The first major DAO raised $150 million in weeks, then lost $60 million to a hack.
A decentralized autonomous organization, or DAO, is an entity governed by rules encoded in smart contracts on a blockchain, with no central authority or management hierarchy. Members vote on proposals using governance tokens. The concept emerged from the Ethereum blockchain community in the mid-2010s.1
The first major DAO, known simply as "The DAO," launched in April 2016 as an investor-directed venture capital fund built on the Ethereum blockchain. Within weeks, it raised approximately 150 million dollars from more than 11,000 investors.2
On June 17, 2016, an attacker exploited a vulnerability in The DAO's code and drained roughly sixty million dollars in cryptocurrency. The hack prompted the Ethereum community to execute a hard fork, splitting the blockchain to reverse the theft. The original chain continued as Ethereum Classic.3
The failure of The DAO did not end the concept. Subsequent DAOs learned from the vulnerability and adopted more robust governance structures, security audits, and slower funding mechanisms.
By 2022, DAOs managed an estimated ten billion dollars in treasury assets collectively.4 They operated across domains including decentralized finance (DeFi), social clubs, art collection, and grant-making. Some, like MakerDAO, managed stablecoins pegged to the U.S. dollar. Others, like ConstitutionDAO, formed for a single purpose, in that case an unsuccessful attempt to purchase a copy of the U.S. Constitution at auction.
The legal status of DAOs remains unsettled. Wyoming became the first U.S. state to recognize DAOs as legal entities in 2021.5 Most jurisdictions have no framework for an organization without officers, a registered address, or a board of directors. The DAO model proposes that coordination can happen through code rather than hierarchy, a claim that regulators, courts, and the organizations themselves are still testing.