Comparing TradFi, CeFi, and DeFi BFC Practice Questions (Page 9)

Questions 41–45

1. 41application · medium

   A risk analyst is comparing the counterparty risk of a loan from a traditional bank, a CeFi lending platform, and a DeFi lending protocol. Which of the following correctly describes the counterparty risk in each model?

   • ATradFi has no counterparty risk because banks are insured.
   • BTradFi and CeFi involve a central counterparty, while DeFi shifts risk to smart contract code and collateralization.
   • CDeFi has no counterparty risk because smart contracts are trustless.
   • DCeFi has lower counterparty risk than DeFi because it is regulated.
   Reveal Solution Discussion Select an answer first
2. 42foundation · easy

   Which of the following best describes centralized finance (CeFi) as it applies to digital assets?

   • AA system where all financial services are provided by government-regulated central banks.
   • BA system where financial transactions are recorded on a private ledger maintained by a consortium of banks.
   • CA peer-to-peer network where users lend and borrow directly using smart contracts.
   • DA system where a centralized platform, such as an exchange, manages user funds and executes trades on behalf of customers.
   Reveal Solution Discussion Select an answer first
4. 43application · medium

   A non-profit organization wants to provide financial services to unbanked populations in regions with limited banking infrastructure. They need a solution that allows users to access services with just a smartphone and internet connection, without requiring a traditional bank account. Which model is most suitable?

   • ADeFi, because it can be accessed via a smartphone and internet without a traditional bank account.
   • BA combination of TradFi and CeFi, because it provides the most regulatory protection.
   • CCeFi, because centralized exchanges are available in every country.
   • DTradFi, because it offers the most widely accepted financial services.
   Reveal Solution Discussion Select an answer first
5. 44expert · hard

   A central bank is exploring the use of a permissioned blockchain for a wholesale central bank digital currency (CBDC) to settle interbank payments. They are comparing this to a DeFi-style public blockchain. Which of the following is a key reason the central bank would prefer the permissioned blockchain?

   • AIt allows for the same level of anonymity as public blockchains.
   • BIt eliminates the need for a central authority.
   • CIt provides the central bank with control over the network and the ability to enforce monetary policy.
   • DIt is more decentralized than a public blockchain.
   Reveal Solution Discussion Select an answer first
6. 45foundation · easy

   How does the operational model of DeFi differ from TradFi regarding intermediaries and custody?

   • ADeFi requires government-issued licenses for all participants; TradFi operates without regulatory oversight.
   • BDeFi uses smart contracts to automate services, and users retain custody of their assets; TradFi relies on banks as intermediaries and custodians.
   • CDeFi uses a central clearinghouse to settle trades; TradFi relies on peer-to-peer networks.
   • DDeFi and TradFi both rely on a central authority to validate transactions and maintain the ledger.
   Reveal Solution Discussion Select an answer first