Risk Management in Blockchain Finance BFC Practice Questions (Page 2)

Questions 6–10

1. 6application · medium

   A blockchain-based lending platform needs to monitor for potential money laundering activities. They have implemented transaction monitoring software. What is the most effective way to ensure the monitoring is aligned with regulatory expectations?

   • ARely solely on the software vendor's default settings.
   • BMonitor only transactions above a very high threshold to reduce false positives.
   • CSet the monitoring rules once and never change them.
   • DRegularly review and update the monitoring rules based on new regulatory guidance and typologies.
   Reveal Solution Discussion Select an answer first
2. 7application · medium

   A decentralized exchange (DEX) is concerned about the risk of a governance attack where an attacker acquires a majority of the governance tokens. Which mitigation strategy would be MOST effective in preventing this?

   • AIncrease the total supply of governance tokens to make it harder to acquire a majority.
   • BImplement a time-lock on governance proposals to give the community time to respond.
   • CAllow the founding team to veto any governance proposal.
   • DRequire a two-thirds majority for all governance proposals.
   Reveal Solution Discussion Select an answer first
4. 8expert · hard

   A global cryptocurrency exchange operates in multiple jurisdictions. One jurisdiction requires that all customer funds be held in a regulated custodian. Another jurisdiction requires that the exchange maintain control over customer funds to prevent money laundering. The exchange is facing conflicting regulatory requirements. Which approach would BEST reconcile these conflicting requirements?

   • AEstablish separate legal entities in each jurisdiction, each complying with local regulations.
   • BUse a single global custodian that meets the most stringent requirements.
   • CHold customer funds in a smart contract that can be controlled by the exchange.
   • DRefuse to operate in the jurisdiction with the stricter requirements.
   Reveal Solution Discussion Select an answer first
5. 9expert · hard

   A decentralized finance (DeFi) protocol is governed by a DAO. The DAO has a treasury of $50 million. A proposal to invest $10 million in a high-yield but unaudited protocol is put forward. The DAO's governance process requires a simple majority to pass. The core team is concerned about the risk of a governance attack and the potential loss of funds. Which governance change would BEST mitigate the risk while preserving the DAO's decentralized nature?

   • ARequire a two-thirds supermajority for any proposal that moves more than $5 million.
   • BIncrease the total supply of governance tokens to dilute the attacker's voting power.
   • CImplement a time-lock of 7 days before any treasury transaction is executed.
   • DDelegate all investment decisions to a small committee of experts.
   Reveal Solution Discussion Select an answer first
6. 10application · medium

   A fintech startup is launching a DeFi lending protocol. The team has identified that a critical smart contract function has a reentrancy vulnerability. To address this before launch, they decide to implement a circuit breaker that pauses the contract in the event of unusual activity. Which additional control should they implement to BEST reduce the risk of a successful exploit while the circuit breaker is being evaluated?

   • APerform a third-party audit of the contract and then deploy it with the circuit breaker as the only safeguard.
   • BIncrease the gas limit for the vulnerable function to allow more complex operations during a transaction.
   • CDeploy the contract with a time-lock on administrative functions and require multi-signature approval for upgrades.
   • DUse a withdrawal pattern that updates balances before transferring funds, and add a reentrancy guard to the vulnerable function.
   Reveal Solution Discussion Select an answer first