Decentralized Finance (DeFi) Quiz

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57 Questions

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

Use of smart contracts on a blockchain

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

Providing traditional banking services

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

Coding errors and hacks

What do DEX aggregators have that differentiate them from DEXs?

Additional component or Aggregator layer

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

Protocol layer

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

To tokenize real-world assets

Which technology does DeFi primarily rely on for its operations?

Smart contracts on a blockchain

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

Ability to offer high-interest rates

What is the primary function of MakerDAO?

Decentralized lending

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

Compound Finance

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

Reduced risk of hacking

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

Blockchain

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

Decentralized finance applications

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

Big Tech, national governments, and software developers building decentralized finance applications

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

Smart contracts

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

DeFi

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?

Impermanent loss

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

Non-linear

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?

Front running

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

Through tokens granting voting rights distributed amongst participants

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

Freezing customer funds without reason

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

Irreversible vulnerabilities

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

2018

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

'An exchange cannot be decentralized if it can lose or freeze customer funds.'

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

'Market price impact'

What technology was introduced by the Ethereum blockchain in 2017?

Smart contracts

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

Compound Finance

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

Rewarding liquidity providers

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

Peer-to-peer transactions

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

Decentralized finance (DeFi)

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?

Front running

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

Market price impact

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

2018

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

An exchange cannot be decentralized if it can lose or freeze customer funds.

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

Creating a decentralized stablecoin and credit system

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

High-risk, high-reward investment opportunities

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

Aggregator layer

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?

Front-running attack

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

Hacks and coding errors

What technology does DeFi primarily rely on for its operations?

Blockchain

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

The project's value proposition

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

The token distribution mechanism

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

The clear use-case of the token within its ecosystem

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

The doxxed status of the team

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

The strength of the niche's active community

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

The clear use-case of the token within its ecosystem

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

The doxxed status of the team

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

The use of staking or burning mechanisms

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

The project's value proposition

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

How the tokens are being distributed

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

The novel solutions offered by the chosen niche

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

Providing decentralized lending and stablecoin issuance

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

The strength of the active community behind the chosen niche

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

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

What technology was introduced by the Ethereum blockchain in 2017?

'Tokenomics' involving distribution and utility of tokens

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

'Governance' in Decentralized Autonomous Organizations (DAOs)

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

2020

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.

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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