# The DAO Hack (2016) - The Original Sin By [Lista DAO](https://blog.lista.org) ยท 2026-08-07 --- We met at dusk. Moolah had asked for it specifically - _come at the hour the light goes amber, not before, not after_ - and so we arrived at the bench at five forty-five on a Sunday in late March, when the plum blossoms had already begun their slow, slightly sad transition from full bloom to drift. The pond was dark and still. The first cherry buds were out, tight little fists at the ends of the branches. The children who usually played in the park were being herded home by their parents. A single old man was standing very still at the water's edge, watching something I could not see. Moolah was already on the bench when we arrived. She had no latte. That was the first thing I noticed - that she had no latte. The space beside her where the cup usually sat was empty. She was looking at the pond. "Sit down," she said. "I want to tell you a ghost story." We sat. "This is the first one," she said. "I want you to remember that. The disasters I am going to tell you about over the next several weeks did not appear out of nowhere. They have lineage. They have ancestors. And the ancestor of all of them - the one that made everything that came after possible, and that broke a community in ways it has never fully healed from - happened in the summer of 2016, and was called The DAO." The light was going. Behind the trees, the sky had turned a color halfway between pink and gold. "Ethereum was very young," Moolah said. "About a year old. The protocol was working. People were excited. They wanted to do something ambitious - something that would prove this whole experiment could matter. So a group of developers built a project they called The DAO. _The_ DAO. Not _a_ DAO. The first one. The original. A decentralized investment fund - anyone could deposit ether, vote on which projects to fund, and share in the returns. The code would do the rest. No managers. No board. Just code." "And people deposited?" "People deposited a great deal. By the time the funding window closed in May of 2016, The DAO held about one hundred and fifty million dollars of ether. At the time, that was roughly fourteen percent of all ether in existence. One out of every seven ether ever minted. All sitting in a single smart contract. The largest crowdfunded project in history, at that point. The community was euphoric. The press was calling it the future of organizations. Everyone was watching." She paused. "And then, in June, someone read the contract." "Someone?" "Someone with the patience and skill to read three hundred lines of code carefully and find the bug. There was a function in the contract called _splitDAO_ - it allowed a depositor to withdraw their share of funds and form their own smaller DAO if they disagreed with where the main one was heading. Reasonable feature. Sensible governance. But the function had been written in a way that contained a flaw the developers had not noticed. A flaw that was, in retrospect, well-known among security researchers at the time. It was called _re-entrancy_." "What does that mean?" She rearranged herself. The amber light caught the edge of her fur. "Imagine you go to a bank window. You hand the teller your withdrawal slip for ten dollars. The teller takes the slip, opens the cash drawer, hands you ten dollars, and _then_ writes in the ledger that ten dollars has been withdrawn from your account. Most of the time, this works fine. But suppose, between the moment the teller hands you the cash and the moment the teller writes in the ledger, you hand the teller _another_ withdrawal slip for ten dollars. The teller hasn't yet recorded that your balance went down. As far as the ledger says, you still have your full balance. So the teller pays out the second slip. And the third. And the fourth. The teller is so busy paying out withdrawals that she never gets back to writing in the ledger. By the time she does, your account balance has gone below zero, but you have already left the bank with several times what was in it." I felt a small chill. "That's the bug." "That's the bug. The DAO's _splitDAO_ function sent the ether out _before_ updating the internal balance. The attacker - we still do not know definitively who they were - wrote a small contract that called _splitDAO_, received the ether, and immediately called _splitDAO_ again before the balance had been updated. Recursively. Hundreds of times in a single transaction. The DAO did not realize it was being drained because it was too busy paying out the next withdrawal to ever finish recording the last one." "How much?" "Three and a half million ether. About fifty million dollars at the prices of the time. A third of the entire DAO. Drained in a single afternoon." The old man at the water's edge had moved on. The light was deeper now, the gold turning to copper. "What did people do?" "They panicked. Discord servers melted down. Forums caught fire. The price of ether dropped twenty percent in hours. The community - the small, tight, idealistic community of people who had built and funded this thing - split, almost immediately, into two camps. And the argument between those two camps is the most important argument in the history of this entire industry. It has never been resolved, and it never will be." "What were the two camps?" "The first camp said: _the contract did exactly what it was written to do. The attacker exploited a feature, not a bug. The code is the law. We agreed, when we deposited our money, that the code would govern. The code has spoken. The money is gone. We must accept this and rebuild._ This was the position of the purists. The cypherpunks. The ones who believed that immutability was the entire point of a blockchain. To them, reversing the hack - even to recover their own money - was the same as admitting that the system was, in the end, just another financial system run by humans who would change the rules when convenient. They would rather lose the money than lose the principle." "And the second camp?" "The second camp said: _fifty million dollars has been stolen from thousands of people, and we have the technical ability to reverse it, and there is no virtue in letting a thief win because we were too proud to act. We will roll back the chain. We will make the depositors whole and treat this as the emergency it is. The principle of immutability matters, but it does not matter more than people's lives._" "And what happened?" "There was a vote. Roughly eighty-five percent of the community voted to perform what's called a _hard fork_ - to retroactively change the chain's history, undo the hack, and return the ether to the original depositors. It was the largest deliberate intervention into a blockchain's ledger that had ever been performed. The fork happened on July twentieth, 2016. The ether was returned. The depositors were made whole, more or less." "Then it ended well." "Then it began. Because a minority - the purists, who had voted against the fork - refused to follow the new chain. They kept running the old one, with the hack intact. They said: _we will not change history. Whoever stole the money still has it. The chain is the chain._ The blockchain split into two. The one with the hack reversed became known as Ethereum. The one with the hack preserved - the original, in some sense - became known as Ethereum Classic. They are still both running today. They share the same history up until July of 2016. After that, they are different worlds. The same protocol, the same software, the same coins, all forked into two universes by a single argument about what trust meant." I wrote in the notebook. _The DAO. June 2016. Re-entrancy bug. Drain of 3.6M ETH (~$50M). Hard fork to recover. Split: Ethereum (forked) and Ethereum Classic (original)._ Underneath, I wrote: _the argument was never about the money. It was about what blockchains are for._ "And the attacker?" "Was never definitively identified. There have been theories. There have been investigations. There has been at least one journalist who claims to have found them. The attacker themselves, on the Ethereum Classic chain, still holds a portion of the original drained ether, sitting there, untouched, for nearly a decade now. A monument to the hack, in plain sight, on a chain that nobody can change." I stared at the pond. The carp were not visible. The water was very dark. "Why did this matter so much?" I asked. "Beyond the money." "Because it forced a community of true believers to confess that they were not, in fact, willing to follow their own rules when the rules produced an outcome they could not bear. Most of them voted to fork. Most of them are still on the forked chain. The ones who stayed - on Ethereum Classic - were the ones who said _the rules matter even when they hurt._ The ones who left - to the new Ethereum - were the ones who said _the people matter more than the rules._ Both are reasonable positions. Both are still defended fiercely. But the question they were arguing about - _can a smart contract really be law if humans can override it when they want to?_ - is the foundational question of this whole industry, and it was answered, definitively, in the summer of 2016, and the answer was _no_." "That's a hard answer." "It is the answer the industry has been quietly digesting for almost a decade. Every time a major protocol has had a hack since, this question has come back. _Can we roll it back? Should we?_ Every time, the answer has been _no, this time we cannot, because the chain is too big now and the consensus is too distributed._ But everyone knows, in the back of their mind, that there was a time when the answer was yes. The original sin of DeFi is not the bug but the fork. The fork made the bug forgivable, and in doing so, taught the industry that bugs _could_ be forgiven, which made all the bugs that came after slightly easier to live with and slightly harder to fix. We are, in some sense, still living in the shadow of that decision." Dev had been quiet the whole time. Now he said, "I didn't know any of this." "Most people don't," Moolah said. "It happened almost ten years ago, in an industry that forgets everything older than six months. But it is the foundation. Every other story I am going to tell you over the next several weeks is, in some way, a descendant of this one. The story of someone reading code that thousands of people had not read carefully enough. The story of money disappearing in a single afternoon. The story of a community arguing about what to do, and the argument changing them. You will hear this shape again. You will hear it many times." The light had gone almost entirely. The streetlamps at the edges of the park flickered on. A wind moved across the pond and the carp, hidden under the dark surface, stayed where they were. "I don't have a happy ending for you," Moolah said. "The DAO is the only one of these stories I know without a happy ending. The money was returned, but the principle was lost, and the principle was the whole point. People did make money back. The community did rebuild. Ethereum did become what it is today. But it became what it is _as a result of_ the fork, not in spite of it. We are all, even now, on a chain that exists because someone, in 2016, decided that immutability could be broken when the cost of holding it was too high. That is the inheritance. That is the original sin." She slipped off the bench. The streetlamp closest to us made her look smaller than usual, and older, and I had the very strong feeling - for the second time in two weeks - that she had been carrying these stories for longer than I could imagine, and that telling them was something she did because she felt she ought to, not because she enjoyed it. "Same place next week," she said quietly. "Same time. I will tell you about a day in March of 2020, when one of the most important protocols in DeFi nearly died because of a problem none of its designers had anticipated. Bring the notebook." "Always." She slid into the pond. The water closed over her without a sound. Above us, the first stars were beginning to come out. The plum petals drifted on the dark surface like small pale boats. I did not feel like saying anything for a long time. * * * _Next: Black Thursday (2020) - The Day MakerDAO Almost Died_ --- *Originally published on [Lista DAO](https://blog.lista.org/the-dao-hack-2016-the-original-sin)*