[6] After launching in April 2016 via a token sale, it became one of the largest crowdfunding campaigns in history,[6] but it ceased activity after much of its funds - in the form of US$ exchanged for "Ether-crypto coins" - were taken in a hack in June 2016.

The DAO had an objective to provide a new decentralized business model for organizing both commercial and non-profit enterprises.

[2][22] The funds were moved into an account subject to a 28-day holding period under the terms of the Ethereum smart contract so were not actually gone.

[11][12] The DAO was a decentralized autonomous organization[26] that exists as a set of contracts on the Ethereum blockchain,[27] with no physical address or officials with formal authority.

[29] However, the complexity of the code base and the rapid deployment of the DAO meant that neither the coders, the auditors, nor the owners could ensure the intended behavior of the organization, with the eventual attacker finding an unexpected loophole.

[30] The DAO was intended to operate as "a hub that disperses funds (currently in Ether, the Ethereum value token) to projects".

[3] The DAO's reliance on Ether allowed people to send their money to it from anywhere in the world without providing any identifying information.

[16] In order to provide an interface with real-world legal structures, the founders of The DAO established a Swiss-based company, "DAO.Link", registered in Switzerland as a limited liability corporation (Société à responsabilité limitée, SARL), apparently co-founded by Slock.it and Neuchâtel-based digital currency exchange Bity SA.

[27][31] Additional risks included the lack of legal precedents: it was unknown how governments and their regulatory agencies would treat The DAO's ventures and contracts.

Normally, there is no way to recover funds if a member mistakenly transfers cryptocurrency to the wrong wallet, including in case of fraud.

[32] Additionally, to function in the real world, contractors would likely need to convert the invested Ether into national currencies.

[citation needed] The code behind The DAO had several safeguards against anyone capturing the voting rights of shareholders to win investments.

[19] Slock.it (a German Blockchain venture), and Mobotiq (a French electric vehicle start-up) were listed as seeking potential funding on the daohub.org website during the May "creation period".