A DAO should establish an on-chain reserve fund to mitigate unpredictable market fluctuations. Such a fund acts as a financial buffer, ensuring operational stability during volatile periods. By holding diversified assets like stablecoins, governance tokens, or other cryptocurrencies, the reserve can absorb economic shocks, maintain liquidity, and support ongoing projects. Transparent allocation, governed by smart contracts, ensures trust and accountability. Historical data from DeFi protocols shows reserve funds reduce insolvency risks by up to 40% during market downturns. For example, MakerDAO’s surplus buffer has stabilized its ecosystem during crypto crashes. Without a reserve, a DAO risks governance disruptions or project delays due to funding shortages. A well-managed fund, regularly audited and adjusted via community consensus, balances risk and resilience, fostering long-term sustainability.