Core Protocols and Liquidity Mechanisms in DeFi BFC Practice Questions (Page 8)

Questions 36–40

1. 36foundation · easy

   What is a synthetic asset in DeFi?

   • AA token that is backed by a physical asset stored in a vault.
   • BA token that derives its value from an underlying real-world asset or another cryptocurrency, without requiring direct ownership of that asset.
   • CA token that represents a share in a liquidity pool.
   • DA token that is created by a smart contract but has no value.
   Reveal Solution Discussion Select an answer first
2. 37application · medium

   A DeFi lending protocol is considering a proposal to change its collateral ratio. The protocol uses a DAO with a governance token. Which step is typically required for the change to take effect?

   • AThe change is automatically applied when the collateral ratio deviates from a target
   • BHolders of the governance token vote on the proposal, and if it passes, the smart contract parameters are updated
   • CLiquidity providers must approve the change through a separate vote
   • DThe core development team unilaterally deploys a new smart contract
   Reveal Solution Discussion Select an answer first
4. 38foundation · easy

   Which statement best describes how an automated market maker (AMM) enables trading without a traditional order book?

   • AIt relies on a centralized server to quote prices for each trade.
   • BIt uses a liquidity pool of two or more assets and a mathematical formula to set prices.
   • CIt requires a market maker to manually update bid and ask prices.
   • DIt matches buy and sell orders from users in a peer-to-peer manner.
   Reveal Solution Discussion Select an answer first
5. 39application · medium

   A user is comparing two ways to earn rewards on a proof-of-stake network: staking native tokens directly, or providing liquidity to a DEX pool that includes the native token. Which statement accurately distinguishes these two activities?

   • AStaking locks tokens to secure the network and earn consensus rewards, while liquidity provision earns trading fees and may incur impermanent loss
   • BBoth activities involve the same risk because both lock tokens
   • CLiquidity provision is only available on centralized exchanges
   • DStaking provides liquidity to the network, while liquidity provision secures the network
   Reveal Solution Discussion Select an answer first
6. 40application · medium

   A new DeFi protocol wants to attract liquidity to its AMM pool during the initial launch. The team plans to distribute its governance token to liquidity providers. What is the primary purpose of this incentive?

   • ATo reduce the need for an oracle in the pool
   • BTo compensate LPs for the risk of impermanent loss and encourage them to deposit assets into the pool
   • CTo permanently lock the LP tokens in the protocol treasury
   • DTo increase the trading volume of the pool by rewarding traders
   Reveal Solution Discussion Select an answer first