Quiz: DAOs - Digital Finance

Question 1

According to the lecture's definition, what are the three defining properties of a DAO?

(A) Decentralised
(B) Profitable, Automated, Limited
(C) Democratic, Anonymous, Open-source
(D) Distributed, Accountable, Optimal

Answer: (A) A DAO replaces the CEO's judgment with collective voting and the accountant's ledger with a public blockchain. All three properties must be present: decentralisation, autonomy through code, and coordinated organisation toward a shared goal.

Question 2

The lecture describes a 6-step governance pipeline for DAO proposals: Forum, Snapshot, Formal, On-chain, Timelock, Execute. Why do most DAOs use off-chain polling (Snapshot) before committing to an on-chain vote?

(A) Because Snapshot polls are required by SEC regulation
(B) Because on-chain voting costs $5-50 per voter in gas fees
(C) Because on-chain voting is faster than off-chain polling
(D) Because off-chain polls are legally binding and on-chain votes are not

Answer: (B) Gas costs explain why DAOs use off-chain temperature checks (Steps 1-2) before on-chain votes (Step 4). In mature DAOs, only 10-20% of forum discussions become formal proposals, and 60-80% of those pass.

Question 3

In the lecture's worked example, Wei submits a $50K marketing proposal. What is the total time from forum post to funds received, and what does this cost?

(A) 6 months and $50,000 in legal fees
(B) 24 hours and zero fees
(C) 1 hour and $5 in gas fees
(D) Approximately 3 weeks and $200

Answer: (D) The pipeline takes about 3 weeks: forum discussion, Snapshot poll (12,000 Yes / 3,000 No), formal review, 5-day on-chain vote (45,000 Yes / 5,000 No, 4% quorum met), 48-hour timelock, then execution. Total gas cost is approximately $200.

Question 4

What is the purpose of the 24-48 hour "timelock" between a successful on-chain vote and execution?

(A) To allow the blockchain to confirm the vote across all nodes
(B) To give the community a "last chance" to detect malicious proposals
(C) To comply with financial regulations that require a cooling-off period
(D) To give banks time to process the transaction

Answer: (B) The lecture provides a specific example: during a timelock, a security team discovers Wei's wallet is compromised, and the guardian multi-sig vetoes execution. The timelock prevents immediate exploitation of governance attacks.

Question 5

MakerDAO (rebranded to Sky in August 2024 under the Endgame Plan) manages the USDS stablecoin (formerly DAI) and governs billions in TVL, processing hundreds of proposals per year. How is this governed?

(A) SKY token holders vote on collateral types, stability fees
(B) A board of directors at Sky's Copenhagen headquarters
(C) The Ethereum Foundation makes all decisions for Sky
(D) A single founder (Rune Christensen) makes all protocol decisions

Answer: (A) Sky (the protocol formerly known as MakerDAO) has only "contributors," not employees. SKY holders govern the Endgame architecture of autonomous "Stars" (Sub-DAOs) with their own tokens (e.g., Spark). The MKR-to-SKY token migration opened August 2024; legacy DAI remains redeemable 1:1 for USDS. Source: sky.money; Endgame governance docs (August 2024).

Question 6

Uniswap's DAO treasury is one of the largest in the ecosystem (multiple billions of USD equivalent as of Q1 2026), and DeepDAO tracks aggregate DAO treasury assets in the tens of billions across 13,000+ organisations. How are these treasuries protected?

(A) Multi-signature wallets combined with on-chain votes
(B) FDIC insurance up to $250,000
(C) A traditional bank account managed by Uniswap's CFO
(D) The treasury is unprotected and anyone can withdraw from it

Answer: (A) DAO treasuries use multi-sig wallets (Safe/Gnosis), require on-chain vote approval for spending, and use streaming payments (Sablier/Superfluid) for salaries. The key difference from traditional finance: anyone can audit the treasury address in real time. Source: DeepDAO (April 2026).

Question 7

In a traditional S&P 500 corporation, 7-12 board members decide for millions of shareholders. In a DAO, thousands of token holders can vote. The lecture says DAOs are "more transparent" than corporations. What is the specific evidence?

(A) DAOs publish annual reports reviewed by Big Four auditors
(B) DAOs are subject to stricter SEC reporting requirements
(C) All proposals are visible on-chain
(D) DAO board meetings are livestreamed on YouTube

Answer: (C) The lecture's comparison table shows: corporations have "quarterly reports, audited annually" while DAOs have "real-time, on-chain, public" transparency. You cannot look up Apple's bank balance, but you can check Uniswap's treasury at any moment.

Question 8

Sarah provides $50K in liquidity on Uniswap but has no say in protocol fee changes. How do DAOs solve her problem, and what limitation remains?

(A) Sarah must sell her liquidity position before she can vote on any proposal
(B) Sarah automatically receives governance rights proportional to her liquidity provision
(C) The UNI token gives her voting power and she can delegate to an expert
(D) DAOs cannot help liquidity providers in any way

Answer: (C) DAOs give Sarah governance rights she lacked as a mere LP. But the "but" matters: her token weight is negligible, and a16z alone holds enough UNI to veto proposals. DAOs solve access to governance but not necessarily meaningful influence.

Question 9

"The DAO" (2016) raised $150 million in April and was hacked for $50 million in June. What type of smart contract bug enabled the attack?

(A) A governance vote that authorised the fund transfer to the attacker
(B) A weak private key that the attacker brute-forced
(C) An integer overflow that created unlimited tokens
(D) A reentrancy bug

Answer: (D) The ATM analogy: the machine dispenses $100, but before updating the balance from $500 to $400, the attacker requests again. The machine checks the old balance ($500), dispenses again, and repeats until empty. The fix (now standard) is the "Checks-Effects-Interactions" pattern.

Question 10

After The DAO hack, the Ethereum community voted 87% in favour of a hard fork to reverse the theft. Those who opposed the fork created Ethereum Classic (ETC). What was the core argument against the fork?

(A) The stolen funds had already been returned voluntarily
(B) The fork was technically impossible to implement
(C) "Code is law"
(D) Ethereum Classic would be more valuable than the forked Ethereum

Answer: (C) The anti-fork camp argued that immutability is the whole point of a blockchain. If hacks can be reversed by social consensus, who decides which hacks get reversed? The market ultimately chose pragmatism: ETH remains a top-2 crypto asset by market capitalisation while ETC trades roughly two orders of magnitude smaller. Source: CoinGecko (April 2026).

Question 11

The DAO hack is described as "the most important governance debate in blockchain history." Why is this a governance issue and not just a technical one?

(A) Because the attacker was a known governance delegate
(B) Because the Ethereum Foundation unilaterally decided to fork without community input
(C) Because the DAO's governance token was worthless
(D) Because the hack itself was a code bug

Answer: (D) The fork succeeded technically but revealed that "decentralised" systems still rely on social consensus. Both sides had valid arguments. The incident showed that governance in blockchain is not purely algorithmic -- human judgment still determines outcomes.

Question 12

What is the "Checks-Effects-Interactions" pattern that was developed as a defence against reentrancy attacks after The DAO hack?

(A) Check the user's identity, apply a fee, then interact with external contracts
(B) Check the token price, update the oracle, then process the transaction
(C) First check conditions, then update state (reduce the balance)
(D) Check the governance vote, record the result, then execute the proposal

Answer: (C) The DAO's bug was in the order of operations: it sent ETH (interaction) before updating the balance (effect). The fix reverses this: update state first, then send funds. This is now a standard security practice in Solidity smart contract development.

Question 13

Messari and DeepDAO data show median DAO voter participation typically runs below 10% of circulating tokens (often in the low single digits), compared to ~60% for national elections and 70-80% for corporate shareholder votes. What is the main consequence?

(A) Low turnout makes DAOs more efficient because fewer people need to coordinate
(B) DAOs cannot pass any proposals because quorum is never met
(C) Voter turnout has no effect on governance outcomes
(D) Small groups of active voters control outcomes

Answer: (D) A DAO with 100,000 token holders but only a few dozen active voters is not meaningfully decentralised. Low quorum means small groups can pass proposals that affect millions of dollars -- the lecture identifies this as the DAO's "biggest enemy." Source: Messari State of Governance; DeepDAO (April 2026).

Question 14

The lecture lists four reasons why token holders do not vote. Which of the following is NOT one of them?

(A) Proposal fatigue -- Sky (formerly MakerDAO) processes hundreds of proposals per year across its Endgame Sub-DAOs ("Stars")
(B) Gas costs of $5-50 per on-chain vote
(C) Rational ignorance -- the cost of researching proposals exceeds the individual impact of a single vote
(D) Token holders are legally prohibited from voting in most jurisdictions

Answer: (D) The four reasons are: rational ignorance, gas costs, proposal fatigue, and speculation (many holders buy tokens to trade, not to govern). Legal prohibition is not one of them -- DAOs operate in a regulatory grey zone (with Wyoming DAO LLC and Marshall Islands DAO recognition available), but voting itself is not banned.

Question 15

In Uniswap's governance, a16z (a venture capital firm) holds enough UNI tokens to veto any proposal. The community wanted to activate a protocol fee switch, but a16z voted against it. What governance problem does this illustrate?

(A) Plutocracy -- 1-token-1-vote effectively means
(B) Flash loan governance attack
(C) Reentrancy vulnerability in the voting contract
(D) Regulatory intervention by the SEC

Answer: (A) Team + VCs typically hold 45-55% of DAO tokens at launch. After vesting, insiders can dominate governance votes. The lecture calls this "governance theatre" and notes the irony: DAOs designed to prevent concentrated power often recreate it through token distribution. The Uniswap "fee switch" debate has resurfaced repeatedly (2022-2025) with large delegates including venture funds and university endowments able to block activation. Source: Tally (Uniswap delegates) (April 2026).

Question 16

The Beanstalk governance attack (April 2022) drained $182 million. The attacker borrowed $1 billion in governance tokens via a flash loan, passed a proposal to drain the treasury, and repaid the loan. What defence would have prevented this?

(A) Vote locking and snapshot blocks (voting power
(B) Stronger encryption on the governance contract
(C) Higher gas fees to discourage voting
(D) Banning all flash loans from blockchain networks

Answer: (A) Flash loan attacks exploit the gap between economic power (tokens) and commitment (time). Locking requirements force "skin in the game." Timelocks (24-48h execution delay) also help because attackers cannot hold flash-loaned tokens that long. Related governance-failure cases: Mango Markets (Oct 2022, $117M drained via oracle-manipulation governance vote; Avraham Eisenberg convicted of fraud and market manipulation in April 2024); Arbitrum AIP-1 (March 2023, foundation allocated 750M ARB before the ratification vote, sparking community revolt and retroactive restructuring); Build Finance (Feb 2022, hostile governance takeover drained the treasury); Tribe DAO (April 2022, $80M Fei exploit repayment vote). Source: rekt.news; DOJ press releases (April 2024).

Question 17

Under quadratic voting, casting 1 vote costs 1 token, casting 2 votes costs 4 tokens, and casting 10 votes costs 100 tokens. What is the purpose of this increasing cost?

(A) To generate revenue for the DAO treasury through vote fees
(B) To reduce whale dominance
(C) To make the voting process faster by discouraging participation
(D) To prevent any individual from casting more than one vote

Answer: (B) In 1-token-1-vote, a whale with 1,000,000 tokens has 1,000,000x the influence of someone with 1 token. Under quadratic voting, that whale would need 10^12 tokens for 1,000,000 votes. The system balances intensity of preference with breadth of support (Weyl & Posner, 2018).

Question 18

In Gitcoin Grants, 100 people each donating $1 generates a stronger funding signal than 1 whale donating $100. Why?

(A) Because the blockchain network charges lower fees for smaller transactions
(B) Because quadratic funding amplifies the number of unique supporters
(C) Because whales are banned from participating in Gitcoin
(D) Because Gitcoin limits individual donations to $1

Answer: (B) Quadratic funding values breadth over depth. The matching pool algorithm amplifies projects with many small donors over those with few large donors. However, the lecture warns of Sybil attacks: one person creating 100 wallets to fake 100 "unique" votes at linear cost.

Question 19

Amara runs a cooperative of 200 farmers in Lagos. Registering a traditional company costs $2,000 and takes 6 months. A DAO could let her deploy a smart contract from anywhere. What is the main barrier the lecture identifies?

(A) DAOs require a minimum treasury of $1 million to deploy
(B) Nigerian law does not recognise DAOs as legal entities
(C) Farmer cooperatives are exempt from needing any legal structure
(D) Smart contracts cannot be deployed from Nigeria

Answer: (B) DAOs trade familiar legal protections for transparency and programmability. The lecture's comparison table lists "Unclear in most jurisdictions" under DAO liability, compared to "Limited (LLC/AG/GmbH)" for corporations. "Borderless" and "no liability framework" are not always advantages.

Question 20

A student argues: "DAOs with 3-5% voter turnout are more democratic than traditional corporations where boards of 7-12 people decide for millions." Using the lecture's framework, evaluate this claim.

(A) The student is fully correct -- any voting is more democratic than a board
(B) The comparison is irrelevant because DAOs and corporations serve different purposes
(C) The claim has merit but is undermined by token concentration (team + VCs hold
(D) The student is fully wrong -- DAOs are never democratic

Answer: (C) The lecture presents both sides. DAOs enable direct participation, public proposals, and treasury transparency. But "decentralised governance with 45% insider tokens is governance theatre." The democracy spectrum shows DAOs in the liquid-to-direct range, but practice often diverges from theory.