In June 2016, one of the most significant events in blockchain history occurred when a smart contract called "The DAO" was exploited. The aftermath of this event would split the Ethereum community and give birth to Ethereum Classic.
The DAO
The DAO (Decentralized Autonomous Organization) was an ambitious project launched in April 2016. It was a venture capital fund governed entirely by smart contract code, allowing token holders to vote on investment proposals.
The DAO raised approximately 12.7 million ETH (about $150 million at the time), making it the largest crowdfunding campaign in history at that point.
The Exploit
On June 17, 2016, an attacker exploited a vulnerability in The DAO's smart contract code. Using a recursive call exploit (later known as a "reentrancy attack"), the attacker drained approximately 3.6 million ETH into a "child DAO."
Due to The DAO's design, the funds were locked for 28 days before they could be moved, creating a window for the community to respond.
The Community Debate
The Ethereum community faced a difficult choice:
- Do nothing: Let the code execute as written, accepting the loss
- Soft fork: Blacklist the attacker's address
- Hard fork: Roll back the blockchain state to return funds to DAO investors
A heated debate ensued about the nature of blockchain immutability and whether "code is law" should be absolute.
The Hard Fork
On July 20, 2016, the majority of the Ethereum network implemented a hard fork at block 1,920,000, effectively rewriting history to return The DAO funds to their original holders.
Ethereum Classic Is Born
Not everyone agreed with this decision. Those who believed that blockchain immutability was paramount chose to continue mining the original chain - the one where The DAO hack remained in the transaction history.
This chain became known as Ethereum Classic (ETC), while the forked chain continued as Ethereum (ETH).
The Principles at Stake
Ethereum Classic's founding was based on core principles:
- Blockchains should be immutable
- No entity should be able to rewrite history, even with good intentions
- "Code is Law" means accepting both the benefits and consequences
This event established Ethereum Classic as a distinct project with its own philosophy and community.