Governance, DAOs and Treasury Management

Introduction and Context

Tokenomics is not limited to issuance, supply schedules, and incentive design. A token system also needs institutions that decide how resources are used, rules are changed, participants are represented, and disputes are resolved. Governance is therefore the institutional layer of tokenomics. It determines who has authority, how authority is exercised, and how that authority can be constrained.

A decentralised autonomous organisation (DAO) is a blockchain-based coordination system in which rules, proposals, voting procedures, and financial operations are at least partly implemented through smart contracts. The term does not imply complete decentralisation or full autonomy. Most DAOs combine code, token voting, elected or appointed committees, legal entities, service providers, and informal social processes.

Treasury management is the disciplined management of assets controlled by a protocol, DAO, foundation, or community. It includes budgeting, liquidity planning, risk management, diversification, reporting, and authorisation of expenditure. A large treasury does not automatically indicate a financially healthy organisation: its assets may be volatile, illiquid, concentrated, or subject to governance attack.

This chapter compares on-chain and off-chain governance, examines voting and delegation models, analyses governance attacks, and develops professional approaches to budgeting and treasury diversification.

Learning Objectives

After completing this chapter, you should be able to:

1. Distinguish on-chain, off-chain, hybrid, and constitutional governance.
2. Explain token voting, quadratic voting, conviction voting, delegation, and bicameral models.
3. Assess participation, quorum, threshold, representation, and capture risks.
4. Analyse common governance attacks and propose mitigations.
5. Prepare a practical DAO budget and calculate basic treasury indicators.
6. Evaluate treasury liquidity, concentration, volatility, counterparty, smart-contract, and regulatory risks.
7. Apply professional and ethical standards to DAO decision-making.

1. Governance as a Tokenomic Institution

Governance answers four connected questions:

• Authority: Who may propose, vote, execute, or veto a decision?
• Procedure: What steps, thresholds, delays, and evidence are required?
• Scope: Which matters are governed by token holders and which are delegated to specialists?
• Accountability: How are decisions recorded, reviewed, reversed, or challenged?

Governance creates value when it coordinates participants more effectively than unilateral control, while preserving credible constraints against abuse. It can also destroy value. Poor governance may approve inflationary emissions, sell treasury assets at distressed prices, transfer funds to insiders, or make protocol changes without adequate testing.

A useful distinction is between constitutional and operational governance. Constitutional governance establishes fundamental rules: voting rights, amendment procedures, treasury authority, emergency powers, and rights of participants. Operational governance concerns recurring decisions such as grants, partnerships, parameters, budgets, and upgrades. Constitutional decisions normally require stronger safeguards than routine operational decisions.

Governance is also distinct from ownership. Holding a token may provide voting rights, economic exposure, access rights, or a combination of these. A token holder may have voting power without a legal ownership claim to the protocol’s assets. The legal and economic meaning depends on the protocol design and applicable law.

2. On-Chain and Off-Chain Governance

On-chain governance

In on-chain governance, proposals and votes are recorded on a blockchain, and an approved decision may be executed automatically by a smart contract after required conditions are met. Typical elements include a proposal contract, voting period, quorum rule, approval threshold, timelock, and execution function.

Advantages include transparency, auditability, predictable procedure, and reduced dependence on a central administrator. Once a proposal is validly approved, execution can be difficult for an individual to obstruct.

Limitations include transaction costs, voter apathy, technical complexity, irreversible mistakes, concentration of voting power, and the risk that a formally valid vote produces an economically harmful result. Code may enforce a decision, but it cannot determine whether the decision was wise, ethical, or legally permissible.

Off-chain governance

Off-chain governance uses forums, social media, meetings, signalling platforms, working groups, delegates, multisignature wallets, foundations, or legal entities. A vote may express community preference without directly executing a transaction. An authorised operator later implements the decision.

Off-chain systems are often cheaper and more flexible. They allow discussion, expert review, negotiation, and rapid response to emergencies. They also support identity-sensitive processes, such as assessing grant applicants or handling confidential security information.

Their weaknesses are discretion, opacity, informal gatekeeping, enforcement uncertainty, and dependence on trusted actors. A successful poll may not bind the person or entity controlling the treasury.

Hybrid governance

Most mature DAOs use a hybrid model. Discussion occurs in forums; temperature checks or signalling votes assess sentiment; elected committees perform due diligence; token holders approve a mandate; a timelock delays execution; and a multisignature or smart contract carries out the decision. This separates deliberation from execution and allows different safeguards for different types of decision.

The appropriate choice depends on decision sensitivity, urgency, technical feasibility, legal context, and the cost of error. A DAO should not place every decision directly on-chain merely to appear decentralised.

3. Voting Rights and Decision Rules

One-token-one-vote

The simplest model gives voting power in proportion to token holdings. If participant i holds hᵢ voting units and the total voting supply is H, that participant’s voting share is:

Here, sᵢ is a proportion between 0 and 1. The formula assumes that all units have equal voting weight and that delegated votes are counted only once. The model is easy to understand but tends to favour wealth concentration. It may also encourage exchanges, custodians, or liquid-token lenders to exercise voting rights associated with assets they do not economically control in the same way as long-term users.

Quorum and approval threshold

A proposal commonly requires both quorum and approval. Let V be total votes cast, H be the relevant voting supply, and q be the quorum rate. Quorum is satisfied when:

If Y denotes votes in favour and N votes against, an approval threshold τ is satisfied when:

These conditions apply only when abstentions are excluded from the approval denominator. Some systems count abstentions toward quorum but not toward approval; others use different rules. Governance documentation must specify the convention.

For example, if the relevant supply is 1,000,000 tokens, quorum is 10%, and 140,000 votes are cast, quorum is met because 140,000 ≥ 100,000. If 90,000 votes are for and 50,000 against, the approval rate is 90,000 ÷ 140,000 ≈ 64.3%. A 60% threshold is therefore met.

Delegated voting

Delegation allows a token holder to assign voting power to a representative without transferring economic ownership. Delegation can improve participation and technical quality, especially where voters lack time or expertise. It can also create representative oligarchies, conflicts of interest, and opaque concentration.

Good delegation systems disclose delegate biographies, voting rationales, conflicts, attendance, and subject-matter competence. Delegation should be revocable, and delegates should not be rewarded in ways that encourage undisclosed vote trading.

Quadratic voting

Quadratic voting attempts to reduce the dominance of large holders by making additional votes increasingly expensive in voting credits. In a simplified form, the cost of purchasing v votes is:

where C(v) is the number of credits required and v is the number of votes. Thus, 1 vote costs 1 credit, while 4 votes cost 16 credits. The model assumes divisible or adequately granular credits and a reliable mechanism preventing sybil identities from multiplying voting budgets. Without identity or eligibility controls, a wealthy participant may split across many addresses and defeat the intended protection.

Quadratic voting is most useful where the system can identify a fixed voting budget per eligible participant. It is less straightforward for permissionless systems with anonymous, transferable tokens.

Conviction voting

Conviction voting gives greater influence to preferences that remain supported over time. A participant’s voting weight may increase while tokens remain committed to a proposal, often according to a protocol-specific accumulation function. The purpose is to reward durable preferences rather than short-term vote buying. However, a mathematical implementation must be carefully specified, because rapid accumulation or withdrawal rules can create unexpected strategic behaviour.

Bicameral and committee models

A bicameral DAO may require approval from two chambers, such as token holders and recognised contributors. A committee may represent technical, risk, or community expertise. These arrangements can protect minority interests and reduce the chance that a temporary token majority changes foundational rules. They introduce questions of chamber composition, election, removal, term limits, and accountability.

4. Governance Process Design

A professional governance process normally contains the following stages:

1. Agenda formation: A problem, opportunity, or parameter change is identified.
2. Forum discussion: Evidence, alternatives, costs, risks, and conflicts are disclosed.
3. Temperature check: The community tests whether sufficient support exists to develop a formal proposal.
4. Technical and financial review: Specialists assess code, security, budget, legal exposure, and implementation capacity.
5. Formal proposal: The proposal states executable actions, responsible parties, timing, assumptions, and success measures.
6. Voting: The system applies documented eligibility, quorum, threshold, and duration rules.
7. Timelock: A delay permits review and, where appropriate, an emergency response.
8. Execution and reporting: The approved action is executed and outcomes are reported against the original mandate.

Proposals should distinguish decision rights from execution rights. Token holders may authorise a grant ceiling, while a grants committee selects recipients within that ceiling. A security council may pause contracts during an exploit but should not permanently redirect treasury assets without broader approval.

5. Governance Attacks and Failure Modes

A governance attack is an attempt to use formal or informal decision mechanisms to obtain an illegitimate, harmful, or disproportionate outcome. The attacker may exploit code, voting economics, social processes, or treasury procedures.

Flash-loan or temporary voting attacks

If voting power is determined from a current token balance and voting is instantaneous, an attacker may borrow tokens, vote, and repay them within one transaction or before a snapshot. Mitigations include snapshot-based voting, vote-escrowed balances, minimum holding periods, delayed execution, and restricting proposal execution when market conditions change materially.

Vote buying and bribery

A participant may pay others to vote in a particular way, directly or through financial incentives. Vote buying is not always technically preventable, particularly where votes are observable. Privacy-preserving voting, commitment schemes, reputation systems, and disclosure rules can reduce some forms, but each introduces complexity and trade-offs.

Plutocratic capture

A small number of holders, insiders, exchanges, or related wallets may control enough voting power to pass proposals. Concentration should be measured by beneficial ownership where possible, not merely by addresses. Relevant indicators include the share held by the largest wallets, the share controlled by known related entities, delegate concentration, and the minimum coalition needed to pass a proposal.

Sybil attacks

A sybil attack creates multiple identities to obtain disproportionate influence in systems based on personhood, reputation, or per-address limits. Countermeasures include proof of personhood, attestations, contribution records, quadratic mechanisms with eligibility controls, and carefully designed identity credentials. Every identity system creates privacy, exclusion, and governance risks of its own.

Proposal or execution attacks

A malicious proposal may hide dangerous calldata, alter a contract administrator, transfer treasury assets, or change quorum rules before executing a second action. Defences include human-readable transaction simulation, independent audits, restricted proposal formats, timelocks, separate security review, and an emergency guardian with narrowly defined powers.

Social and procedural attacks

Attackers may flood discussion channels, impersonate delegates, exploit rushed votes, spread misleading information, or introduce controversial changes during a crisis. Operational controls include identity verification for official communications, proposal templates, cooling-off periods, conflict disclosures, meeting minutes, and a documented emergency procedure.

No mitigation is perfect. Security is a layered system: technical controls, economic incentives, social norms, legal accountability, and continuous monitoring must reinforce one another.

6. Treasury Management Fundamentals

A DAO treasury may hold its native token, major cryptoassets, fiat or fiat-linked assets, liquidity-provider positions, protocol claims, real-world assets, or intellectual property. Treasury management begins with a written policy rather than ad hoc trading.

A treasury policy should define:

• purpose and minimum reserve;
• permitted and prohibited assets;
• target liquidity and time horizons;
• counterparty and custody standards;
• authority limits and approval procedures;
• rebalancing rules;
• accounting, valuation, and reporting methods;
• emergency powers and recovery procedures.

Treasury objectives

Treasury objectives usually include:

1. Solvency: The organisation can meet expected obligations.
2. Liquidity: Cash or readily saleable assets are available when needed.
3. Capital preservation: Avoiding unacceptable permanent loss.
4. Mission funding: Supporting development, grants, security, and operations.
5. Strategic exposure: Retaining assets that align with the protocol’s ecosystem.
6. Transparency: Enabling stakeholders to understand holdings and commitments.

These objectives conflict. Holding only volatile native tokens may align incentives but jeopardise payroll. Holding only stable assets may preserve short-term purchasing power but reduce upside and ecosystem alignment.

Budgeting and runway

A budget converts strategic priorities into authorised spending. A useful classification separates fixed operating costs, variable programme costs, one-time investments, grants, security expenditure, and reserves.

Let L be liquid treasury value, R be restricted or illiquid value, and Bₘ be forecast monthly net cash burn. A simple liquidity runway is:

This formula assumes Bₘ is positive, liquid assets can be realised without material loss, and the forecast period is sufficiently representative. It is not a solvency guarantee. A more realistic scenario may use changing monthly burn:

where Lₜ is liquid value at month t, Iₜ is inflow during the month, and Eₜ is expenditure. The model is measured in a chosen currency and requires consistent valuation dates. It excludes market-price changes unless those are explicitly added.

Worked example. A DAO has 600,000 units of liquid, low-volatility assets and forecasts monthly expenditure of 75,000 units. Its simple runway is 600,000 ÷ 75,000 = 8 months. If a security programme adds a one-time 90,000-unit payment next month, the remaining liquidity after that payment is 510,000 units, and the subsequent simple runway is 510,000 ÷ 75,000 = 6.8 months. The budget should therefore either fund the payment from a designated reserve or reduce recurring expenditure.

Diversification

Diversification reduces dependence on a single asset, issuer, chain, custodian, or strategy. It does not eliminate risk, because supposedly different assets may be highly correlated during a crisis.

A basic concentration ratio for asset i is:

where Vᵢ is the value of asset i and V is total treasury value, both measured at the same time and in the same currency. The weights should satisfy:

assuming all treasury positions are included and liabilities are excluded from the asset allocation calculation. A policy may set maximum weights, for example, a maximum exposure to the native token or to any single stablecoin issuer. Limits should reflect liquidity, legal, technical, and mission risks rather than arbitrary percentages.

A more informative concentration measure is the Herfindahl–Hirschman Index:

Here, wᵢ is expressed as a decimal. A portfolio with four equally weighted assets has HHI = 4 × 0.25² = 0.25. A portfolio entirely concentrated in one asset has HHI = 1. The measure captures asset concentration but not correlation, issuer quality, duration, or custody risk.

Risk categories

Treasury committees should assess at least:

• Market risk: Prices may decline.
• Liquidity risk: Assets may not be sold quickly without price impact.
• Stablecoin and issuer risk: A supposedly stable asset may lose its peg or depend on a fragile issuer.
• Counterparty risk: A custodian, exchange, bank, bridge, or service provider may fail.
• Smart-contract risk: Code may contain exploitable defects.
• Operational risk: Keys, permissions, procedures, or personnel may fail.
• Regulatory and tax risk: Asset classification, reporting, or restrictions may change.
• Governance risk: A hostile or poorly informed vote may redirect funds.
• Inflation risk: Cash purchasing power may decline.

Risk assessment should consider both probability and impact. A low-probability event that could permanently impair the mission deserves attention even if its expected annual cost appears small.

Custody and control

Large treasuries should not depend on one private key or one individual. Multisignature control, geographically separated signers, hardware security modules, transaction limits, address allowlists, independent review, and tested recovery procedures reduce operational risk. Signer selection should consider independence: five wallets controlled by the same organisation do not provide five independent approvals.

7. Applied Case: The Illustrative Atlas Protocol DAO

This fictional case illustrates a professional decision process.

Background

Atlas Protocol is a decentralised lending protocol governed by the ATLAS token. Its treasury is valued at 4 million units of account: 2 million ATLAS, 1.2 million in a major cryptoasset, 600,000 in a dollar-linked asset, and 200,000 in short-duration real-world cash equivalents. Monthly operating expenditure is 180,000 units. A grants committee requests 900,000 units for a twelve-month developer programme.

Problem

The request would improve ecosystem growth, but the treasury is exposed to ATLAS price volatility. The DAO also has a scheduled security audit costing 250,000 units and no written minimum-liquidity policy. A small group of delegates controls a substantial portion of active votes.

Analysis

The liquid reserve for ordinary expenditure is assumed to be the dollar-linked asset plus cash equivalents: 800,000 units. At the current monthly burn, this covers 800,000 ÷ 180,000 ≈ 4.44 months, before the audit. After the 250,000-unit audit, only 550,000 units remain, or approximately 3.06 months of ordinary burn. The full treasury value is misleading because the ATLAS and major cryptoasset holdings may fall or be difficult to liquidate during a market shock.

The proposed grant also has a governance risk. A twelve-month commitment reduces future flexibility and could be difficult to cancel. It should therefore be divided into milestones rather than transferred in full.

Approach and solution

The treasury committee proposes:

1. Reserve 12 months of expected operating expenditure, subject to quarterly review.
2. Pay the audit from the liquid reserve before approving discretionary grants.
3. Approve an initial 300,000-unit grant tranche, followed by three 200,000-unit tranches tied to measurable milestones.
4. Convert a defined portion of volatile holdings into diversified liquid assets, subject to slippage and market-impact limits.
5. Adopt maximum exposure limits for the native token, each stablecoin issuer, and each custodian.
6. Require an independent technical and financial review before each grant tranche.
7. Use a seven-day timelock for ordinary treasury transfers and a narrowly scoped emergency pause for security incidents.
8. Publish a monthly treasury dashboard showing balances, liabilities, committed expenditure, valuation method, runway, and signer activity.
9. Improve delegate disclosure and require delegates to publish voting rationales.

Outcome

The staged approach funds ecosystem development without treating a proposal approval as an unconditional transfer. It preserves optionality, makes performance observable, and reduces the chance that an unpopular or unsuccessful programme consumes the entire discretionary budget.

Learning points

The case demonstrates five principles: treasury value is not the same as liquidity; commitments should be included in forecasts; diversification must address correlated and operational risks; grants should use milestones where uncertainty is high; and governance quality is part of financial risk management.

8. Ethics, Regulation, and Accountability

Decentralisation does not remove ethical duties. Governance participants should disclose conflicts, avoid misleading treasury valuations, protect minority participants, and provide accessible evidence for significant decisions. Delegates should distinguish personal interests from the interests they represent. Treasury managers should not use privileged information for personal trading.

Important regulatory questions may concern securities, collective investment arrangements, money transmission, derivatives, sanctions, consumer protection, taxation, employment, and data protection. The classification of a token or DAO varies by jurisdiction and facts. A DAO should obtain qualified legal and tax advice rather than assuming that code or a non-profit label determines legal status.

Transparency must be balanced with privacy and security. Publishing exact signer identities or operational details may increase personal risk; withholding all information undermines accountability. Good disclosure provides enough evidence for oversight while protecting sensitive information.

9. Technology, Automation, and Contemporary Developments

Governance tooling increasingly combines smart contracts, off-chain voting, delegated representatives, on-chain analytics, simulation environments, and automated treasury alerts. Automated systems can detect unusual transfers, concentration changes, quorum manipulation, or deviations from budget limits. They should support—not replace—human judgement.

AI may assist with proposal summarisation, financial scenario analysis, code review triage, and detection of conflicting statements. However, AI-generated summaries can omit material caveats, reproduce bias, or be manipulated by adversarial inputs. A professional process should preserve source documents, disclose automated assistance where material, and require human verification before a consequential vote.

Emerging approaches include reputation-based participation, non-transferable credentials, optimistic governance, cross-chain governance, and real-world-asset treasury allocations. Each expands capability while introducing new assumptions about identity, bridges, legal enforceability, data quality, and operational dependency.

10. Best-Practice Checklist

A professionally governed DAO should:

• publish a governance constitution and decision matrix;
• define proposal, quorum, threshold, delegation, timelock, and emergency rules;
• separate discussion, technical review, approval, and execution;
• disclose voter and delegate conflicts where appropriate;
• protect against flash-loan voting and hidden calldata;
• use independent multisignature signers and tested recovery procedures;
• maintain a written investment and treasury policy;
• report liquid assets, restricted assets, liabilities, commitments, and valuation methods;
• monitor runway under base, adverse, and severe scenarios;
• set concentration and counterparty limits;
• use milestone-based grants for uncertain programmes;
• review legal, tax, security, and privacy implications;
• evaluate outcomes after execution rather than treating approval as success.

Chapter Summary

Governance is the institutional mechanism through which a token system allocates authority, changes rules, and controls shared resources. On-chain governance offers transparency and enforceability, while off-chain governance provides flexibility, expertise, and lower transaction costs. Hybrid systems are common because different decisions require different forms of deliberation and control.

Voting design involves more than selecting a token-weighting formula. Quorum, approval thresholds, delegation, representation, identity, timelocks, and execution rights jointly determine who can influence outcomes. Flash-loan voting, vote buying, plutocratic capture, sybil attacks, malicious proposals, and social manipulation are significant threats requiring layered safeguards.

Treasury management connects tokenomics to financial discipline. Professionals distinguish total treasury value from liquid resources, calculate runway using explicit assumptions, diversify across assets and operational dependencies, and monitor market, liquidity, counterparty, smart-contract, governance, and regulatory risks. Written policies, multisignature custody, staged commitments, transparent reporting, and scenario analysis improve resilience.

Ultimately, decentralisation is not an absence of governance. It is a design problem involving authority, accountability, incentives, technology, and human judgement.

Key Terms

Governance: The system of rules and processes used to make and enforce collective decisions.

DAO: A blockchain-based organisation whose coordination is partly implemented through smart contracts and digital governance tools.

On-chain governance: Governance in which proposals, votes, or execution are recorded or enforced on a blockchain.

Off-chain governance: Governance conducted through forums, delegates, committees, foundations, or other processes outside direct blockchain execution.

Hybrid governance: A model combining on-chain and off-chain decision and execution processes.

Quorum: The minimum participation required for a proposal to be validly considered.

Approval threshold: The required proportion of valid votes supporting a proposal.

Delegation: Assignment of voting power to a representative without necessarily transferring economic ownership.

Quadratic voting: A voting model in which additional voting influence requires disproportionately more voting credits.

Conviction voting: A model that gives greater influence to preferences maintained over time.

Timelock: A delay between approval and execution of a governance decision.

Governance attack: An attempt to exploit governance mechanisms to obtain an illegitimate or harmful outcome.

Sybil attack: The creation or use of multiple identities to gain disproportionate influence.

Treasury: Assets controlled by a protocol, DAO, foundation, or community.

Liquidity: The ability to meet obligations or sell assets promptly without substantial price impact.

Runway: The estimated period for which available liquid resources can fund projected net expenditure.

Diversification: Distribution of resources across assets, issuers, custodians, or strategies to reduce concentration.

Multisignature wallet: A wallet requiring approvals from multiple authorised signers.

Concentration ratio: The proportion of total treasury value represented by a particular asset or exposure.

Timelocked execution: Execution that is delayed after approval to permit review or intervention.

Review Questions

5 Short Answer Questions

1. What is the principal difference between on-chain and off-chain governance?
2. Define quorum and approval threshold.
3. Why can delegation improve governance participation?
4. What does treasury runway measure?
5. Identify two risks associated with holding a DAO’s native token in its treasury.

5 Long Answer Questions

1. Compare the advantages and limitations of on-chain, off-chain, and hybrid governance.
2. Explain how quorum, approval thresholds, delegation, and timelocks interact to shape governance outcomes.
3. Describe at least four governance attacks and the controls that can mitigate them.
4. Develop a treasury policy for a DAO whose income and native token are both highly volatile.
5. Explain why treasury diversification must consider more than the number of assets held.

3 Analytical / Application Questions

1. A DAO has 2,000,000 voting units, a 12% quorum requirement, and a 60% approval threshold. In a vote, 300,000 units participate, with 165,000 voting for and 135,000 against. Determine whether quorum and approval requirements are met, showing your reasoning.
2. A treasury contains 1.5 million units of a native token, 1 million units of a major cryptoasset, 500,000 units of a dollar-linked asset, and 1 million units of cash equivalents. Calculate each asset’s portfolio weight and HHI. Discuss at least two limitations of this concentration analysis.
3. Design a governance and treasury response to a proposal requesting an immediate transfer of 40% of the treasury to an anonymous development team. Specify the evidence, voting process, custody controls, milestones, and failure contingencies you would require before approval.

Multiple Choice Questions with Answers

Question 1

Which statement best describes hybrid DAO governance?

A. All decisions are made privately by a foundation.

B. All decisions execute automatically without discussion.

C. Discussion, voting, review, and execution may use different on-chain and off-chain mechanisms.

D. Only delegates may participate in governance.

Correct Answer: C. Discussion, voting, review, and execution may use different on-chain and off-chain mechanisms.

Question 2

A governance system has a relevant voting supply of 1,000,000 units and a quorum requirement of 10%. What minimum participation is required?

A. 10,000 units

B. 50,000 units

C. 100,000 units

D. 500,000 units

Correct Answer: C. 100,000 units

Question 3

What is a principal purpose of a timelock?

A. To guarantee that a proposal is economically beneficial

B. To provide time for review before an approved action executes

C. To eliminate the need for quorum

D. To convert tokens into stablecoins automatically

Correct Answer: B. To provide time for review before an approved action executes

Question 4

Which attack uses temporarily borrowed tokens to influence a vote?

A. Flash-loan governance attack

B. Physical custody attack

C. Duration mismatch attack

D. Accounting rounding attack

Correct Answer: A. Flash-loan governance attack

Question 5

Under the simplified quadratic voting rule C(v) = v², how many credits are required for 3 votes?

A. 3

B. 6

C. 9

D. 12

Correct Answer: C. 9

Question 6

A DAO has 480,000 units of liquid assets and monthly net burn of 60,000 units. What is its simple liquidity runway?

A. 6 months

B. 8 months

C. 10 months

D. 12 months

Correct Answer: B. 8 months

Question 7

Which treasury risk concerns the possibility that an asset cannot be sold quickly without a large price reduction?

A. Liquidity risk

B. Identity risk

C. Quorum risk

D. Delegation risk

Correct Answer: A. Liquidity risk

Question 8

What does a multisignature wallet primarily reduce?

A. All market-price volatility

B. Dependence on a single private key or signer

C. The need for financial reporting

D. The possibility of voter apathy

Correct Answer: B. Dependence on a single private key or signer

Question 9

If four assets each represent 25% of a treasury, what is the HHI using decimal weights?

A. 0.10

B. 0.20

C. 0.25

D. 1.00

Correct Answer: C. 0.25

Question 10

Why are milestone-based grants often preferable to a single immediate transfer?

A. They guarantee that the recipient cannot fail.

B. They eliminate all governance requirements.

C. They preserve oversight and allow funding to depend on measurable progress.

D. They ensure the grant is held entirely in the native token.

Correct Answer: C. They preserve oversight and allow funding to depend on measurable progress.