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Comparison table highlighting differences between traditional law and blockchain code as deterrents under various circumstances.

What Are The Origins Of The Web3 DAO?

Posted on May 30, 2025June 15, 2025 by Brian Colwell

The Web3 DAO begins with the BitShares DAC and Dan Larimer, and involves one of the greatest pivot points in crypto history – the roll-back of the Ethereum blockchain by Vitalik Buterin that, ultimately, created the Ethereum and Ethereum Classic division.

The Bitshares DAC & Dan Larimer

In 2013, the DAC (decentralized autonomous company) was introduced by Dan Larimer with his BitShares concept and whitepaper published on bitcointalk.org here Creating a Fiat/Bitcoin Exchange without Fiat Deposits. In 2013, the decentralized exchange BitShares was built, and in 2014 BitShares was launched. BitShares was a virtual e-commerce platform that connected merchants and customers without a central authority.

In 2014, Dan Larimer shared his vision of decentralized governance: “I envisage a situation where governments aren’t necessary. That the free market will be able to provide all the goods and services to secure your life, liberty and property without having to rely on coercion. The free market will be able to provide justice more effectively and more efficiently than the government. Society will be transformed into a blockchain-based, self-sustainable system, run by algorithms and free-market rules.”

Ethereum DAC’s & Vitalik Buterin

In 2013, @VitalikButerin suggested in his blog post Bootstrapping A Decentralized Autonomous Corporation: Part-1 the replacement of a company’s management by software technology capable of recruiting and paying people to perform the tasks that contribute to the company’s mission when he said, “even if we still need human beings to perform certain specialized tasks, can we remove the management from the equation instead?” Then, Vitalik Buterin examined in his blog post Bootstrapping A Decentralized Autonomous Corporation: Part-2 how autonomous agents might explore the world, absorb data, evaluate relevance, and make decisions. Finally, Buterin wrote in his blog post Bootstrapping A Decentralized Autonomous Corporation: Part-3 on the potential use cases of DACs and identified some potential implementation concerns.

The First DAO – “The DAO” & The Attack

Created in May 2016, the first DAO was “The DAO” (AKA the “Genesis DAO”), which raised 12.7mil ETH ($150mil USD at the time) in a token sale intended to finance projects contributing to Ethereum development. On June 17, 2016, a hacker found a loophole in the DAO’s smart contracts that allowed him to drain funds from The DAO’s treasury. In the first few hours of the attack, 3.6 million ETH were stolen. Vitalik Buterin and the Ethereum community considered a variety of next steps, such as soft-forks and hard-forks of the Ethereum blockchain, as well as the pros and cons of such actions.

The Considerations: To Fork, Or Not To Fork?

The considerations of both Ethereum blockchain fork Supporters and Detractors are listed in the table below:

Post The DAO hack, the considerations of both Ethereum blockchain fork Supporters and Detractors were considered and are listed in the table

The Letter From The Hacker

The possibility of a fork locking-up the attacker’s stolen ETH prompted the attacker to issue this open letter: An open letter from The DAO “Attacker” – https://pastebin.com/CcGUBgDG

The image is the open letter from The DAO “Attacker”

The Fork Is Mightier Than The Sword

A vote was held, the democratic nature of which has been called into question as Ethereum community members were given one vote per Ether that they held, making the outcome “one dollar, one vote” rather than “one person, one vote”, and the Ethereum Foundation moved forward with a hard-fork of the Ethereum blockchain, returning stolen funds to The DAO investors. Regarding the “bailout” as a corruption of the immutable ledger and believing that “code is law”, the minority who refused to accept the hard-fork that rolled back the Ethereum blockchain’s history continued to support the pre-forked blockchain, which became known as Ethereum Classic (ETC).

It can be fairly said that The DAO’s collapse created Ethereum as it is today.

Final Thoughts

The story of the Web3 DAO is ultimately a tale of innovation, crisis, and the philosophical tensions at the heart of blockchain technology. From Dan Larimer’s pioneering vision of decentralized autonomous companies to the dramatic collapse and resurrection of The DAO, these early experiments laid the groundwork for today’s thriving DAO ecosystem.

The DAO hack of 2016 remains one of the most pivotal moments in cryptocurrency history. It forced the community to confront fundamental questions about immutability, governance, and the meaning of “code is law.” While the hard fork solution was controversial, splitting Ethereum into two chains, it demonstrated that blockchain communities could respond to existential threats while maintaining their core values of decentralization.

As we look forward, the DAO model represents more than just a technical innovation; it embodies a radical reimagining of how humans can coordinate, collaborate, and create value together. The journey from BitShares to The DAO to today’s diverse ecosystem of decentralized organizations shows that while the path may be fraught with challenges, the destination – a more open, transparent, and accountable organizational future – remains worth pursuing.

Thanks for reading!

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