A Ghost From Ethereum’s Past Is Becoming a $220 Million Security Fund

 

Nearly a decade after one of crypto’s most painful episodes, a large pool of forgotten Ether tied to TheDAO is being put back to work. This time, not as a risky experiment, but as a long-term security fund for Ethereum.

 

Roughly $220 million worth of ETH that has sat unclaimed since the infamous 2016 DAO hack is being transformed into a new, ecosystem-wide security endowment. The goal is simple on paper: fund audits, tools, research, and emergency response efforts that help keep Ethereum and its users safe. 

 

From Crisis to Capital

To understand why this matters, you have to go back to TheDAO itself.

 

In early 2016, TheDAO was pitched as a radical idea. A decentralized venture fund governed entirely by code and token holders. It quickly became the biggest crowdfunding event crypto had ever seen, pulling in millions of Ether from participants around the world.

 

Then it broke.

 

A flaw in the smart contract allowed an attacker to drain a massive portion of the funds. Panic followed. Debates erupted. And eventually, Ethereum hard-forked to reverse the damage, a decision that permanently split the network and created Ethereum Classic.

 

What was left behind were fragments of that original system. Contracts that never got emptied. ETH that was never claimed. Funds that, for years, were largely ignored.

 

Now they are coming back into focus.

 

Where the Money Comes From

The new security fund is built from two main pools of ETH left over from TheDAO era.

 

The largest portion comes from what is known as the ExtraBalance contract. This Ether was left behind during the original refund process, largely due to overpayments and technical quirks. Today, that balance adds up to more than 70,000 ETH, worth over $200 million at current prices.

 

Most of that ETH will not be spent outright. Instead, the majority is expected to be staked, generating yield that can fund security work year after year. That turns a one-time windfall into something closer to an endowment.

 

The second pool is smaller but more immediately usable. Around 4,600 ETH sits in old curator-related wallets connected to TheDAO. Those funds are expected to be deployed more directly toward grants and security initiatives.

 

Together, they form one of the largest dedicated security funds the Ethereum ecosystem has ever seen.

 

What the Fund Will Actually Do

Ethereum has no shortage of capital, but security spending has often been fragmented. This fund is meant to change that.

 

The focus is broad by design. Audits for major protocols. Funding for security tooling and infrastructure. Support for incident response teams when exploits happen. Research into emerging risks across layer 2 networks, wallets, and user-facing applications.

 

There is also an emphasis on user protection, things like phishing detection, transaction safety tools, and services that help everyday users avoid costly mistakes.

 

Some of the money will likely go to well-known security firms. Some will go to smaller, community-driven projects that quietly do important work but struggle to secure consistent funding.

 

Governance, DAO-Style

In a nod to TheDAO’s original vision, the fund will not operate like a traditional foundation grant program.

 

Instead, distribution is expected to lean heavily on decentralized governance mechanisms. Quadratic funding, retroactive grants, and community voting will all play a role. The idea is to reward impact, not just proposals, and to let a broad set of stakeholders help decide where the money goes.

 

The Ethereum Foundation will still be involved, particularly in setting guardrails and defining what qualifies as security work. But the ambition is to keep decision-making as open and participatory as possible.

 

Why This Matters Now

Ethereum is no longer an experimental network. It secures hundreds of billions of dollars in value across DeFi, NFTs, stablecoins, and layer 2 systems. With that scale comes constant pressure from attackers.

 

Exploits today are faster, more complex, and often more damaging. At the same time, public funding for security work tends to lag behind growth. This fund helps close that gap.

 

It also reflects a broader shift in how the Ethereum community thinks about risk. Security is no longer something you bolt on at the end. It is infrastructure.

 

The Bottom Line

There is something poetic about this moment. I love how they are taking one of Ethereum's darkest moments and turning it in to a security fund to try to ensure that something like this would never happen again.

 

TheDAO hack forced Ethereum to confront its own limits

 

It exposed the dangers of unaudited code and untested governance. It shaped how the ecosystem thinks about security to this day.

 

Turning the remnants of that failure into a permanent security fund feels like closing a loop. A way of acknowledging the past without being defined by it.

 

If the fund works as intended, one of crypto’s earliest disasters may end up funding its future resilience.