Ethereum’s First Great Crisis Returns as a $220 Million Security Endowment
Almost a decade after the catastrophic collapse of The DAO nearly tore Ethereum apart, the last remnants of that era are being repurposed into one of the largest security funds in crypto history.
Griff Green, co-founder of Giveth and one of the original keyholders of the recovered DAO funds, has announced the creation of the DAO Security Fund. Around 75,000 ETH—valued at roughly $220 million at current prices—will be deployed to strengthen Ethereum’s security ecosystem through audits, tooling, and rapid incident response.
From existential crisis to security engine
The DAO, launched in 2016 as a decentralized investment vehicle, raised around $150 million in ETH and quickly became a symbol of Ethereum’s potential. That ended abruptly when a vulnerability in its smart contract was exploited, leading to the siphoning of millions of dollars’ worth of ETH.
The fallout forced Ethereum into its first major governance crisis and ultimately a contentious hard fork: one chain (Ethereum as we know it today) rolled back the hack, while another (Ethereum Classic) continued without reversal. For many, this was the moment Ethereum’s culture was forged—messy, public, and painfully educational.
Green argues that it was also the birth of modern Ethereum security.
“The DAO really kick‑started the security industry in Ethereum,” he said on Laura Shin’s Unchained podcast. “Before the DAO hack, there was no audit industry.” What began as a brutal lesson in smart contract design evolved into an entire sector of auditing firms, formal verification tools, and best practices.
Now, the very funds tied to that crisis are being redirected to push that evolution further.
What is the DAO Security Fund?
The DAO Security Fund is designed as a long-term endowment, not a short-term grant pool. The core idea: stake the remaining 75,000 ETH and use the staking yield to fund security initiatives across the Ethereum ecosystem.
Instead of distributing the principal, the fund will aim to grow or at least preserve it, turning the staking rewards into a perpetual source of financing for:
– Smart contract audits for high-impact protocols and infrastructure
– Security tooling such as automated analyzers, fuzzers, static analysis frameworks, and monitoring systems
– Incident response teams that can coordinate quickly when bugs or exploits are discovered
– Education and best practices for developers and auditors alike
In practice, this turns a one-time historical windfall into recurring support for security work that is often underfunded, especially in early-stage or public-goods projects.
Why these funds were still available
After the fork that followed The DAO hack, many of the affected funds were placed under multisig control and gradually made available to legitimate claimants. But a portion of that ETH remained unclaimed for years—either because original DAO token holders lost access, forgot, or simply chose not to participate in recovery processes.
Those stranded assets sat idle while Ethereum underwent multiple waves of bull and bear markets, the DeFi boom, and the rise of NFTs. With the transition to proof of stake, the opportunity cost of leaving a large amount of ETH dormant became even more obvious.
The DAO Security Fund is essentially a decision to stop letting that capital gather dust and instead put it to work in a way that aligns with the lessons of 2016: security failures can be existential, and prevention is vastly cheaper than cleanup.
A cultural full circle for Ethereum
There is a narrative symmetry that is hard to miss. The DAO hack was Ethereum’s first large-scale demonstration that:
– Smart contracts are only as secure as their code
– Economic incentives can be badly misaligned
– Governance in decentralized systems is fraught, public, and political
The new fund attempts to transform that trauma into a structural advantage. Rather than treating the hack as a wound to be forgotten, it becomes the origin story for a permanent security endowment.
This also reflects how far the ecosystem has come. In 2016, sophisticated audits were rare, and “security” often meant a few developers skimming contracts for obvious bugs. Today, Ethereum supports:
– Specialized auditing firms staffed by cryptographers and formal methods experts
– Tooling that can catch re-entrancy, overflow, and logic flaws automatically
– Bug bounty platforms and structured disclosure norms
– Battle-tested patterns for upgradability, timelocks, and privilege separation
The DAO Security Fund aims to push this even further, especially as protocols grow more composable and interdependent, magnifying the impact of a single bug.
How the money could be allocated
Although detailed governance mechanics are still evolving, several categories of spending are likely priorities:
1. Audits for critical infrastructure
Core DeFi protocols, cross-chain bridges, L2 infrastructure, and staking platforms can pose systemic risk if they fail. Subsidized or fully funded audits for these building blocks can benefit the entire ecosystem, not just the teams deploying them.
2. Open-source security tools
Tools that any developer can use—linters, static analyzers, symbolic execution engines, fuzzers—can raise the security baseline across thousands of projects. Funding development and maintenance of such tools has outsized impact relative to their cost.
3. Emergency response grants
When a major vulnerability is discovered, response time is crucial. Having a pool of funds ready to support white-hat operations, on-chain mitigations, or coordinated communication can prevent or limit massive losses.
4. Research and formal verification
More advanced methods—like using formal verification to mathematically prove properties of smart contracts—are still relatively niche and expensive. Grants could expand their use for high-value systems like rollups and stablecoins.
5. Developer training and standards
Funding curricula, certifications, security checklists, and reference architectures can make it easier for teams to “get security right” from day one, rather than bolting it on after the fact.
Governance and legitimacy questions
Repurposing historic funds is not without controversy. Some observers question:
– Who has legitimate authority to decide how unclaimed DAO-related ETH should be used
– Whether remaining claimants could still emerge and dispute allocations
– How transparent and accountable the fund’s governance will be over time
To remain credible, the DAO Security Fund will likely need:
– Clear, public criteria for grants and spending
– Regular reporting on performance of staked ETH and use of yield
– Inclusive governance mechanisms that involve multiple stakeholders from across the ecosystem
– Policies for handling any late, legitimate claims to the original funds
The symbolic weight of these assets increases the need for governance that is not just functional but visibly fair.
Why Ethereum still needs a security endowment
Even after years of progress, security remains one of Ethereum’s biggest systemic risks. Billions have been lost to hacks, rug pulls, and poorly designed contracts. Many patterns repeat: re-entrancy bugs, access control errors, flawed oracle designs, unsafe upgrade mechanisms.
At the same time, the cost of high-quality security work is significant, and commercial incentives are uneven. Speculative projects can afford top-tier audits purely as a marketing expense, while critical public infrastructure, research, and tooling often struggle to secure funding.
A dedicated endowment changes that balance:
– It creates stable, non-cyclical funding that is less dependent on market hype
– It directs capital toward projects whose value is shared by the entire ecosystem rather than a single token
– It builds institutional memory—supporting not just one-off fixes but security culture and standards that compound over time
In other words, it attempts to treat security as a public good rather than an optional luxury.
Broader implications for Web3
If successful, the DAO Security Fund could become a template for other ecosystems:
– Reclaimed or stranded assets—from old treasury addresses, recovery forks, or legal settlements—could be redirected into similar endowments.
– Foundations and DAOs might allocate a percentage of their treasuries to permanent security funds rather than short-term campaigns.
– Cross-chain initiatives could emerge, funding security work that benefits multiple networks and standards (for example, common libraries, cryptographic primitives, or cross-chain bridge frameworks).
The story would then echo beyond Ethereum: early, painful failures become the financial backbone of a more secure, more mature industry.
A paradox resolved
In 2016, The DAO’s collapse was widely seen as proof that Ethereum was not ready for prime time. Critics pointed to the hack as evidence that immutable code and decentralized finance were too risky.
Nearly ten years later, the same incident is being reframed as the catalyst—and now the bankroll—for a more resilient Ethereum. The paradox is that one of the network’s greatest embarrassments may yet become one of its greatest strengths.
Instead of trying to erase the memory of The DAO, the DAO Security Fund anchors it in institutional form: a large, professionally managed pool of capital dedicated to preventing history from repeating itself.
If it works, Ethereum’s oldest crisis will have done more than fracture a blockchain—it will have permanently financed the effort to keep that blockchain, and the systems built on top of it, far safer than they were when it all began.