Smart Contract Applications Across FinTech BFC Practice Questions (Page 9)

Questions 41–44

1. 41foundation · easy

   How does a smart contract reduce manual intervention in a financial agreement?

   • ABy storing the agreement in a centralized database that only the counterparty can update
   • BBy converting the agreement into a paper document that is manually signed
   • CBy requiring a third-party arbitrator to approve every transaction
   • DBy automatically executing the agreed terms when predefined conditions are met
   Reveal Solution Discussion Select an answer first
2. 42application · medium

   A regional bank wants to automate its letter-of-credit process for importers and exporters. Currently, each shipment requires manual verification of shipping documents, bank staff checking that payment terms are met, and multiple courier transfers of paper documents between banks. The bank wants to reduce processing time from days to hours while maintaining trust among parties. Which smart contract approach best addresses this requirement?

   • AA private permissioned blockchain with smart contracts that automatically release payment when verified shipping documents are submitted and match the agreed terms.
   • BA public blockchain smart contract that stores all shipping documents on-chain and executes payment automatically without any external verification.
   • CA smart contract that uses a single trusted third party to verify documents and then manually triggers the payment on the blockchain.
   • DA smart contract that only digitizes the paper documents and stores them in a shared database, while payment remains manual.
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4. 43application · medium

   A large bank wants to integrate a smart contract for syndicated loans with its existing core banking system, which uses a centralized database and proprietary APIs. The bank also needs to ensure that the smart contract can trigger payments from the core system. Which integration approach is most practical?

   • AReplace the core banking system with a blockchain-based system to achieve full integration.
   • BHave the smart contract directly access the core banking database to execute payments.
   • CUse middleware or an API gateway that translates between the smart contract events and the core banking system's APIs.
   • DRun the smart contract on the same server as the core banking system without any interface layer.
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5. 44expert · hard

   A DeFi lending protocol is being redesigned after a security incident. The team must choose between two designs: Design A uses a single price oracle that is updated every 5 minutes; Design B uses a decentralized oracle network with a 15-minute delay but higher accuracy. The protocol also needs to comply with a new regulation requiring that all liquidations be explainable to regulators. Which design choice best balances security, regulatory explainability, and operational risk?

   • AUse Design A because faster price updates allow more timely liquidations, which is more important than accuracy.
   • BUse Design B but remove the liquidation mechanism entirely to avoid regulatory scrutiny.
   • CUse Design A but add a manual review process for every liquidation to ensure regulatory compliance.
   • DUse Design B because the decentralized oracle network reduces the risk of manipulation, and the delay can be mitigated by setting a conservative liquidation threshold.
   Reveal Solution Discussion Select an answer first