Blockchain Technology DeFi and Tokenomics 2 — Questions and Answers
Question 1: What is a token's 'total supply' in tokenomics?
- The number of tokens currently in circulation
- The maximum number of tokens that will ever exist (Correct answer)
- The number of tokens held by the founding team
- The number of tokens burned to date
Correct answer: The maximum number of tokens that will ever exist
Total supply refers to the maximum number of tokens that will ever be created according to the protocol's rules, setting a hard cap on issuance.
Question 2: What does 'TVL' measure in DeFi?
- Total Volume of Liquidations
- Total Value Locked in smart contracts (Correct answer)
- Transaction Velocity Limit
- Token Valuation Leverage
Correct answer: Total Value Locked in smart contracts
TVL (Total Value Locked) measures the total dollar value of assets deposited and locked within a DeFi protocol's smart contracts.
Question 3: What is a 'flash loan' in DeFi?
- A loan that charges very low interest rates
- An uncollateralized loan that must be borrowed and repaid within the same transaction (Correct answer)
- A loan backed by NFT collateral
- A loan processed instantly with no KYC
Correct answer: An uncollateralized loan that must be borrowed and repaid within the same transaction
Flash loans are uncollateralized DeFi loans that must be borrowed and repaid within a single blockchain transaction, or the entire transaction reverts.
Question 4: Which of the following is an example of an algorithmic stablecoin?
- USDC
- Tether (USDT)
- TerraUSD (UST) (Correct answer)
- DAI
Correct answer: TerraUSD (UST)
TerraUSD (UST) was an algorithmic stablecoin that maintained its peg through an algorithmic relationship with the LUNA token rather than fiat reserves.
Question 5: In tokenomics, what is 'vesting'?
- The process of burning tokens to reduce supply
- A schedule that releases tokens to team members or investors gradually over time (Correct answer)
- A method for staking tokens to earn yields
- The governance process for minting new tokens
Correct answer: A schedule that releases tokens to team members or investors gradually over time
Vesting is a time-based release schedule for tokens allocated to team members, investors, or advisors, preventing immediate sell-off after a project launches.
Question 6: What is the role of a 'liquidity provider' (LP) in an AMM-based DEX?
- To validate transactions on the blockchain
- To deposit token pairs into a pool and earn a share of trading fees (Correct answer)
- To set token prices for the exchange
- To audit smart contracts for vulnerabilities
Correct answer: To deposit token pairs into a pool and earn a share of trading fees
Liquidity providers deposit equal values of two tokens into a pool, enabling traders to swap between them, and earn a proportional share of the trading fees generated.
Question 7: What is 'slippage' in DeFi trading?
- The delay between submitting and confirming a transaction
- The difference between the expected price and the actual execution price of a trade (Correct answer)
- The gas fee reduction for large trades
- The penalty for withdrawing from a liquidity pool early
Correct answer: The difference between the expected price and the actual execution price of a trade
Slippage is the difference between the expected price of a trade and the actual price at execution, often caused by low liquidity or large trade sizes moving the pool's price.
Blockchain Technology DeFi and Tokenomics 2
What is a token's 'total supply' in tokenomics?