Role of DLT in Decentralized Finance (DeFi) BFC Practice Questions (Page 6)

Questions 26–30

1. 26application · medium

   A DeFi protocol is moving from proof-of-work (PoW) to proof-of-stake (PoS) to reduce energy consumption and increase transaction throughput. Which trade-off must the protocol's governance team most carefully manage?

   • APoS requires more energy than PoW, contradicting the goal of reducing energy consumption
   • BPoS eliminates the need for consensus among validators, making the network less secure
   • CPoS makes smart contracts immutable, preventing protocol upgrades
   • DPoS may concentrate influence among large token holders, potentially reducing decentralization
   Reveal Solution Discussion Select an answer first
2. 27expert · hard

   A financial institution wants to offer DeFi services to its clients but must comply with anti-money laundering (AML) regulations that require identifying all parties to a transaction. Which approach best reconciles the institution's compliance obligations with the permissionless nature of public DeFi protocols?

   • AUse a public DeFi protocol and monitor transactions with blockchain analytics to identify clients
   • BUse a permissioned DeFi protocol where only verified participants can transact
   • CUse a public DeFi protocol and rely on the pseudonymity of blockchain addresses to protect client privacy
   • DUse a public DeFi protocol and require clients to sign a waiver acknowledging the lack of AML protections
   Reveal Solution Discussion Select an answer first
4. 28application · medium

   A financial inclusion NGO wants to offer microloans to unbanked individuals in regions with limited banking infrastructure. They are evaluating whether a DeFi platform built on a public DLT could serve this population. Which characteristic of DeFi, enabled by DLT, is most directly aligned with the NGO's goal?

   • AThe platform uses a proof-of-stake consensus mechanism that reduces energy consumption compared to proof-of-work
   • BAnyone with an internet connection and a digital wallet can access the platform without a traditional bank account
   • CThe platform's governance is controlled by a decentralized autonomous organization (DAO) rather than a central authority
   • DAll transactions are recorded on an immutable ledger that provides a transparent audit trail for regulators
   Reveal Solution Discussion Select an answer first
5. 29expert · hard

   A DeFi protocol team is deciding between a proof-of-stake (PoS) blockchain and a proof-of-work (PoW) blockchain for a new lending platform. The platform must handle high transaction throughput and low fees, but also needs strong security against a 51% attack. Which consideration should be the primary factor in their decision?

   • APoW is more suitable for high-throughput applications because it is more battle-tested and secure
   • BPoS generally offers higher throughput and lower fees, but its security depends on the total value staked and the distribution of validators
   • CPoS automatically ensures decentralization because validators are selected randomly, while PoW leads to centralization
   • DPoW provides absolute security against 51% attacks, making it the only viable option for a lending platform
   Reveal Solution Discussion Select an answer first
6. 30expert · hard

   A DeFi protocol is planning to launch on a new blockchain that uses a delegated proof-of-stake (DPoS) consensus mechanism. The team is concerned about the risk of validator centralization. Which mitigation strategy is most effective?

   • AIncrease the number of validators to the maximum possible, regardless of the network's performance
   • BImplement a mechanism that penalizes validators who collude or act maliciously, such as slashing their staked tokens
   • CAllow token holders to delegate their voting power to any validator without any restrictions
   • DUse a proof-of-work consensus mechanism instead to avoid the risk of validator centralization
   Reveal Solution Discussion Select an answer first