infamous security failure in Ethereum history will be used to help keep the ecosystem secure. 

Some unclaimed money from the whole DAO debacle is being used to help establish a $220 million endowment to shore up Ethereum’s security called TheDAO Security Fund. (However, some funds will stay untouched so they can still be claimed.)

The capital will be granted to projects working on Ethereum security, with funding distributed mostly through DAO processes. A portion of the ETH will also be staked so as to create an ongoing source of funding for security projects.

“It's 2026 and we never touched any of those funds. They've appreciated substantially. And so it's time. It's time to put them to work to make Ethereum safer and more secure,” said Griff Green, one of TheDAO’s “curators” or maintainers who was an employee of Slock.it, the company that coded up the original DAO. He then became one of the “White Hat Group” who rescued the money from TheDAO. 

Turning a Hack Into Security

In 2016, after the hack, the community hard forked the blockchain so as to take all the stolen ETH and return it to DAO participants via the so-called Withdraw Contract, which would send back 1 ETH for every 100 DAO tokens sent in, reflecting the original sale price. 

Aside from the pool of money for ongoing claims (yes, even a decade on, Griff is still contacted for claims), TheDAO saga created other stashes that can be used for the security fund. 

Any capital left unclaimed in the Curator Multisig of 4,600 worth of ETH (actually mostly DAO tokens) totaling $13.5 million, will be allocated to Ethereum security initiatives. (Many of these tokens were often accidentally and erroneously sent either to TheDAO or Withdraw Contract, and while many such funds had already been returned, not everyone requested that these tokens be sent back.)

Staking for the Future

Additionally, another stash of money will be used to stake to create an ongoing stream of funds for security initiatives. Back during TheDAO crowdsale, as it inched closer to its closing date, the price ticked up — first, to 1.05 ETH for every 100 DAO tokens and finally finishing at 1.5 ETH for every 100 DAO tokens. 

After the hard fork when the money was being returned, for those who had paid more than 1 ETH for 100 DAO tokens, the overage from their purchases was called the ExtraBalance. The money remaining unclaimed in the ExtraBalance is 70,500 ETH (about $206.6 million). 

Of that ETH, 69,420 (a very crypto number) will be staked, with the yield being used to create an endowment. Currently, that amount of ETH staked would generate almost $8 million worth of ETH in yield annually. 

A DAO Grants Process

The security grants will be awarded following a process that honors the intention of the original DAO. 

The group plans to use tactics such as quadratic funding, in which larger grants go to projects that have received many small donations vs. ones that have received few large donations; retroactive funding, which funds projects or expenses that have already occurred; and RFP ranked-choice voting, in which security proposals are requested and voters rank them in order of preference. 

The group also plans to solicit applications for operators for future funding rounds. 

The Ethereum Foundation will set the eligibility criteria for each round, and Green’s organization, Giveth, will support the operators. 

TheDAO Security Fund’s Focus

Nowadays, Ethereum is much bigger and more diverse than it was at the time TheDAO was launched, when it became pretty much the only application generating much interest on the less-than-one-year-old blockchain. 

That raises the question of what an Ethereum-focused fund would focus on, since many projects can claim to be connected to or related to Ethereum or the Ethereum virtual machine (EVM) in some way.

TheDAO Security Fund will focus on layer 1, layer 2s, smart contracts, incident response, research, user protection, infrastructure, operational security, education, and more, but not, for instance, EVM-compatible alt-L1s. 

Groups doing the kind of work that could be funded include, for instance, SEAL (Security Alliance) and SEAL 911; auditors like Trail of Bits, OpenZeppelin and Quantstamp; or products focused on user protection and wallet safety such as Revoke.cash and Blockaid. 

For infrastructure, it could support groups like L2Beat, which does research on layer 2s, and Safe, a multisig wallet service. For operational security, it could fund Yubikey, which can be used to secure servers, or Signal, a popular encrypted messaging app. 

“TheDAO Security Fund … is going to put a lot of money into the hands of security researchers all over the Ethereum space and really make Ethereum security second to none,” said Green.

Reviving the DAO ecosystem

As for the secondary goal of supporting the advancement of DAOs, Green says this is a focus, “because the DAO ecosystem really is at a low point…. With regulatory issues not really being a thing, people are like, ‘Why would I create a DAO?’” (He was referencing news like that Eigenlayer, Apecoin DAO, Jupiter DAO, and Scroll DAO had closed or paused operations; meanwhile others like the Cronos blockchain have had their communities overruled by centralized entities or whales, such as, in this case, Crypto.com, in controversial votes.)

“For me at least,” he went on, “this is what was exciting about Ethereum, that we could build something better than governments. And we could use this tool — this amazing blockchain technology — to do something that makes it easy for people to signal their decisions and have more whatever level of participation they want into the decision making in society.” 

Ten years after he began working on TheDAO, the new fund that Green is helping to spin up may finally achieve the goal he’d had a decade ago.

Tune into our livestream interview with TheDAO curator, Griff Green!