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Decentralized Finance (DeFi) Quiz
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Decentralized Finance (DeFi) Quiz

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@LuxuryElectricOrgan

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Questions and Answers

What is the main feature of decentralized finance (DeFi)?

  • Exclusive focus on traditional financial instruments
  • Use of smart contracts on a blockchain (correct)
  • Reliance on intermediaries like brokerages and banks
  • Lack of layered architecture

    • Which of the following is NOT a function of DeFi platforms?

  • Lending and borrowing funds
  • Speculating on price movements using derivatives
  • Providing traditional banking services (correct)
  • Trading cryptocurrencies

    • What has been a common issue in the history of DeFi?

  • Coding errors and hacks (correct)
  • Low adoption rate
  • Layered architecture complexity
  • High interest rates with low risk

    • What do DEX aggregators have that differentiate them from DEXs?

    <p>Additional component or Aggregator layer</p> Signup and view all the answers

    What is the primary protocol used in DeFi platforms for financial transactions?

    <p>Protocol layer</p> Signup and view all the answers

    What is the main purpose of the Asset layer in the DeFi stack?

    <p>To tokenize real-world assets</p> Signup and view all the answers

    Which technology does DeFi primarily rely on for its operations?

    <p>Smart contracts on a blockchain</p> Signup and view all the answers

    What is the biggest advantage of DeFi platforms according to the text?

    <p>Ability to offer high-interest rates</p> Signup and view all the answers

    What is the primary function of MakerDAO?

    <p>Decentralized lending</p> Signup and view all the answers

    Which platform introduced a new cryptocurrency, Comp, for rewarding lenders and borrowers?

    <p>Compound Finance</p> Signup and view all the answers

    What is the primary advantage of decentralized exchanges (DEX) like Uniswap?

    <p>Reduced risk of hacking</p> Signup and view all the answers

    What technology enables direct peer-to-peer transactions in DeFi?

    <p>Blockchain</p> Signup and view all the answers

    What has gained traction with venture capital investors in the context of DeFi?

    <p>Decentralized finance applications</p> Signup and view all the answers

    What was described as a three-way fight in the future of digital finance?

    <p>Big Tech, national governments, and software developers building decentralized finance applications</p> Signup and view all the answers

    What does DeFi use for loan, repayment, and liquidation processes?

    <p>Smart contracts</p> Signup and view all the answers

    What made up a large portion of the cryptocurrency market in terms of price changes as of September 2020?

    <p>DeFi</p> Signup and view all the answers

    What is the term for the loss suffered by liquidity providers in DeFi protocols due to significant alterations in the value ratio of token pairs they have invested in?

    <p>Impermanent loss</p> Signup and view all the answers

    What is the nature of price impact in liquidity pool DEXes due to the AMM (Automated Market Makers) nature itself?

    <p>Non-linear</p> Signup and view all the answers

    What type of attack in public blockchains involves a participant (usually a miner) putting their own transaction ahead of an upcoming trading transaction, making the initial transaction less profitable or even reverted?

    <p>Front running</p> Signup and view all the answers

    How is governance typically done in a Decentralized Autonomous Organization (DAO) as part of a DeFi platform?

    <p>Through tokens granting voting rights distributed amongst participants</p> Signup and view all the answers

    What is one example of a legal consequence faced by operators of decentralized exchanges from government regulators mentioned in the text?

    <p>Freezing customer funds without reason</p> Signup and view all the answers

    What is the term for coding errors and hacks that are common in DeFi, given that blockchain transactions are irreversible?

    <p>Irreversible vulnerabilities</p> Signup and view all the answers

    In what year was the decentralized exchange Bancor reportedly hacked and suffered a loss of $13.5M in assets before freezing funds?

    <p>2018</p> Signup and view all the answers

    What did Charlie Lee, the creator of Litecoin, claim about the decentralization of an exchange based on the text?

    <p>'An exchange cannot be decentralized if it can lose or freeze customer funds.'</p> Signup and view all the answers

    Which problem is mostly significant for relatively large deals versus the liquidity pool size in liquidity pool DEXes?

    <p>'Market price impact'</p> Signup and view all the answers

    What technology was introduced by the Ethereum blockchain in 2017?

    <p>Smart contracts</p> Signup and view all the answers

    Which platform introduced a new cryptocurrency, Comp, for rewarding lenders and borrowers?

    <p>Compound Finance</p> Signup and view all the answers

    What is the primary function of decentralized exchanges (DEX) like Uniswap?

    <p>Rewarding liquidity providers</p> Signup and view all the answers

    What is the main feature of decentralized finance (DeFi)?

    <p>Peer-to-peer transactions</p> Signup and view all the answers

    What was described as a three-way fight in the future of digital finance?

    <p>Decentralized finance (DeFi)</p> Signup and view all the answers

    What is the term for a special type of attack in public blockchains when some participant puts their own transaction ahead, making the initial transaction less profitable or even reverted?

    <p>Front running</p> Signup and view all the answers

    What is the most common problem of liquidity pool DEXes that occurs due to the non-linear nature of price impact in AMM?

    <p>Market price impact</p> Signup and view all the answers

    In which year did the decentralized exchange Bancor reportedly suffer a loss of $13.5M in assets before freezing funds?

    <p>2018</p> Signup and view all the answers

    What did Charlie Lee, the creator of Litecoin, claim about the decentralization of an exchange based on the text?

    <p>An exchange cannot be decentralized if it can lose or freeze customer funds.</p> Signup and view all the answers

    What is the primary function of MakerDAO according to the text?

    <p>Creating a decentralized stablecoin and credit system</p> Signup and view all the answers

    What is the primary advantage of using decentralized finance (DeFi) platforms?

    <p>High-risk, high-reward investment opportunities</p> Signup and view all the answers

    Which component differentiates DEX aggregators from decentralized exchanges (DEXs) in the DeFi architecture?

    <p>Aggregator layer</p> Signup and view all the answers

    What type of attack in public blockchains involves a participant (usually a miner) putting their own transaction ahead of an upcoming trading transaction, making the initial transaction less profitable or even reverted?

    <p>Front-running attack</p> Signup and view all the answers

    What was described as a significant issue in the history of decentralized finance (DeFi)?

    <p>Hacks and coding errors</p> Signup and view all the answers

    What technology does DeFi primarily rely on for its operations?

    <p>Blockchain</p> Signup and view all the answers

    What is an important consideration when identifying a niche for a project in the crypto ecosystem?

    <p>The project's value proposition</p> Signup and view all the answers

    What aspect is included in the checklist for researching a project?

    <p>The token distribution mechanism</p> Signup and view all the answers

    What is a key consideration related to 'Tokenomics' when evaluating a project?

    <p>The clear use-case of the token within its ecosystem</p> Signup and view all the answers

    What is an essential aspect to consider when evaluating the team and communication of a project?

    <p>The doxxed status of the team</p> Signup and view all the answers

    Which aspect is part of the checklist for identifying a niche in the crypto ecosystem?

    <p>The strength of the niche's active community</p> Signup and view all the answers

    What is an important factor to consider when evaluating 'Tokenomics' of a project?

    <p>The clear use-case of the token within its ecosystem</p> Signup and view all the answers

    In evaluating a project, what is a crucial aspect related to 'Team and Communication'?

    <p>The doxxed status of the team</p> Signup and view all the answers

    What is an important aspect to consider when researching a project?

    <p>The use of staking or burning mechanisms</p> Signup and view all the answers

    What is an essential consideration when identifying a niche for a project in the crypto ecosystem?

    <p>The project's value proposition</p> Signup and view all the answers

    What is an essential consideration when evaluating the 'Tokenomics' of a project?

    <p>How the tokens are being distributed</p> Signup and view all the answers

    What is a crucial aspect to consider when researching a project?

    <p>The novel solutions offered by the chosen niche</p> Signup and view all the answers

    What is the primary function of MakerDAO according to the text?

    <p>Providing decentralized lending and stablecoin issuance</p> Signup and view all the answers

    Which aspect is part of the checklist for identifying a niche in the crypto ecosystem?

    <p>The strength of the active community behind the chosen niche</p> Signup and view all the answers

    What did Charlie Lee, the creator of Litecoin, claim about the decentralization of an exchange based on the text?

    <p>It is an important consideration when identifying a niche for a project in the crypto ecosystem</p> Signup and view all the answers

    What technology was introduced by the Ethereum blockchain in 2017?

    <p>'Tokenomics' involving distribution and utility of tokens</p> Signup and view all the answers

    What has gained traction with venture capital investors in the context of DeFi?

    <p>'Governance' in Decentralized Autonomous Organizations (DAOs)</p> Signup and view all the answers

    In what year was the decentralized exchange Bancor reportedly hacked and suffered a loss of $13.5M in assets before freezing funds?

    <p>2020</p> Signup and view all the answers

    Study Notes

    • Ethereum blockchain introduced smart contracts in 2017, leading to decentralized finance (DeFi) platforms like MakerDAO.

    • MakerDAO is a decentralized lending platform based on a stablecoin, DAI, established in 2017. It uses smart contracts for loan, repayment, and liquidation processes.

    • In June 2020, Compound Finance introduced a new cryptocurrency, Comp, for rewarding lenders and borrowers in its decentralized finance ecosystem.

    • DeFi attracted significant attention in 2020, with platforms like Compound, Uniswap, and Aave offering yield farming and liquidity mining opportunities.

    • DeFi has gained traction with venture capital investors, including Andreessen Horowitz and Michael Novogratz.

    • As of September 2020, DeFi made up a large portion of the cryptocurrency market in terms of price changes.

    • The future of digital finance was described as a three-way fight between Big Tech, national governments, and software developers building decentralized finance applications.

    • DeFi is based on decentralized applications (DApps) and blockchain technology, enabling direct peer-to-peer transactions, mediated by smart contracts.

    • Many DeFi platforms, including Uniswap, offer decentralized exchanges (DEX), allowing users to trade cryptocurrencies without intermediaries like banks or brokerages.

    • Decentralized exchanges reduce the risk of hacking and offer greater anonymity, but they may suffer from low trading volumes and reduced market liquidity.

    • Users on decentralized exchanges are at risk of losing their assets if they are hacked for their passwords or private keys, as there is no way to reverse transactions.

    • Ethereum blockchain introduced smart contracts in 2017, leading to decentralized finance (DeFi) platforms like MakerDAO.

    • MakerDAO is a decentralized lending platform based on a stablecoin, DAI, established in 2017. It uses smart contracts for loan, repayment, and liquidation processes.

    • In June 2020, Compound Finance introduced a new cryptocurrency, Comp, for rewarding lenders and borrowers in its decentralized finance ecosystem.

    • DeFi attracted significant attention in 2020, with platforms like Compound, Uniswap, and Aave offering yield farming and liquidity mining opportunities.

    • DeFi has gained traction with venture capital investors, including Andreessen Horowitz and Michael Novogratz.

    • As of September 2020, DeFi made up a large portion of the cryptocurrency market in terms of price changes.

    • The future of digital finance was described as a three-way fight between Big Tech, national governments, and software developers building decentralized finance applications.

    • DeFi is based on decentralized applications (DApps) and blockchain technology, enabling direct peer-to-peer transactions, mediated by smart contracts.

    • Many DeFi platforms, including Uniswap, offer decentralized exchanges (DEX), allowing users to trade cryptocurrencies without intermediaries like banks or brokerages.

    • Decentralized exchanges reduce the risk of hacking and offer greater anonymity, but they may suffer from low trading volumes and reduced market liquidity.

    • Users on decentralized exchanges are at risk of losing their assets if they are hacked for their passwords or private keys, as there is no way to reverse transactions.

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    Test your knowledge on decentralized finance (DeFi), which offers financial instruments without relying on intermediaries such as brokerages, exchanges, or banks by using smart contracts on a blockchain, mainly Ethereum. Learn about lending, borrowing, trading, and earning interest in DeFi platforms.

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