A user wants to provide liquidity to a DeFi automated market maker (AMM) pool and earn trading fees. The user is concerned about the risk of impermanent loss if the price of one token in the pool changes significantly. Which action would best help the user manage this risk?

Choose a pool with two tokens that are highly correlated in price

Use a limit order instead of providing liquidity

Provide liquidity to a pool with a single token

Set a very low fee tier for the pool

A DeFi project wants to allow users to lend and borrow multiple assets, with interest rates determined by supply and demand. The project also wants to ensure that loans are overcollateralized to protect lenders. Which type of protocol should the project build?

An order book-based trading platform

A liquidity pool-based lending protocol with dynamic interest rates

A user wants to trade token A for token B on a DeFi AMM. The user is concerned about receiving a poor price due to low liquidity. Which feature of an AMM helps mitigate this concern?

The protocol's governance token rewards

The constant product formula that adjusts price based on pool reserves

The use of an order book to match buyers and sellers

The ability to set a maximum slippage tolerance

A user wants to borrow a stablecoin by depositing ether as collateral in a DeFi lending protocol. The user wants to minimize the risk of liquidation. Which action should the user take?

Borrow the maximum amount allowed by the protocol

Deposit a collateral amount well above the minimum collateralization ratio

Set a high interest rate on the loan

Use a volatile token as collateral

A DeFi lending platform is considering adding a new collateral type that is a newly launched, highly volatile token. The platform's risk team warns that the token's price can drop sharply within minutes. Which risk mitigation strategy should the platform implement to best protect against sudden collateral value loss?

Allow borrowers to choose their own collateralization ratio

Disable liquidations for this collateral type to avoid user losses

Set a fixed interest rate for loans backed by this collateral

Require a higher collateralization ratio and use real-time price oracles with liquidation triggers

EC-CouncilBlockchain Business Leader Certification

Domain 8Objective 1

Decentralized Finance (DeFi) Applications and Ecosystem BBLC Practice Questions (Page 2)

Part of the DeFi, NFTs, and Web3 Business Models domain, which makes up ~6% of our current practice bank.

45questions here

9free pages

4concepts

Questions 6–10

6application · medium
A user wants to provide liquidity to a DeFi automated market maker (AMM) pool and earn trading fees. The user is concerned about the risk of impermanent loss if the price of one token in the pool changes significantly. Which action would best help the user manage this risk?
Select an answer first
7application · medium
A DeFi project wants to allow users to lend and borrow multiple assets, with interest rates determined by supply and demand. The project also wants to ensure that loans are overcollateralized to protect lenders. Which type of protocol should the project build?
Select an answer first
8application · medium
A user wants to trade token A for token B on a DeFi AMM. The user is concerned about receiving a poor price due to low liquidity. Which feature of an AMM helps mitigate this concern?
Select an answer first
9application · medium
A user wants to borrow a stablecoin by depositing ether as collateral in a DeFi lending protocol. The user wants to minimize the risk of liquidation. Which action should the user take?
Select an answer first
10application · medium
A DeFi lending platform is considering adding a new collateral type that is a newly launched, highly volatile token. The platform's risk team warns that the token's price can drop sharply within minutes. Which risk mitigation strategy should the platform implement to best protect against sudden collateral value loss?
Select an answer first

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