CCE DeFi and Decentralized Applications 2

Question 1

What is a flash loan in DeFi?

Accepted Answer

An uncollateralized loan that must be borrowed and repaid within a single blockchain transaction

Answer

Flash loans are unique to DeFi — they allow borrowing any amount without collateral as long as the loan is returned within the same transaction block.

Question 2

What is the role of a governance token in a DeFi protocol?

Accepted Answer

To give holders voting rights over protocol parameter changes and upgrades

Answer

Governance tokens grant holders the ability to propose and vote on changes to protocol rules, fee structures, and treasury allocations.

Question 3

What distinguishes a DEX (Decentralized Exchange) from a CEX (Centralized Exchange)?

Accepted Answer

DEXs allow peer-to-peer trading via smart contracts without custody of user funds

Answer

DEXs execute trades directly on-chain through smart contracts, meaning the exchange never holds user funds, eliminating counterparty custodial risk.

Question 4

In the context of DeFi lending (e.g., Aave, Compound), what is the collateralization ratio?

Accepted Answer

The ratio of collateral value to the borrowed amount, used to ensure loan solvency

Answer

Collateralization ratio ensures that loans are over-collateralized so lenders are protected even if the borrower's collateral value declines.

Question 5

What is a liquidity pool in a DeFi protocol?

Accepted Answer

A smart contract holding reserves of two or more tokens used to facilitate trading

Answer

Liquidity pools are smart contracts funded by liquidity providers that hold token pairs, enabling decentralized trading without a traditional order book.

(CCE) Certified Cryptocurrency Expert Practice Test

(CCE) Certified Cryptocurrency Expert Practice Test

CCE DeFi and Decentralized Applications 2