DeFi Protocols and Their Financial Functions BDC Practice Questions (Page 9)

Questions 41–45

1. 41foundation · easy

   What is a synthetic asset in DeFi?

   • AA token that is backed by a physical asset stored in a vault.
   • BA token that mirrors the value of a real-world asset, such as a stock or commodity, without holding the underlying asset.
   • CA token that is created by a central bank.
   • DA token that is mined using proof-of-work.
   Reveal Solution Discussion Select an answer first
2. 42expert · hard

   A decentralized insurance protocol wants to cover smart contract failures but is concerned about the cost and latency of on-chain claims assessment. The team is considering using an optimistic model where claims are assumed valid unless challenged. Which additional mechanism is essential to make this model secure?

   • AA bonding curve that requires challengers to stake tokens and rewards them if the claim is fraudulent.
   • BA smart contract that automatically approves all claims that are below a certain dollar amount.
   • CA time delay that allows anyone to challenge a claim within a certain period.
   • DA centralized claims adjuster who reviews all claims before they are approved.
   Reveal Solution Discussion Select an answer first
4. 43foundation · easy

   How do decentralized insurance protocols typically manage risk?

   • ABy relying on a central authority to approve all claims.
   • BBy investing all premiums in high-yield DeFi strategies.
   • CBy pooling premiums from many users and using a claims assessment process to pay out valid claims.
   • DBy requiring every user to hold a minimum amount of the protocol's token.
   Reveal Solution Discussion Select an answer first
5. 44application · medium

   A developer is creating a synthetic asset platform that allows users to mint a token tracking the price of gold. The platform must ensure that the synthetic token remains collateralized and that its price accurately reflects the real-world gold price. Which combination of features is essential for this platform?

   • AA collateral pool of a stablecoin and a price oracle that provides the current gold price.
   • BA smart contract that automatically adjusts the supply of the synthetic token based on demand.
   • CA decentralized exchange that lists the synthetic token for trading.
   • DA governance token that allows holders to vote on the gold price.
   Reveal Solution Discussion Select an answer first
6. 45application · medium

   A DeFi developer is building a lending protocol that accepts a volatile token as collateral. To reduce the risk of undercollateralized positions during rapid price drops, the protocol needs to automatically trigger liquidations before a position becomes insolvent. Which mechanism should the developer implement?

   • ASet a conservative collateralization ratio and use a price oracle to monitor collateral value continuously, triggering liquidation when the ratio falls below the threshold.
   • BUse a fixed interest rate model that increases borrowing costs when utilization is high, assuming this will prevent liquidations.
   • CDisable liquidations entirely and instead rely on a large insurance fund to cover any bad debt.
   • DAllow borrowers to choose any collateralization ratio and rely on manual liquidation by community members when prices fall.
   Reveal Solution Discussion Select an answer first