Role of DLT in Decentralized Finance (DeFi) BFC Practice Questions (Page 3)

Questions 11–15

1. 11foundation · easy

   In DeFi, how do smart contracts reduce the need for intermediaries?

   • AThey require a lawyer to review and approve each transaction before it is added to the ledger.
   • BThey encode the rules of an agreement and execute them automatically without human intervention.
   • CThey rely on a central authority to execute each transaction manually.
   • DThey store all user data on a centralized server for easy access.
   Reveal Solution Discussion Select an answer first
2. 12application · medium

   A bank is evaluating a DeFi lending protocol to offer unsecured micro-loans to underbanked customers. The bank's compliance team is concerned about the lack of a central authority to enforce know-your-customer (KYC) rules. Which characteristic of DeFi, compared to traditional finance, is the primary source of this concern?

   • AThe use of permissionless smart contracts that execute without a central intermediary
   • BThe use of tokenized collateral that cannot be seized in case of default
   • CThe lack of a centralized database to store customer transaction history
   • DThe reliance on proof-of-stake consensus instead of proof-of-work
   Reveal Solution Discussion Select an answer first
4. 13expert · hard

   A DeFi protocol is considering a switch from proof-of-work (PoW) to proof-of-stake (PoS) to reduce energy costs. However, the protocol's security model relies on the high cost of attacking the network. Which factor must be most carefully evaluated in the PoS design to maintain equivalent security?

   • AThe mechanism for penalizing validators who act maliciously (slashing)
   • BThe number of tokens in circulation
   • CThe block time and transaction throughput
   • DThe minimum stake required to become a validator
   Reveal Solution Discussion Select an answer first
5. 14application · medium

   A financial analyst is comparing a traditional stock exchange with a DeFi token exchange. Which difference best illustrates the role of DLT in enabling DeFi?

   • AIn DeFi, users must have a bank account and a credit score to participate, while traditional exchanges are open to everyone
   • BIn DeFi, all trades are executed instantly with zero transaction fees, while traditional exchanges charge fees
   • CIn DeFi, trades are settled directly on the blockchain through smart contracts, while a traditional exchange relies on a central clearinghouse
   • DIn DeFi, a central authority sets the exchange rate, while traditional exchanges use market forces
   Reveal Solution Discussion Select an answer first
6. 15foundation · easy

   What is the primary function of a smart contract in a DeFi application?

   • ATo store users' private keys securely on the blockchain.
   • BTo provide a graphical user interface for DeFi applications.
   • CTo act as a legal counsel that interprets contract terms in case of disputes.
   • DTo automatically execute predefined actions when certain conditions are met.
   Reveal Solution Discussion Select an answer first