Ethereum’s most infamous experiment is back. Not as a venture fund, but as something the ecosystem probably needs more of: a permanent security budget.
On January 29, a group of Ethereum veterans announced plans to convert approximately 75,000 ETH from a decade-old recovery fund into a staking fund whose yield will fund smart contract security work across Ethereum and its Layer 2 ecosystem.
This funding comes from “edge case” funds left over from the 2016 hard fork that saved TheDAO from collapse. These are funds intended to support security infrastructure at all times, even when unclaimed.
Ten years later, the tools and threat landscape have matured enough to operationalize that intent.
Looking at the timing reveals deeper changes. This is not nostalgia, but a recognition that Ethereum’s security capabilities need to scale like institutions if the network wants to support global finance.
The pool has grown from millions to nine figures while largely dormant, and the ecosystem finally has the operational fundamentals to manage it responsibly. It’s not the emotions that have changed. What has changed is the risk calculation.
What will happen to TheDAO?
TheDAO Security Fund manages approximately 70,500 ETH from ExtraBalance withdrawal contracts and approximately 4,600 ETH from Curator Multisig.
The Fund will not explicitly touch ETH within the main WithdrawDAO contract created by the hard fork. DAO tokens will still be redeemable for ETH and its recovery mechanism will remain in place.
Deployment planning treats capital as an endowment. This fund stakes 69,420 ETH to generate yield and leaves some ETH in ExtraBalance for continued claims.
Staking operations are performed through Dappnodes distributed across six continents, with multiple client implementations and validator keys distributed across multiple shards.
Conservative validator economics also suggest meaningful annual production capacity. At approximately 4% APY without MEV-Boost, or 5.69% with MEV-Boost, 69,420 ETH will generate approximately 2,777-3,950 ETH per year excluding operating costs. At $2,800 per ETH, that equates to approximately $7.8 million to $11.1 million per year.
This is an ongoing security budget that does not require the sale of principal.
The fund’s scope focuses on Ethereum and its Layer 2 ecosystem, covering wallet UX and user protection, smart contract security, incident response, and core protocol security.
The Ethereum Foundation’s Trillion Dollar Security Initiative provides a strategic roadmap.
Allocation mechanisms include secondary funding, retroactive funding, and RFP-based ranked choice voting conducted in rounds by independent operators.
EF Grants Management defines eligibility requirements, Giveth supports operators, and each round ends with a public retrospective. A new set of curators will run this fund. Vitalik Buterin and Griff Green will be joined by Taylor Monaghan, Jordi Bayrina, Pukavasaccio, Alex van de Sande and Pol Lansky.
What happened to TheDAO?
TheDAO was an on-chain venture funding concept in 2016 that raised over $150 million, representing about 14% of the ETH supply at the time. This scale was critical to Ethereum’s legitimacy, and subsequent exploits were crucial.
Attackers exploited vulnerabilities in the contract to drain funds and force Ethereum into a critical governance moment: a hard fork to move funds into a collection contract that token holders can use to withdraw their shares.
The hard fork created the WithdrawDAO contract and enabled standard redemptions. But the standard claims didn’t cover everything. Curator Multisig was tasked with addressing edge cases such as late-stage creation price mismatches, child DAO writes, and other tokens and ETH submissions captured in “ExtraBalance.”
On August 2, 2016, the Curator’s communication clearly stated that after January 31, 2017, unclaimed ETH will be sent to non-profit organizations to support the security of smart contracts, or incinerated if no such fund exists.
This policy is now the moral pillar of the 2026 revival.
TheDAO has also become a regulatory landmark in the United States. The SEC’s 2017 Investigative Report used an analysis of facts and circumstances to conclude that the DAO token is a security under federal law, cementing TheDAO as a recurring reference point in “What is a security?” discussion.
The brand carries regulatory baggage, which makes its reuse as a security funding mechanism ironic.
Why now and what it means
It was not market opportunists who started the fire, but security experts.
In August 2025, SEAL 911 sought a sustainable funding source for incident response. Fade from Wintermute pointed to edge case funding and approached Griff Green via pcaversaccio.
The curator pointed out that the system was designed to manage around $6 million, but currently holds around 75,000 ETH (more than $200 million at current prices). Doing nothing had become a major safety liability.
Better primitives have been added to the ecosystem. The deal is 10 years old and was built when Solidity was young. Multisig practices and security frameworks have matured dramatically, and this is precisely the operational upgrade that SEAL’s multisig framework and distributed validator technology are formalizing today.
The Ethereum Foundation’s Trillion Dollar Security Initiative sets out the ambition that Ethereum needs to achieve “civilization-scale” security in order to support global finance. TheDAO Security Fund is explicitly included in that roadmap to transform historical artifacts into infrastructure.
What that means for Ethereum is structural. Security funding is likely to move from one-time grants triggered by incidents to an endowment model that plans multi-year programs, including incident response capabilities, formal validation pipelines, and wallet UX enhancements.
This fund will be a real test bed for the pricing and selection of security public goods, conducting transparent and retrospective allocation experiments.
If these mechanisms work, they could become a template for other ecosystems.
TheDAO brand is being repurposed to reframe Ethereum’s origin story. In 2016, TheDAO forced Ethereum to make its social layer public, and the community chose to fork and recover their funds rather than treat “code is law” as absolute.
In 2026, the same story will demonstrate that social agreements do more than just bail out users. Instead, a resiliency device built over a decade can now take on the security of an entire ecosystem.
A deeper narrative thread connects Ethereum’s legitimacy crisis to its institutional maturation. This means that what critics called a centralized hard fork will become the funding mechanism for a decentralized security infrastructure.
There are potential vectors of controversy. Even with documented intent, “using leftovers” invites scrutiny. Are claims truly exhausted or simply lying dormant? How will edge case claims be adjudicated in the future? Will this create a governance precedent for other recovery pools?
The fund has addressed some of this issue by keeping its claims channel open with ExtraBalance and avoiding major withdrawal agreements, but these questions still remain.
If a dispute arises over the eligibility of a claim or the legitimacy of a curator, or if an operational incident impacts multisig or validator setup, the narrative could shift from “security donations” back to “DAO controversy coming back.”
3 forward paths
In the basic case, it appears that the security fund will be a permanent item.
If 69,420 ETH continues to be staked at stable validator yields and regular grant rounds create a transparent retrospective showing a measurable pipeline from trillion-dollar security priorities to funded work, Ethereum’s security capabilities will expand to become more institutional.
This increases trust in larger on-chain balances and mainstream UX, making security part of the “why build here” story.
In a bullish case, security funds become a competitive moat. Ethereum’s L2 ecosystem may adopt a similar donation pattern if yields are favorable, or if ETH price increases, annual budgets expand significantly, and professional incident response and tools are significantly increased.
Security becomes part of Ethereum’s institutional readiness story, just as exchanges and custodians sell trust.
In the opposite case, governance and operational risk dominate the headlines. Disputes over claim eligibility, operational incidents involving multisig or validator setups, or regulatory rhetoric that reinstates the “DAO token = security” burden can dampen perceptions even if the funds are secure. The story returns from donations to controversy.
| scenario | What can be seen on-chain/in operation | What it means for Ethereum | Main risks |
|---|---|---|---|
| Base case: permanent security item | 69,420 ETH remains staked (stable validator operation); Regular grant rounds With published retrospective. A clear link to the funded work EF Trillion Dollar Security (1TS) Priority. Predictable rhythm + report | Security funding comes from temporary “post-incident” grants; Agency-level multi-year budgets (incident response capabilities, formal validation pipeline, wallet UX enhancements); greater confidence in larger on-chain balances and mainstream UX | governance drift (mission creep, weak accountability). grant capture (Insider/low ROI spending). Operational satisfaction over time |
| Bull Case: Security becomes a moat | advantageous yield system and/or the annual budget expands due to the increase in ETH price. Measurable security outcomes (fewer incidents or reduced severity, better tools, faster response). L2s mirror donation pattern. The allocation mechanism will be iterated and improved based on reflection. | Ethereum is “Why build here?”Trust Premium;Security becomes a moat of competition with other ecosystems. The model is template to fund security public goods elsewhere; | overreach (The fund tries to do too much). Incentives are not aligned with user outcomes (metric theater). Political friction between ecosystem actors over priorities |
| In the opposite case: the argument prevails. | public controversy over Claim entitlement/legitimacy of “edge case” funds. Multisig/Validator Incident or operational failure. Renewed attention to regulatory baggage (the story of DAOs as security). Suspended or disrupted subsidy rounds | The story begins with “security” “The DAO controversy will return” Even if the funds are safe, the perception cools. Governance makes headlines, not security outcomes | Governance legitimacy risk (Who decides and why?) Operational security risks (key management, validator setup); any failures are amplified by reputation and regulations |
At this time, you need to monitor your on-chain balances for ExtraBalance, Curator multisig, and WithdrawDAO to keep track of your stakes and the amount left in your claims.
Other metrics to monitor include changes in staking yield regimes to estimate annual security budget size, grant round design, retroactivity to assess whether allocation improves, and alignment with Ethereum Foundation priorities to see if funds are going where EF identifies the greatest security return on investment.
TheDAO’s return is not a second act. This is about translating Ethereum’s most painful lessons into its most durable security infrastructure.