Smart Contracts for Finance BFC Practice Questions (Page 4)

Questions 16–20

1. 16expert · hard

   A decentralized exchange (DEX) is deploying a smart contract that allows users to trade tokenized assets. The contract uses a constant product formula to determine prices. An auditor finds that the contract does not check the actual token balance before executing a trade, which could allow an attacker to drain funds. The team must fix this while minimizing gas costs. Which approach is best?

   • AMove the contract to a sidechain where transactions are cheaper, assuming the vulnerability is less exploitable.
   • BAdd a balance check at the end of the trade function to ensure the contract's token balance matches the expected amount after the swap.
   • CRequire users to provide a signed message from the token contract confirming the transfer.
   • DUse a reentrancy guard on all external calls, but do not add balance checks.
   Reveal Solution Discussion Select an answer first
2. 17foundation · easy

   In the context of financial agreements, what is the primary role of a smart contract?

   • ATo provide a legally binding paper document that replaces traditional contracts
   • BTo create a digital signature that verifies the identity of parties in a transaction
   • CTo automatically execute and enforce the terms of an agreement when predefined conditions are met
   • DTo store encrypted financial data on a centralized database for auditing purposes
   Reveal Solution Discussion Select an answer first
4. 18foundation · easy

   Which of the following is a well-known security risk in smart contracts?

   • ADistributed denial-of-service (DDoS) attacks on the blockchain network
   • BSQL injection attacks on the blockchain database
   • CReentrancy attacks, where a malicious contract repeatedly calls back into the vulnerable contract before the state is updated
   • DPhishing attacks that trick users into revealing their private keys
   Reveal Solution Discussion Select an answer first
5. 19application · medium

   A consortium of banks is deploying a smart contract to manage syndicated loans. The contract must allow the loan terms to be amended if all member banks agree. Which lifecycle feature should be implemented?

   • AA kill switch that terminates the contract and requires deploying a new one for any amendment.
   • BA time-lock that automatically changes the loan terms after a fixed period.
   • CA governance mechanism that requires a multi-signature approval from all member banks before the contract's parameters can be updated.
   • DA function that allows any single bank to update the loan terms unilaterally.
   Reveal Solution Discussion Select an answer first
6. 20application · medium

   A development team is writing a smart contract for a decentralized exchange that holds user funds in escrow. During code review, a developer suggests using a 'withdraw' pattern instead of sending funds directly to users. What is the primary security benefit of this pattern?

   • AIt makes the contract upgradeable without a proxy.
   • BIt reduces the risk of reentrancy attacks by separating external calls from state updates.
   • CIt eliminates the need for gas limits on transactions.
   • DIt ensures that all users have the same transaction priority.
   Reveal Solution Discussion Select an answer first