CCE Cryptocurrency Core Concepts 5

Question 1

What is a stablecoin and what mechanism does a fiat-collateralized stablecoin use?

Accepted Answer

A cryptocurrency maintaining price stability by holding fiat currency reserves equal to its supply

Answer

Fiat-collateralized stablecoins like USDC maintain a 1:1 peg by holding equivalent fiat reserves in custodian bank accounts.

Question 2

What is an Initial Coin Offering (ICO)?

Accepted Answer

A fundraising method where a project sells new tokens to early investors

Answer

An ICO is a crowdfunding mechanism where blockchain projects issue and sell tokens to raise capital, similar to a startup's IPO.

Question 3

What is the blockchain trilemma as described by Vitalik Buterin?

Accepted Answer

The trade-off between achieving decentralization, security, and scalability simultaneously

Answer

The blockchain trilemma states that a blockchain can typically optimize for only two of three properties: decentralization, security, and scalability.

Question 4

What is 'double spending' and how does Bitcoin prevent it?

Accepted Answer

Spending the same UTXO twice; prevented by the distributed ledger and consensus rules

Answer

Double spending is attempting to use the same coins in two transactions; Bitcoin's distributed ledger and longest-chain consensus prevent it by making conflicting transactions detectable.

Question 5

What does 'on-chain' vs. 'off-chain' refer to in cryptocurrency?

Accepted Answer

On-chain = recorded directly on the blockchain; off-chain = settled outside the main chain

Answer

On-chain transactions are permanently recorded on the blockchain ledger, while off-chain transactions occur through external channels (like payment channels) without immediate ledger entries.

(CCE) Certified Cryptocurrency Expert Practice Test

(CCE) Certified Cryptocurrency Expert Practice Test

CCE Cryptocurrency Core Concepts 5