The DAO’s Unclaimed ETH Becomes a $250M Ethereum Security Fund

The DAO’s remaining unclaimed Ethereum, valued at over $200 million, will be used to establish the DAO Security Fund, an endowment dedicated to improving Ethereum's security and advancing DAO governance mechanisms.

• Over $200 million in unclaimed ETH from the 2016 DAO hack forms the DAO Security Fund to bolster Ethereum's security.

• The fund will stake ETH to generate annual revenue for grants, while perpetually honoring claims from original DAO participants.

• Grants will prioritize wallet security and support decentralized governance tooling, aiming to make Ethereum safer than traditional banking.

The DAO Security Fund is being launched with over $200 million in previously unclaimed Ethereum (ETH) from the 2016 DAO hack. This fund aims to significantly boost Ethereum security, making it safer than traditional banks, and will also support the development of bottom-up, community-driven DAO governance tools. The initiative seeks to address current security vulnerabilities in crypto, particularly concerning wallet safety, and will operate by staking the ETH to generate revenue for grants, ensuring claims from original DAO participants remain open indefinitely.

DAO Security Fund Launch

• 00:02:36 The DAO, an attempted decentralized venture fund from 2016 that initially raised $150 million before being hacked, is being re-launched in a new capacity as the DAO Security Fund. This new fund will utilize an estimated $200 million worth of unclaimed ETH from the original DAO, which was managed as edge cases by a multisig after the hard fork. The fund's primary mission is to support Ethereum security initiatives and improve the overall safety of the ecosystem.

Origin of Unclaimed Funds

• 00:10:38 The unclaimed funds for the DAO Security Fund originate from several sources left after the 2016 DAO hard fork, which returned most ETH to token holders. The largest bucket consists of approximately 70,000 ETH from 'extra balance' that resulted from some participants paying more than the initial 0.01 ETH per DAO token during the token sale. Other sources include ETH from child DAOs, a small amount from the DAO hacker, and various smaller amounts sent incorrectly to DAO-related contracts, totaling about $200 million today.

Funding Model and Claims

• 00:17:15 The DAO Security Fund plans to stake 69,420 ETH (valued around $8 million annually in yield) to generate ongoing revenue, which will then fund security grants and operational costs. Claims for the original unclaimed ETH will remain open indefinitely, despite a low rate of claims over the past decade. The fund hopes that publicizing this initiative will encourage more rightful owners to claim their assets, which have appreciated significantly since 2016.

Grant Distribution & DAO Support

• 00:20:28 The fund will distribute grants using DAO-style methods like retro funding, quadratic funding, and conviction voting, instead of traditional curator selection. This approach aims to support the DAO ecosystem and foster collective decision-making, particularly for bottom-up governance tools that can scale beyond Dunbar's number. The fund seeks to advance innovative solutions for widespread participation in decision-making, moving beyond corporate governance applications of DAOs.

Ethereum Security Focus

• 00:29:56 The DAO Security Fund will primarily focus on Ethereum and L2 security projects, with a strong emphasis on improving wallet user experience, which is identified as a major vulnerability. The fund will work directly with the Ethereum Foundation to determine eligibility criteria for grant rounds. Priority will be given to projects addressing systemic issues like the dangers of hot wallets and fostering an ecosystem of support, including existing projects like SEAL 911 and OpenZeppelin, as well as new, yet-to-be-developed solutions.

Importance of Operational Security

• 00:53:56 For general crypto users, the most crucial security advice is to acquire a hardware wallet and avoid storing private keys on daily-use computers, viewing it as a one-time insurance policy. For blockchain developers and founders, operational security (OpSec) is paramount, emphasizing the separation of crypto-related work environments from regular activities. Developers must be cautious about running unverified code and be mindful that they are dealing with money, not just code, which elevates security implications beyond traditional software development.