How the DAO Hack Changed Ethereum

Blocknative CEO Matt Cutler discusses the DAO hack and how it made Ethereum "ideologically pure."

By Zack Abrams

November 7, 2022

When it comes to blockchains, there are certain rules that aren't meant to be broken. One of the most important is "immutability," or the idea that once a transaction takes place on-chain, it can't be undone.

But what if a blockchain's community comes together to say rules were made to be broken? (At least, maybe just this once.) That's essentially what happened with Ethereum's DAO hack as the first nexus point for the nascent Ethereum ecosystem.

In 2016, The DAO, had raised 14% of all ether at the time — around $250 million — but was exploited due to a flawed smart contract. Rather than write off the loss, the community banded together to vote to rewrite history, forking the blockchain and erasing the hack from the records as if it never happened. The unaltered blockchain took on the name "Ethereum Classic" and Ethereum, the blockchain now more commonly used, erased the DAO's hack from history.

The DAO hack was technically legal — after all, code is law. But the community banded together to save their coins, and Ethereum's success. Given that Ethereum has continued on since that decision was made, it seems fair to say it was the right call. Though, some still consider Ethereum to be indelibly stained by their actions and wonder what might happen if history were to repeat itself.

Ethereum ecosystem builder and Blocknative CEO Matt Cutler discusses the impact of the DAO hack on Ethereum in Coinage Episode 1, and addresses how a decision like that is looked at differently at different moments in a blockchain's history.

"I think one of the things that the Ethereum ecosystem has demonstrated repeatedly over time is a bias towards pragmatism and a bias towards basically outcomes that are in line with ... what the ecosystem thinks is within its long-term best interests, or its health," Cutler said.

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