Blockchain 101 Certification Tokens, Wallets & Digital Assets 1 — Questions and Answers
Question 1: What characteristic defines a fungible token?
- Each token is unique and cannot be exchanged equally with another
- Every token of the same type is interchangeable and holds equal value (Correct answer)
- Tokens are tied to a specific real-world physical asset
- Tokens can only be transferred once between wallets
Correct answer: Every token of the same type is interchangeable and holds equal value
Fungible tokens are interchangeable on a 1:1 basis — any unit of the same token is equivalent in value and utility to any other unit.
Question 2: Which Ethereum token standard is most commonly used for creating fungible tokens like cryptocurrencies and utility tokens?
- ERC-721
- ERC-1155
- ERC-20 (Correct answer)
- ERC-777
Correct answer: ERC-20
ERC-20 is the most widely adopted Ethereum standard for fungible tokens, defining a common interface for transfer, approval, and balance querying.
Question 3: What is a Non-Fungible Token (NFT)?
- A token with no monetary value stored on a centralized server
- A unique cryptographic token that represents ownership of a distinct asset (Correct answer)
- A token backed 1:1 by a fiat currency reserve
- A token that can be subdivided into fractional units freely
Correct answer: A unique cryptographic token that represents ownership of a distinct asset
An NFT is a unique cryptographic token on a blockchain that certifies ownership of a specific, non-interchangeable digital or physical asset.
Question 4: How do utility tokens primarily differ from security tokens?
- Utility tokens represent equity ownership; security tokens grant platform access
- Utility tokens grant access to a product or service; security tokens represent an investment contract (Correct answer)
- Utility tokens are always issued on Ethereum; security tokens use Bitcoin
- Utility tokens are anonymous; security tokens require KYC only at issuance
Correct answer: Utility tokens grant access to a product or service; security tokens represent an investment contract
Utility tokens give holders access to a platform's products or services, while security tokens are investment contracts subject to securities regulations.
Question 5: What is the process of creating new tokens and adding them to a blockchain called?
- Burning
- Staking
- Minting (Correct answer)
- Forking
Correct answer: Minting
Minting is the process by which new tokens are generated and recorded on the blockchain, increasing the total supply.
Question 6: Which token standard on Ethereum is specifically designed for Non-Fungible Tokens (NFTs)?
- ERC-20
- ERC-721 (Correct answer)
- ERC-4626
- ERC-223
Correct answer: ERC-721
ERC-721 is the Ethereum standard for non-fungible tokens, where each token has a unique ID and cannot be substituted with another token of the same contract.
Question 7: What does 'token burning' accomplish in a blockchain ecosystem?
- It permanently destroys tokens by sending them to an unspendable address, reducing total supply (Correct answer)
- It converts tokens from one blockchain to another via a bridge
- It freezes tokens so they cannot be transferred for a set period
- It splits each token into two separate tokens of half the value
Correct answer: It permanently destroys tokens by sending them to an unspendable address, reducing total supply
Token burning permanently removes tokens from circulation by sending them to a provably unspendable address, typically to create deflationary pressure.
Blockchain 101 Certification Tokens, Wallets & Digital Assets 1
What characteristic defines a fungible token?