Cardano being the protocol, in a case where a DAPP is built on its layer, if Funds are lost (ex: etheruem with the DAO attack, and even recently with NANO requesting to alter their ledger to recover funds) How will the cardano protocol respond to these situations if they occur?
Two words, Ethereum Classic.
Issues like the DAO hacked will be mitigated by the separation of the Cardano settlement layer from the Cardano computational layer. It’s explained here: https://youtu.be/04D2BP33YI8?t=613
Basically if you put your money in a shitty DAPP and it gets stolen, you’re still out the money. But everyone else who didn’t invest in that app is protected. A hacker can’t bring more funds back to the settlement layer than originally left it to invest in that particular sidechain.
As far as exchange hacks go, I think you’re essentially on your own or at the mercy of the exchange deciding to issue a refund. Charles has been pretty clear that he’s morally opposed to blacklisting the accounts where the hacked money was sent or bailing people out.
The philosophy seems to be: you won’t be hurt by other people’s poor choices, but ultimately if you make a poor decision it falls on you.