Core Protocols and Liquidity Mechanisms in DeFi BFC Practice Questions (Page 10)

Questions 46–50

1. 46application · hard

   A DEX uses a constant product formula x*y=k for its ETH/DAI pool. If the pool currently has 100 ETH and 200,000 DAI, what is the approximate amount of DAI a trader must pay to buy 1 ETH, ignoring fees?

   • A2,020.20 DAI
   • B1,980.20 DAI
   • C2,000.00 DAI
   • D2,040.00 DAI
   Reveal Solution Discussion Select an answer first
2. 47application · medium

   A user is comparing staking their tokens in a proof-of-stake network versus providing liquidity to a DEX pool. They want to understand which option is more similar to a 'lock-up' investment. What is the most accurate comparison?

   • ALiquidity provision always requires a lock-up period, while staking is completely flexible
   • BBoth staking and liquidity provision have identical lock-up periods and penalty structures
   • CStaking typically involves a lock-up period with penalties for early withdrawal, while liquidity provision allows withdrawal at any time but with impermanent loss risk
   • DNeither staking nor liquidity provision involves any form of lock-up or penalty
   Reveal Solution Discussion Select an answer first
4. 48foundation · easy

   In a 50/50 AMM pool with tokens A and B, if the price of token A doubles relative to token B, what is the most likely outcome for a liquidity provider?

   • AThe provider will automatically profit because the pool now holds more of the valuable token.
   • BThe provider's share of the pool remains exactly the same in dollar value.
   • CThe provider will receive additional LP tokens to compensate for the price change.
   • DThe provider will experience impermanent loss compared to holding the original tokens outside the pool.
   Reveal Solution Discussion Select an answer first
5. 49expert · hard

   A trader wants to execute a large order on a DEX with minimal price impact. The pool has moderate liquidity, and the trader is willing to wait. Which execution strategy is most effective?

   • AUse a flash loan to increase the pool's liquidity temporarily
   • BSplit the order into smaller trades and execute them over time using a TWAP strategy
   • CExecute the entire order in one transaction with a high slippage tolerance
   • DWait for the pool's trading volume to decrease before executing
   Reveal Solution Discussion Select an answer first
6. 50application · medium

   A DeFi protocol's governance token is being distributed to liquidity providers as a reward. A large institutional investor acquires 30% of the total token supply through a combination of buying on the open market and providing liquidity. What is the primary risk this concentration of governance power creates?

   • AThe investor could unilaterally pass proposals that benefit themselves at the expense of other users
   • BThe investor's tokens will be locked forever and cannot be sold
   • CThe investor's liquidity provision will be automatically withdrawn
   • DThe investor will automatically become the protocol's administrator with special privileges
   Reveal Solution Discussion Select an answer first