Role of DLT in Decentralized Finance (DeFi) BFC Practice Questions (Page 1)

Questions 1–5

1. 1foundation · easy

   In the context of DLT, what does 'immutability' refer to?

   • AThe property that once a transaction is recorded, it cannot be easily altered or deleted.
   • BThe requirement that all nodes must be online simultaneously for the ledger to function.
   • CThe guarantee that all transactions are visible only to the parties involved.
   • DThe ability of authorized administrators to modify past transactions when errors are found.
   Reveal Solution Discussion Select an answer first
2. 2foundation · easy

   In traditional finance, a bank acts as an intermediary. In DeFi, what replaces this intermediary role?

   • AA government regulatory body that approves each transaction.
   • BSmart contracts and consensus mechanisms on a distributed ledger.
   • CA central clearinghouse that settles all trades on behalf of users.
   • DA network of notaries who verify the identity of each participant.
   Reveal Solution Discussion Select an answer first
4. 3foundation · easy

   What does 'composability' mean in the context of DeFi protocols?

   • AThe requirement that all DeFi protocols use the same programming language.
   • BThe ability of a protocol to be used only by a single application.
   • CThe ability of different DeFi protocols to be combined and interact with each other like building blocks.
   • DThe process of converting a DeFi protocol into a traditional financial institution.
   Reveal Solution Discussion Select an answer first
5. 4expert · hard

   A DeFi protocol on a proof-of-stake blockchain is experiencing high transaction fees during peak usage, making micro-transactions uneconomical. The team is considering two solutions: (1) implementing a layer-2 rollup that batches transactions, or (2) increasing the block gas limit. Which trade-off should guide their decision?

   • ALayer-2 rollups increase throughput but introduce additional trust assumptions and complexity
   • BLayer-2 rollups reduce security because they do not use the underlying consensus mechanism
   • CIncreasing the block gas limit is the only way to reduce fees without affecting decentralization
   • DIncreasing the block gas limit is a permanent solution that requires no changes to the protocol
   Reveal Solution Discussion Select an answer first
6. 5expert · hard

   A DeFi protocol uses an upgradeable smart contract pattern with a proxy. The team wants to upgrade the contract to fix a critical vulnerability. However, the upgrade requires users to approve a new implementation, and the governance process is slow. What is the most significant risk during this period?

   • AUsers will lose access to their funds because the proxy contract is immutable
   • BAttackers may exploit the vulnerability before the upgrade is approved and deployed, potentially draining user funds
   • CThe governance token will be devalued because of the delay in upgrading
   • DThe proxy contract will automatically stop functioning if the upgrade is not approved within a certain time
   Reveal Solution Discussion Select an answer first