What Are the Risks of Holding All Treasury Funds in a Single Smart Contract?

Holding all treasury funds in a single smart contract creates a single point of failure, which is a major security risk. A bug or exploit in that one contract could lead to the complete and irreversible loss of the entire treasury.

This centralizes risk, making the DAO a very attractive target for hackers. Furthermore, a single contract may lack the flexibility to manage different types of assets or implement complex financial strategies.

To mitigate this, DAOs often use multiple smart contracts, multi-signature wallets, and cold storage solutions to distribute and secure their assets.