DeFi and Token Security Flashcards
6 cards from real CBSE practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 DeFi and Token Security flashcards as text
What is the primary security risk associated with upgradeable proxy contracts in DeFi?
Answer: The proxy admin can silently replace the implementation with malicious logic without user consent
Upgradeable proxies introduce centralized control — a compromised or malicious admin can swap in exploit code, defeating the trustlessness of DeFi.
A CBSE candidate is auditing a cross-chain bridge. Which vulnerability class has caused the largest losses in bridge hacks?
Answer: Improper validation of cross-chain message signatures allowing forged mint approvals
The Ronin ($625M) and Wormhole ($320M) hacks both exploited insufficient signature validation on cross-chain messages, enabling unauthorized minting.
What is a 'honeypot' token in DeFi, and how does it harm investors?
Answer: A fraudulent token designed to allow buys but block sells, trapping investor funds
Honeypot tokens use hidden transfer restrictions that prevent selling, luring investors in but leaving them unable to exit their positions.
Which metric should a security analyst monitor to detect abnormal DeFi protocol behavior indicative of an ongoing exploit?
Answer: Total Value Locked (TVL) drop of >20% in a single block or transaction
A sudden dramatic TVL drop signals rapid fund withdrawal consistent with an exploit, triggering incident response.
What is the security implication of a DeFi protocol's token having an infinite mint function owned by a single EOA (externally owned account)?
Answer: A single compromised private key gives an attacker unlimited token supply control, enabling total market manipulation
An infinite mint controlled by one EOA means one phished or stolen key destroys the entire token economy with no recourse.
Under the US Bank Secrecy Act, DeFi protocols with US users that allow token swaps may be classified as what type of regulated entity?
Answer: Money Services Businesses (MSBs) subject to AML/KYC requirements
FinCEN guidance indicates that DeFi protocols facilitating value exchange for US persons may qualify as MSBs, triggering AML and KYC obligations.