Risk Management in Blockchain Finance BFC Practice Questions (Page 5)

Questions 21–25

1. 21application · medium

   A blockchain insurance company is evaluating the risk of a smart contract bug in their policy payout system. They have historical data on the frequency of bugs in similar contracts and the average payout per claim. Which method should they use to estimate the expected annual loss?

   • AMultiply the probability of a bug occurring by the average financial loss per incident.
   • BConduct a qualitative assessment by interviewing developers.
   • CUse the maximum possible loss from a single incident.
   • DMonitor the system for bugs and report any findings.
   Reveal Solution Discussion Select an answer first
2. 22application · medium

   A blockchain-based supply chain finance platform relies on a single cloud provider for its infrastructure. The platform has experienced a regional outage that affected its nodes. To ensure business continuity, which strategy should be implemented?

   • ARely on the cloud provider's disaster recovery plan.
   • BKeep a backup of the blockchain data on a local server.
   • CIncrease the capacity of the current cloud provider to handle more load.
   • DDeploy nodes across multiple cloud providers and regions to achieve geographic redundancy.
   Reveal Solution Discussion Select an answer first
4. 23application · medium

   A blockchain-based insurance company uses smart contracts to automate claims. They have identified that a bug in the claim validation logic could allow fraudulent claims. To mitigate this risk, they decide to implement a multi-signature requirement for claims above a certain threshold. What is the PRIMARY benefit of this control?

   • AIt reduces the likelihood of a single compromised key being used to approve fraudulent claims.
   • BIt eliminates the need for a third-party audit of the smart contract.
   • CIt ensures that all claims are processed automatically without human intervention.
   • DIt increases the speed of claim processing by reducing the number of approvals needed.
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5. 24application · medium

   A blockchain payment company is assessing the risk of a 51% attack on the public blockchain they use for settlement. They have historical data on the network's hash rate and the cost of renting hash power. Which approach best quantifies the likelihood and impact of this risk?

   • ACalculate the cost of a 51% attack and compare it to the potential financial loss from a double-spend.
   • BMonitor the network hash rate daily and report any significant changes to the board.
   • CAssume the risk is negligible because the blockchain is well-known.
   • DConduct a qualitative workshop with the engineering team to rate the risk as high, medium, or low.
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6. 25expert · hard

   A DeFi protocol has a governance mechanism that allows token holders to propose and vote on changes. A malicious proposal is submitted that, if executed, would drain the treasury. The proposal is scheduled to execute in 48 hours. The team has a multi-signature wallet that can pause the protocol, but pausing would also halt all legitimate user transactions. What is the best course of action?

   • APause the protocol immediately to prevent the malicious proposal from executing, then work on a longer-term fix.
   • BImmediately sell all treasury assets to prevent them from being drained.
   • CDo nothing and hope the proposal fails to reach quorum.
   • DLet the proposal execute and then attempt to reverse the transaction.
   Reveal Solution Discussion Select an answer first