Security and Compliance in Smart Contracts BBLC Practice Questions (Page 1)

Questions 1–5

1. 1application · medium

   A decentralized exchange (DEX) must comply with AML regulations. The team wants to integrate KYC checks without sacrificing user privacy. Which approach best balances compliance and privacy?

   • ASkip KYC for small transactions to avoid the burden.
   • BStore all KYC data on-chain in an encrypted form.
   • CRequire users to submit their passport details directly to the smart contract.
   • DPerform KYC off-chain and issue a privacy-preserving credential that users present on-chain.
   Reveal Solution Discussion Select an answer first
2. 2application · medium

   A startup is deploying a smart contract that allows users to deposit Ether and later withdraw their balance. The contract uses a mapping of user balances and a withdraw function that sends the balance and then sets the balance to zero. During a security review, a developer points out that the withdraw function is vulnerable to reentrancy. Which code change best mitigates this vulnerability while preserving the intended behavior?

   • AAdd a require statement that checks the contract's total balance is sufficient.
   • BIncrease the gas limit for the withdraw transaction.
   • CUse tx.origin to verify the caller is the owner before allowing withdrawals.
   • DSet the user's balance to zero before making the external call.
   Reveal Solution Discussion Select an answer first
4. 3foundation · easy

   Which of the following is a common approach to integrate KYC/AML compliance into a dApp while preserving user privacy?

   • AUsing a centralized server to store KYC data without any on-chain record
   • BAllowing users to interact without any identity verification
   • CPerforming identity verification off-chain and storing only a cryptographic proof on-chain
   • DStoring all user identification documents directly on the blockchain
   Reveal Solution Discussion Select an answer first
5. 4foundation · easy

   Which of the following is a key jurisdictional consideration when deploying a smart contract that handles financial transactions?

   • AThe legal jurisdiction where the contract's users are located may determine which financial regulations apply
   • BFinancial regulations only apply to centralized exchanges, not to smart contracts
   • CSmart contracts are not subject to any financial regulations because they are code
   • DOnly the jurisdiction where the contract is deployed on the blockchain matters
   Reveal Solution Discussion Select an answer first
6. 5expert · hard

   A company is deploying a smart contract for a token sale that is accessible globally. The legal team is concerned about securities regulations in different countries. Which approach best mitigates regulatory risk?

   • ARegister the token as a security in all jurisdictions.
   • BMake the token available to all users and rely on a disclaimer.
   • CImplement geo-blocking to restrict access from jurisdictions where the token is not registered.
   • DUse a decentralized autonomous organization (DAO) to avoid regulation.
   Reveal Solution Discussion Select an answer first