Definition ∞ Protocol treasury risk refers to the potential for financial loss or mismanagement associated with the digital assets held by a decentralized protocol’s treasury. This risk encompasses vulnerabilities to exploits, poor asset allocation decisions, governance failures, or adverse market conditions impacting the value of the stored funds. It directly affects the long-term sustainability and security of the protocol.
Context ∞ News reports often scrutinize protocol treasury risk, particularly after security incidents or significant market downturns, as it reflects the financial stability and operational resilience of decentralized autonomous organizations. Effective treasury management and transparent governance are critical discussions for mitigating these risks. This ensures the continued viability of digital asset projects and investor confidence.
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