Blockchain and Crypto DeFi & Smart Contracts

Question 1

What does DeFi stand for?

Accepted Answer

Decentralized Finance

Answer

DeFi stands for Decentralized Finance, referring to financial services built on blockchain networks without traditional intermediaries.

Question 2

What is a liquidity pool in DeFi?

Accepted Answer

A reserve of tokens locked in a smart contract

Answer

A liquidity pool is a collection of funds locked in a smart contract that enables decentralized trading, lending, and other financial activities.

Question 3

What is yield farming in DeFi?

Accepted Answer

Earning rewards by providing liquidity to protocols

Answer

Yield farming involves providing liquidity to DeFi protocols in exchange for rewards, often by moving assets between protocols to maximize returns.

Question 4

What is an Automated Market Maker (AMM)?

Accepted Answer

A smart contract that prices assets using a mathematical formula

Answer

An AMM is a smart contract protocol that uses mathematical formulas to price assets and facilitate trading without a traditional order book.

Question 5

What is 'impermanent loss' in DeFi?

Accepted Answer

Temporary value loss experienced by liquidity providers when asset prices diverge

Answer

Impermanent loss is the temporary loss of value liquidity providers experience when the price ratio of their deposited assets changes compared to simply holding them.

Blockchain and Crypto Practice Test

Blockchain and Crypto Practice Test

Blockchain and Crypto DeFi & Smart Contracts