The DAO Hack for Non-Techies, Featuring Greedy Bots, Legal Loops, and Lessons from the Blockchain Wild West

Let’s rewind to 2016. It was a simpler time.

Donald Trump was just launching his campaign, Drake’s “One Dance” was on the radio 24/7, and Ethereum—this fancy new blockchain thing—was gaining traction among geeks and dreamers alike.

Then came the DAO.

Not "dao" like your dad mispronouncing "dow".
Not even “Dao” like the ancient Chinese philosophy.

THE DAO—short for Decentralized Autonomous Organization—was a crypto experiment that promised to replace venture capitalists with code.

You know, those guys in suits who fly around in private jets and say things like “let’s circle back”?

Well, what if a bunch of strangers online pooled their money and let a smart contract decide where to invest it?

Sounds utopian, right?

The Dream: “Let the Code Decide!”

The DAO was supposed to be this super fair, ultra-transparent, democratic fund. No more humans with emotions. Just code, logic, and profit.

• You send ETH (Ethereum’s cryptocurrency) to The DAO.

• You get DAO tokens.

• Token holders vote on which projects get funded.

• If you don’t like what’s happening, you “split” and take your ETH elsewhere.

In theory, it was brilliant.

In reality? It was a $150 million pot of money controlled by a glorified vending machine, written in a programming language barely out of beta.

What could go wrong?

The Bug (a.k.a. the “Code Is Law” Loophole)

Enter: A hacker. Or as the crypto bros later called him, "the attacker acting within the bounds of the protocol."

You see, the smart contract behind The DAO had a function that let people take their ETH out. But it had one teeny, tiny flaw:

It updated your balance after it sent you the money.

That’s like your bank letting you withdraw your savings but forgetting to subtract the money from your account until you leave the ATM.

Now imagine this:

• The attacker withdraws their ETH.

• The contract sends it.

• But their balance hasn’t been updated yet.

• So the attacker says, “Actually, I’d like to withdraw again.”

• The contract says, “Sure!”

• Repeat.

• Repeat again.

• Repeat $60 million times.

“It’s Not a Hack, It’s a Feature!”

The wildest part? The attacker didn’t break any laws.
He didn’t “hack” the blockchain.

He just... used the contract exactly as it was written. Like that guy who wins a game show by reading the fine print no one else noticed.

The Ethereum community freaked out. Crypto Twitter (yes, it existed even then) exploded.

Half the people screamed:

“ROLL IT BACK! This was theft!”

The other half screamed:

“CODE IS LAW! You can’t undo it, or Ethereum loses its soul!”

It was the first major identity crisis for the blockchain world.

The Ethereum Divorce: Hard Fork Edition

Eventually, the Ethereum community chose to “hard fork” the blockchain—basically a blockchain time machine that rewound things to just before the hack.

This meant:

• On one version of Ethereum (now called just Ethereum), they gave people their money back.

• On the old, un-forked version (now called Ethereum Classic), the hacker kept the $60 million.

And just like that, Ethereum had a twin sibling with trust issues.

It was like watching a breakup where both exes decided to keep the same last name, moved to the same neighborhood, opened rival coffee shops across the street from each other, and now passive-aggressively compete over who’s the “real Ethereum.” One serves artisanal smart contracts with oat milk, the other insists “code is law” and drinks their coffee black—with bugs in it.

So What’s the Lesson Here?

Besides the obvious one—don’t trust a vending machine with $150 million?

Here’s what INUAA teaches people through our training:

1. Smart contracts are only as smart as their creators.
   And sometimes, those creators forget a line of code that turns your dream into a disaster.

2. Audits matter.
   No matter how fancy your tech is, always check (and double-check) the fine print.

3. Code is law… until it isn’t.
   When real money is on the line, people stop being idealists and start acting like regulators.

4. Web3 isn’t just for developers.
   Lay people—yes, you are reading this on your phone—need to understand the risks too. Not just how to click “connect wallet.”

Why INUAA Exists (Shameless Plug, But Stay with Me)

We don’t just want to train coders. We want to train humans.

Because if you’re going to use Web3 tools—whether it's DeFi, NFTs, or investing in a DAO—you need to know more than just “how to click the shiny buttons.”

You need to know when the shiny button is attached to a financial bear trap.

So, join us. Learn. Ask questions. Enjoy some brunch. Taste some tokenized coffee (yes, seriously!). Build amazing things—but build wisely. Most importantly, know what to do and what to avoid—because pata potea is still pata potea… even with smart contracts.