A DeFi protocol is considering whether to purchase insurance or increase its bug bounty rewards. The protocol has a limited budget and faces both smart contract risk and oracle manipulation risk. Which approach best balances risk mitigation across both threat types?

Allocate budget to both a moderate bug bounty and a targeted insurance policy for oracle-related losses.

Spend the entire budget on insurance that covers all possible losses.

Spend the entire budget on the largest possible bug bounty.

Skip both and rely on the protocol's governance community to self-police.

EC-CouncilBlockchain Developer Certification

Domain 7Objective 4

Incident Response and Risk Mitigation BDC Practice Questions (Page 11)

Part of the Blockchain Security and DeFi Development domain, which makes up ~11% of our current practice bank.

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Questions 51–51

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A DeFi protocol is considering whether to purchase insurance or increase its bug bounty rewards. The protocol has a limited budget and faces both smart contract risk and oracle manipulation risk. Which approach best balances risk mitigation across both threat types?
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Incident Response and Risk Mitigation BDC Practice Questions (Page 11)

Questions 51–51

A DeFi protocol is considering whether to purchase insurance or increase its bug bounty rewards. The protocol has a limited budget and faces both smart contract risk and oracle manipulation risk. Which approach best balances risk mitigation across both threat types?

Keep studying — Blockchain Security and DeFi Development