The DAO Hack: A Blockchain Dilemma

On June 17, 2016, the founders of the Decentralized Autonomous Organization (DAO), an experimental venture capital network based on blockchain technology, discovered they had been victims of an attack—a theft of investors' cryptocurrency worth about US$55 million. Because the attacker ingeniously exploited a flaw in the rules that governed the operations of the DAO, as written into a smart contract, it was possible to argue, as the attacker did, that the theft was not technically illegal. The DAO investors had stark choices before them. They could let the attacker take possession of the cryptocurrency that had been hacked, or they could fork the blockchain, which would undermine confidence in the DAO, and possibly in the cryptocurrency it was based on and even the concept of a blockchain.