The DAO Reentrancy Hack

On June 17, 2016, an attacker drained 3.6 million ETH — roughly $50 million at the time — from The DAO, a decentralised investment fund built on Ethereum. The DAO had raised over $150 million in its token sale just a month earlier, making it the largest crowdfunding event in history up to that point.

What happened

The DAO's withdrawal function followed an unsafe pattern: it sent ETH to the caller before updating the caller's internal balance. When the recipient was a contract, Ethereum invoked the recipient's fallback function on receipt — and that fallback could call back into the original withdrawal function before the balance was decremented.

The attacker's contract did exactly this in a loop: receive ETH → re-enter the withdrawal → receive ETH → re-enter → repeat. By the time the balance was finally updated, the same DAO tokens had drained the contract many times over. The funds flowed into a "child DAO" controlled by the attacker, where a built-in time lock prevented immediate withdrawal.

Aftermath

• Vitalik Buterin and most of the early Ethereum community supported a hard fork to roll back the theft.
• On July 20, 2016, Ethereum's main chain executed the fork, sending the stolen funds to a recovery contract from which DAO token holders could redeem ETH.
• A minority of users refused, citing immutability as a non-negotiable principle. They continued the original chain as Ethereum Classic (ETC), which still trades today.

Why it matters

The DAO is the founding incident of smart-contract security. It established:

• The reentrancy pattern as the canonical Solidity bug — every audit checklist still leads with it.
• The "checks-effects-interactions" pattern as the standard mitigation: update state before making external calls.
• The philosophical fault-line between strict immutability and pragmatic governance that has shaped every protocol's emergency-response design since.

Nine years later, Curve's 2023 incident and Penpie showed that the original bug class is still finding new ways to recur.