Decentralized Finance (DeFi) Applications and Ecosystem BBLC Practice Questions (Page 4)

Questions 16–20

1. 16foundation · easy

   What is a key difference between decentralized finance (DeFi) and traditional finance?

   • ADeFi relies on a central authority to enforce rules, while traditional finance uses code.
   • BDeFi requires identity verification for all users, while traditional finance allows anonymous participation.
   • CDeFi is regulated by a global authority, while traditional finance is not.
   • DDeFi operates on open protocols with transparent rules, while traditional finance relies on intermediaries and private ledgers.
   Reveal Solution Discussion Select an answer first
2. 17application · medium

   A user is comparing traditional finance (TradFi) and DeFi for borrowing. The user wants to borrow funds without undergoing a credit check and wants the loan terms to be enforced automatically. Which characteristic of DeFi makes this possible?

   • ACentralized clearinghouses that guarantee settlement
   • BA credit scoring system built into the blockchain
   • CSmart contracts that execute loan agreements automatically based on predefined conditions
   • DGovernment-backed deposit insurance
   Reveal Solution Discussion Select an answer first
4. 18application · medium

   A user is comparing a traditional bank loan to borrowing from a DeFi lending protocol. Which difference is most fundamental?

   • ADeFi loans always have lower interest rates.
   • BDeFi loans are executed by smart contracts without a bank as intermediary.
   • CDeFi loans are insured by the government.
   • DDeFi loans do not require collateral.
   Reveal Solution Discussion Select an answer first
5. 19application · medium

   A DeFi protocol has just suffered a flash loan attack that exploited a vulnerability in its smart contract. What is the most effective way to prevent similar attacks in the future?

   • AMove to a private blockchain.
   • BIncrease the gas fees for all transactions.
   • CConduct a thorough security audit and implement a bug bounty program.
   • DDisable flash loans entirely.
   Reveal Solution Discussion Select an answer first
6. 20application · medium

   A startup is planning to launch a DeFi lending product. The team wants to minimize the risk of smart contract exploits. Which approach is most effective in reducing this risk?

   • ARely on a single audit from the development team.
   • BAvoid publishing the smart contract code.
   • CConduct multiple independent audits and a bug bounty program.
   • DUse a complex smart contract to deter attackers.
   Reveal Solution Discussion Select an answer first