DeFi Protocols and Their Financial Functions BDC Practice Questions (Page 2)

Questions 6–10

1. 6foundation · easy

   What is the fundamental difference between an order book DEX and an automated market maker (AMM) DEX?

   • AOrder book DEXs require KYC, while AMMs do not.
   • BOrder book DEXs match buyers and sellers directly, while AMMs use liquidity pools and algorithms to set prices.
   • COrder book DEXs are centralized, while AMMs are decentralized.
   • DOrder book DEXs only support spot trading, while AMMs support derivatives.
   Reveal Solution Discussion Select an answer first
2. 7foundation · easy

   Which statement best describes the role of DeFi protocols in the financial ecosystem?

   • AThey only serve as a backup system for traditional banks.
   • BThey provide financial services such as lending, borrowing, and trading without requiring a traditional intermediary.
   • CThey replace all existing financial regulations with automated code.
   • DThey are primarily used for storing personal data securely.
   Reveal Solution Discussion Select an answer first
4. 8application · medium

   A yield farming protocol offers rewards in a governance token. The team notices that most farmers are selling the token immediately, causing its price to drop. What is a common strategy to encourage long-term participation?

   • AImplement a vesting schedule for rewards
   • BIncrease the reward rate to attract more farmers
   • CBurn the governance token to increase its value
   • DReduce the reward rate to discourage farming
   Reveal Solution Discussion Select an answer first
5. 9application · medium

   A stablecoin protocol uses a collateralized debt position (CDP) model with ETH as collateral. During a market crash, the price of ETH drops 30% in minutes. What mechanism is designed to keep the stablecoin pegged?

   • ALiquidate undercollateralized positions by selling collateral at a discount
   • BIncrease the collateralization ratio to require more ETH per stablecoin
   • CPause the protocol until the market stabilizes
   • DAutomatically mint more stablecoins to buy ETH and support its price
   Reveal Solution Discussion Select an answer first
6. 10application · medium

   A developer is building a DeFi application that allows users to deposit ETH into a lending protocol, receive aETH, and then use that aETH as collateral in another protocol to borrow DAI. The developer wants to ensure that the aETH token can be used seamlessly across multiple protocols. Which property is most important for the aETH token to have?

   • AIt must be an ERC-20 compatible token that is recognized by other DeFi protocols.
   • BIt must have a fixed exchange rate with ETH that never changes.
   • CIt must be a native token of the blockchain, not a smart contract token.
   • DIt must be approved by a central authority before being used in other protocols.
   Reveal Solution Discussion Select an answer first