Role of DLT in Decentralized Finance (DeFi) BFC Practice Questions (Page 10)

Questions 46–50

1. 46expert · hard

   A DeFi lending protocol is considering whether to make its smart contracts upgradeable. The team is split: some want a proxy-based upgradeable contract to fix bugs, while others prefer immutable contracts to guarantee trustlessness. Which consideration is most important in this decision?

   • AUpgradeable contracts introduce a governance risk because the admin can change the contract's behavior
   • BImmutable contracts are always more secure because they cannot be changed
   • CImmutable contracts are easier to audit because they are shorter
   • DUpgradeable contracts are required to comply with financial regulations
   Reveal Solution Discussion Select an answer first
2. 47expert · hard

   A security token offering (STO) platform wants to tokenize real estate assets and ensure compliance with securities regulations. The platform must restrict transfers of tokens to accredited investors only. Which approach best balances regulatory compliance with the benefits of DLT?

   • AImplement a smart contract that enforces transfer restrictions by checking investor accreditation status before allowing token transfers
   • BAvoid using DLT altogether and maintain a traditional centralized registry to ensure compliance
   • CUse a public, permissionless blockchain and rely on token holders to self-report their accreditation status
   • DIssue tokens on a private blockchain that is not accessible to the public, eliminating the need for transfer restrictions
   Reveal Solution Discussion Select an answer first
4. 48application · medium

   A developer is building a DeFi application that aggregates liquidity from multiple decentralized exchanges (DEXs) to offer users the best swap rates. The application needs to interact with several smart contracts from different protocols. Which DLT feature is most critical for enabling this integration?

   • ATokenization, which allows the DEXs to represent their liquidity pools as tokens
   • BDecentralization, which ensures that no single entity controls the DEX protocols
   • CImmutability, which ensures that the DEX smart contracts cannot be altered after deployment
   • DComposability, which allows smart contracts to call and integrate with other smart contracts on the same blockchain
   Reveal Solution Discussion Select an answer first
5. 49application · medium

   A DeFi platform automates the execution of a collateralized loan: when a borrower's collateral value drops below a threshold, the smart contract automatically liquidates the position. What is the primary benefit of this automation compared to a traditional margin call?

   • AIt removes the need for a trusted third party to monitor and enforce the loan terms
   • BIt eliminates the need for any collateral, reducing risk for the borrower
   • CIt ensures the loan is always profitable for the lender regardless of market conditions
   • DIt allows the borrower to negotiate terms after the loan is issued
   Reveal Solution Discussion Select an answer first
6. 50expert · hard

   A central bank is exploring the issuance of a central bank digital currency (CBDC) using DLT. They require the system to support offline payments and ensure that transactions are final even if the network is temporarily partitioned. Which DLT design consideration is most critical?

   • AThe choice between a UTXO-based and account-based ledger model
   • BThe use of smart contracts to automate monetary policy
   • CThe consensus mechanism's ability to handle network partitions without double-spending
   • DThe token standard used to represent the CBDC
   Reveal Solution Discussion Select an answer first