Ethereum Uses Unclaimed DAO Hack Funds to Create $220M Security Fund

TLDR

• Ethereum repurposes $220M from unclaimed DAO hack funds for security improvements.
• The DAO Security Fund aims to boost Ethereum network security with audits and grants.
• Ethereum will stake funds to generate annual yield for security and incident response.
• The Ethereum Foundation plans DAO-based funding to protect against network risks.

Ethereum is repurposing funds from the 2016 DAO hack to create a $220 million endowment aimed at enhancing security across its network. These funds, which were initially allocated for edge case refunds, will now be directed to support various security initiatives as Ethereum continues to scale and mature.

The initiative, called the DAO Security Fund, will fund projects aimed at improving the security infrastructure of the Ethereum ecosystem. The goal is to strengthen the network against risks like phishing, wallet drains, and other operational challenges that have become more significant as Ethereum grows into a global financial system.

Background on the DAO Hack

The DAO hack, which occurred in 2016, remains one of the most infamous events in Ethereum’s history. During the exploit, an attacker stole around 4.5% of the total ETH in circulation at the time. This led to a major crisis for Ethereum, ultimately resulting in the network’s first hard fork, which split it into Ethereum (ETH) and Ethereum Classic (ETC).

In the aftermath of the attack, Ethereum took steps to recover funds and address vulnerabilities in its smart contracts. However, a portion of the funds remained unclaimed and idle. Nearly a decade later, these funds are now being put to work in a more proactive way to safeguard Ethereum’s future.

Formation of the DAO Security Fund

The DAO Security Fund will primarily be funded by about 70,500 ETH, which is worth roughly $206 million. This amount comes from an unclaimed ExtraBalance withdrawal contract. 

Additionally, the fund will include around 4,600 ETH and DAO tokens held in a curator multisig, valued at around $13.5 million. These funds will be staked to generate an annual yield of approximately $8 million.

This endowment will not only support general security improvements but will also fund specific initiatives like smart contract audits, infrastructure upgrades, and user protection measures. The Ethereum Foundation, which oversees the fund, will use mechanisms like quadratic funding and ranked-choice voting to distribute the money effectively.

Funding Distribution and Security Goals

The DAO Security Fund will be managed and distributed through DAO-based governance mechanisms. This means that the Ethereum community will play a role in determining how the funds are allocated, ensuring that security efforts are focused on the most critical areas.

 The Ethereum Foundation will set criteria for each round of funding, ensuring that the projects align with the overall security goals of the network.

The fund’s focus will include work on Ethereum’s mainnet and layer 2 networks, where many decentralized applications (dApps) and services operate. With Ethereum’s growing adoption, the importance of robust security measures has become more urgent, particularly as the network continues to handle more financial transactions.

Ethereum’s Broader Security Initiatives

The DAO Security Fund is part of Ethereum’s broader strategy to enhance the security of the ecosystem as it grows. This initiative is a part of the Ethereum Foundation’s “Trillion Dollar Security” program, which reflects the increasing importance of securing the Ethereum network as a global financial layer.

Ethereum’s ongoing efforts to secure its ecosystem come as the network faces new challenges related to phishing attacks, vulnerabilities in smart contracts, and the operational risks of scaling decentralized finance (DeFi) applications. The DAO Security Fund aims to address these risks by supporting a wide range of security-focused projects and innovations.

The post Ethereum Uses Unclaimed DAO Hack Funds to Create $220M Security Fund appeared first on CoinCentral.