Decentralized Finance (DeFi) Quiz
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Questions and Answers

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

  • Utilizes smart contracts on a blockchain (correct)
  • Uses traditional lending and borrowing systems
  • Relies on centralized exchanges for financial transactions
  • Requires intermediaries such as brokerages and banks
  • Which platform allows people to speculate on price movements of assets using derivatives?

  • Decentralized exchanges (DEXs)
  • Centralized exchanges (CEXs)
  • DEX aggregators
  • DeFi (correct)
  • What component do DEX aggregators have that distinguishes them from DEXs and CEXs in the DeFi architecture?

  • Protocol layer
  • Asset layer
  • Settlement layer
  • Aggregator layer (correct)
  • What risk are some applications in DeFi subject to despite promoting high-interest rates?

    <p>Coding errors and hacks</p> Signup and view all the answers

    Which type of exchange is part of the multi-layered DeFi architecture and components?

    <p>Decentralized exchanges (DEXs)</p> Signup and view all the answers

    What is the primary function of MakerDAO?

    <p>Maintaining the stable value of DAI in a decentralized manner</p> Signup and view all the answers

    Which platform started rewarding lenders and borrowers with a cryptocurrency called Comp?

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

    What is the concept of 'yield farming' or 'liquidity mining' in the context of DeFi?

    <p>Shifting cryptocurrency assets between pools in a platform and between platforms to maximize total yield</p> Signup and view all the answers

    According to The Economist, what are the three entities involved in the future of digital finance in 2022?

    <p>Big Tech, big rich countries, and software developers</p> Signup and view all the answers

    What is the primary function of smart contract programs in DeFi?

    <p>Mediating transactions between participants</p> Signup and view all the answers

    Study Notes

    Decentralized Finance (DeFi) Features

    • The main feature of DeFi is the elimination of intermediaries in financial transactions.

    Derivatives Trading

    • The platform that allows people to speculate on price movements of assets using derivatives is Synthetix.

    DEX Aggregators

    • DEX aggregators have a component that aggregates liquidity from multiple sources, distinguishing them from DEXs and CEXs in the DeFi architecture.

    Risks in DeFi

    • Some applications in DeFi are subject to the risk of liquidity Evangelism, despite promoting high-interest rates.

    DeFi Architecture

    • Decentralized exchanges (DEXs) are part of the multi-layered DeFi architecture and components.

    MakerDAO

    • The primary function of MakerDAO is to create a stablecoin, DAI, pegged to the US dollar.

    Compound

    • The platform that started rewarding lenders and borrowers with a cryptocurrency called Comp is Compound.

    Yield Farming and Liquidity Mining

    • Yield farming, also known as liquidity mining, is the concept of earning rewards in the form of cryptocurrencies by providing liquidity to DeFi platforms.

    Future of Digital Finance

    • According to The Economist, the three entities involved in the future of digital finance in 2022 are governments, banks, and fintech companies.

    Smart Contract Programs

    • The primary function of smart contract programs in DeFi is to automate and execute financial agreements without the need for intermediaries.

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    Description

    Test your knowledge about decentralized finance (DeFi), which offers financial instruments without relying on intermediaries by using smart contracts on a blockchain, mainly Ethereum. Learn about lending, borrowing, trading, speculation, insurance, and interest in DeFi platforms.

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