Build Finance DAO

The Build Finance DAO was a decentralized autonomous organization (DAO), a venture based on blockchain technology. It was the subject of a 2022 hostile takeover by a member who amassed enough votes to pass a motion that allowed them to liquidate the DAO's cryptocurrency holdings and flood the market with new tokens.

History

Build Finance DAO was formed around September 2020. It was described as a "decentralized venture builder", designed around its BUILD token, that would fund new ventures.^[1] The ventures funded by the DAO would adopt the BUILD token, helping popularize it.^[2] As a DAO with token-based membership its decisions would be based on voting power.^[1]

Takeover

In February 2022 a user amassed enough tokens to take over control of the DAO. The user then made a governance proposal which would allow it to issue new new tokens, which initially failed but succeeded on the second attempt^[3]

The success of the proposal left the other members of the Build Finance DAO without any control of the governance of the DAO.^[4] The user then took a number of steps to liquidate the DAO's holdings and issued over 1 billion new BUILD tokens.^[2] Their activities generated a gain of about 160 ETH, or about US$470,000, which were laundered through coin tumblers preventing identification of the user.^[1][5]

Aftermath and Reaction

Attempts to convince the user to return the funds were unsuccessful.^[2]

The Build Finance hostile takeover has been described as a rare example of a "rug pull" which was not initiated by insiders,^[4] and an illustration of the risks of majority-based voting on decentralized finance projects, and of the need to anticipate risks and attack vectors in designing DAOs.^[6][5][4] One author suggested it highlights a need for quorum requirements.^[7]