Smart Contracts for Finance BFC Practice Questions (Page 5)

Questions 21–25

1. 21application · medium

   A team is deploying a smart contract for a decentralized lending platform. The contract allows users to deposit collateral and borrow stablecoins. During testing, the team discovers that the contract does not properly handle the case where a user tries to withdraw more than their collateral allows. Which security best practice should be applied?

   • AAdd explicit require statements to validate that the withdrawal amount does not exceed the user's collateral balance.
   • BUse a multi-signature wallet to approve every withdrawal manually.
   • CRely on the blockchain's consensus mechanism to reject invalid transactions.
   • DIncrease the gas limit for the withdraw function so that the transaction fails if it exceeds the collateral.
   Reveal Solution Discussion Select an answer first
2. 22application · medium

   A development team is building a smart contract for an insurance product that pays out automatically when a flight is delayed. They need to ensure the contract can be updated if the insurance terms change due to new regulations. Which design approach best supports this requirement?

   • ADeploy a new contract each time the terms change and migrate all policyholders to the new address.
   • BInclude a `kill` function that allows anyone to terminate the contract if terms change.
   • CUse a proxy contract that delegates calls to an upgradable implementation contract.
   • DStore the terms in an external JSON file that the contract reads at runtime.
   Reveal Solution Discussion Select an answer first
4. 23expert · hard

   A decentralized insurance protocol uses a smart contract to hold premiums and pay claims. The team wants to reduce the risk of a single point of failure in the oracle that supplies weather data. Which approach best improves the security of the oracle dependency?

   • AUse a single oracle but encrypt its data feed.
   • BAllow the contract owner to manually override the oracle data.
   • CReplace the oracle with a random number generator.
   • DUse multiple independent oracles and require a threshold agreement before triggering a payout.
   Reveal Solution Discussion Select an answer first
5. 24application · medium

   A fintech startup wants to deploy a smart contract that automates peer-to-peer lending. The legal team warns that the contract must comply with local securities regulations and that the code must be able to restrict who can participate. Which design choice best addresses this regulatory constraint?

   • AMake the contract immutable and open to everyone to demonstrate transparency.
   • BDeploy the contract on a public blockchain and rely on the anonymity of users to avoid regulatory scrutiny.
   • CIncorporate an allowlist of accredited investors and a jurisdiction check into the contract logic.
   • DUse a legal disclaimer in the user interface instead of coding restrictions.
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6. 25application · medium

   A team is deploying a smart contract for parametric crop insurance that automatically pays out when an oracle reports rainfall below a threshold. During a testnet audit, they discover that the contract can be forced to pay out twice if the oracle sends the same report twice. Which lifecycle practice would have most likely prevented this vulnerability?

   • AIncluding a unique claim identifier and a state variable that marks a claim as settled before transferring funds.
   • BUsing a proxy contract so the logic can be upgraded after deployment.
   • CSetting a high gas limit for the payout transaction.
   • DRelying on the oracle to send only one report per weather event.
   Reveal Solution Discussion Select an answer first