Important points:
- DAO Crisis Unclaimed ETH in 2016 is being used as an Ethereum security fund worth approximately $220 million.
- Approximately 69,420 ETH will be staked, generating security subsidies worth approximately $8 million per year over the long term.
- The focus of the funding will be on the Ethereum mainnet, L2, smart contracts, and user protection, with governance being operated by the DAO.
It was almost a decade after Ethereum’s most embarrassing security breach that TheDAO’s assets were repurposed to strengthen the network. it is now transforming This has become one of the largest special purpose security funding initiatives in Ethereum history, previously a systemic risk.
From the 2016 TheDAO hack to the $220 million security war fund
The collapse of the DAO in 2016 plunged Ethereum into crisis. The greedy intruders have emptied approximately 4.5% of the total ETH on the market at this time, forcing the community to take a high-stakes vote that resulted in a hard fork and the emergence of Ethereum Classic. This episode also reshaped Ethereum’s culture of governance and solidified its opinion on security.
Since then, tens of thousands of ETH linked to TheDAO have remained idle. Many holders were unable to get their funds back, and some were left in limbo due to mistakes made during the chaotic recovery. Currently, the value of dormant assets has increased significantly.
Ethereum contributor Griff Green, who was one of TheDAO’s early curators, reports that the time has come to do so. Decades of not using money have led them to value money to a level that makes it meaningful in Ethereum’s security posture.
Read more: Ethereum’s December “Fusaka” Upgrade: 8× L2 Scale, 60M Gas Default, 16.7M Tx Cap
How the fund is financed
The Security Fund taps into the various pools created when TheDAO was restored.
- Curator Multisig Balance: Approximately 4,600 ETH, primarily comprised of DAO tokens, worth approximately $13.5 million. Many of these tokens were simply lost without being recaptured in the wrong contracts.
- ExtraBalance Pool: For TheDAO crowdsale, the most recent participants spent up to 1.5 ETH per 100 DAO tokens. When refunds were made after a hard fork, the amount above the initial 1 ETH price was recorded as ExtraBalance. Approximately 70,500 ETH of this type is unclaimed.
These assets are not confiscated or expropriated money. These are the remains of a decade-long healing process that has never been fully resolved due to the loss of some participants, misplaced keys, and lack of follow-up.
Stake 69,420 ETH for ongoing security funds
Approximately 69,420 ETH will be staked out from the ExtraBalance pool. This value would generate approximately $8 million in annual staking rewards with existing network parameters.
The fund uses yield to fund security initiatives on an ongoing basis, rather than using principal. This system turns a single windfall into a continuous flow of funds, eliminating the need to rely on donations or crisis appeals when weaknesses arise.
Grant allocation
Funding is enabled through DAO-native mechanisms such as:
- Secondary financing. We focus on projects with a large number of small funders compared to projects with a few large funders.
- Retroactive funding. Compensate your team after quantifiable security work has already been delivered.
- Ranked voting for RFPs. Suggestions are evaluated and ranked based on community preferences.
Eligibility criteria will be determined by the Ethereum Foundation for each funding round, and operational support will be provided by Giveth, an organization highly associated with public goods funding and DAO tools.
The next round of funding could also include external operators selected using an open application process that introduces competition and minimizes the risk of capture.
Read more: Ethereum forms post-quantum security team, commits $2 million to speed up quantum timeline
