Blockchain Applications in Financial Services BFC Practice Questions (Page 2)

Questions 6–10

1. 6expert · hard

   A trade finance platform is used by exporters and importers in multiple countries. They want to reduce the time for letter of credit (LC) processing from days to hours. However, customs authorities in some countries require physical document inspection. What is the best way to reconcile the need for speed with the requirement for physical inspection?

   • AUse a blockchain only for internal bank processes and continue using paper for all other steps.
   • BUse a blockchain to share digital documents while maintaining a parallel physical document trail for customs inspection.
   • CRequire all parties to use a single centralized platform that replaces both physical and digital documents.
   • DEliminate physical documents entirely and rely solely on the blockchain.
   Reveal Solution Discussion Select an answer first
2. 7foundation · easy

   Which characteristic of blockchain technology is the primary reason it can reduce the cost and settlement time of cross-border payments and remittances compared to traditional correspondent banking?

   • AIt eliminates the need for a shared ledger between financial institutions.
   • BIt requires all cross-border payments to be converted into a single global cryptocurrency.
   • CIt uses a decentralized network of nodes to validate and settle transactions directly between parties.
   • DIt replaces all national currencies with a blockchain-based stablecoin.
   Reveal Solution Discussion Select an answer first
4. 8expert · hard

   A DeFi lending protocol has suffered a series of exploits due to oracle manipulation. The team is considering two solutions: integrating a decentralized oracle network with multiple data sources, or implementing a circuit breaker that pauses lending during extreme price volatility. The protocol must maintain high availability for legitimate users while reducing attack surface. Which solution is more effective?

   • AIntegrate a decentralized oracle network and keep the circuit breaker as a backup for extreme cases.
   • BUse a single centralized oracle but add a delay to price updates to prevent flash loan attacks.
   • CImplement only the circuit breaker to minimize changes to the oracle infrastructure.
   • DDisable all external price feeds and rely on a fixed price set by the protocol.
   Reveal Solution Discussion Select an answer first
5. 9expert · hard

   A DeFi lending protocol is facing a high rate of liquidations due to market volatility. The protocol wants to reduce unnecessary liquidations while still protecting lenders. Which mechanism should they implement?

   • AImplement a grace period during which borrowers can add collateral before liquidation is executed.
   • BDisable liquidations entirely during high volatility.
   • CLower the collateralization ratio to allow more borrowing.
   • DIntroduce a liquidation penalty that increases with the severity of the collateral shortfall.
   Reveal Solution Discussion Select an answer first
6. 10application · medium

   A remittance service wants to offer low-cost transfers between two countries with volatile local currencies. They want to avoid holding large reserves in each currency. Which approach best minimizes currency risk while providing fast settlements?

   • AHold large reserves of both local currencies to facilitate direct exchanges.
   • BRely on a correspondent banking network with a 5-day settlement period.
   • CUse a stablecoin pegged to a major fiat currency for the transfer, converting to local currency at the recipient's end.
   • DUse a cryptocurrency with high volatility and convert immediately at both ends.
   Reveal Solution Discussion Select an answer first