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Cryptocurrency and Digital Assets Flashcards

7 cards from real CBCP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

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  1. What is 'DeFi yield farming'?

    Answer: Providing liquidity or staking assets in DeFi protocols to earn rewards and interest

    Yield farming involves strategically deploying crypto assets across DeFi protocols to maximize returns through interest, fees, and governance token rewards.

  2. Which attack vector exploits the order of transactions within a block for profit?

    Answer: Maximal Extractable Value (MEV)

    MEV refers to the maximum value extractable by miners/validators by reordering, inserting, or censoring transactions within blocks they produce.

  3. What is the 'Lightning Network' designed to solve for Bitcoin?

    Answer: Scalability by enabling off-chain payment channels that settle on Bitcoin's base layer

    The Lightning Network creates bidirectional payment channels off-chain, enabling fast and cheap Bitcoin microtransactions that settle on-chain only when channels close.

  4. How does an 'Automated Market Maker' (AMM) determine token prices?

    Answer: Using a mathematical formula based on the ratio of token reserves in a liquidity pool

    AMMs use algorithmic pricing formulas (e.g., x*y=k) that adjust prices automatically based on the ratio of assets held in the liquidity pool.

  5. What is a 'crypto dusting attack'?

    Answer: Sending tiny amounts of cryptocurrency to wallets to de-anonymize owners by tracking subsequent transactions

    Dusting attacks send tiny 'dust' amounts to many wallets; if recipients move those funds, analysts can cluster and link addresses to reveal wallet ownership.

  6. What does 'proof of reserves' mean in the cryptocurrency exchange context?

    Answer: A cryptographic verification that an exchange holds sufficient assets to cover all customer deposits

    Proof of reserves uses Merkle trees and cryptographic attestations to verify an exchange holds 1:1 (or more) backing for all customer funds.

  7. Which property of Bitcoin prevents the same UTXO from being spent twice in a valid transaction?

    Answer: Full nodes independently verifying that each input references an unspent output in the UTXO set

    Every full node maintains a UTXO set and rejects any transaction attempting to reference an already-spent output, making double-spending detectable without a trusted third party.