The DAO attack and how they steal $60 million worth of cryptocurrency
On June 17, 2016, Friday morning the Internet was abuzz with posts, messages and tweets that someone had stolen $60 million worth of a cryptocurrency called ether from an organization called The DAO. While the average joe probably understands that a pretty big heist has taken place, any of the other terms are likely to make little sense. So, let’s deconstruct the headline and try to explain what happened as well as what the consequences of this might be.
The DAO is a so-called Decentralized Autonomous Organization (“DAO”). DAOs run through rules encoded as smart contracts, which in turn are computer programs that facilitate, verify, or enforce the negotiation or performance of a contract, or that make a contractual clause unnecessary. In simple terms, think of any contract between two parties that gets translated into code, so it doesn’t need any external action but does automatically what was agreed. Smart Contracts are a pretty revolutionary and powerful concept by itself
1. How the DAO Attack Happened
The DAO was a decentralized autonomous organization that ran on Ethereum. It was hacked, and the attacker stole $60 million worth of Ether.
2. Why the DAO Attack Was Successful
The attacker was able to exploit a flaw in the code of the DAO to make off with the funds.
3. What Happened to the Stolen Ether
The attacker sent the stolen Ether to a child DAO, which was not subject to the same restrictions as the original DAO.
4. Who Was Behind the DAO Attack?
TheDAO attack was carried out by an anonymous hacker.
5. What Was the Aftermath of the DAO Attack?
The DAO attack resulted in the Forking of the Ethereum blockchain, and the creation of Ethereum Classic.
6. What Can We Learn From the DAO Attack?
The DAO attack highlights the importance of security in the cryptocurrency space. It also showed that even the most well intentioned decentralized organizations are vulnerable to attack.
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