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.
Read the first 7 Cryptocurrency and Digital Assets flashcards as text
What is an 'Initial DEX Offering' (IDO)?
Answer: A fundraising method where new tokens are sold and listed directly on a decentralized exchange
An IDO is a token launch on a DEX launchpad, providing immediate liquidity and trading without the gatekeeping of centralized exchanges.
What is 'impermanent loss' in DeFi liquidity provision?
Answer: The temporary reduction in value a liquidity provider experiences compared to simply holding the assets, caused by price divergence
Impermanent loss occurs when the price ratio of pooled assets changes from deposit time; the loss becomes permanent only if the LP withdraws before prices revert.
Which regulatory framework primarily governs cryptocurrency exchanges operating in the United States?
Answer: A combination of FinCEN (MSB registration), SEC (securities), and CFTC (derivatives) oversight
US crypto exchanges face a patchwork: FinCEN requires MSB registration with AML/KYC, the SEC regulates security tokens, and the CFTC oversees crypto derivatives.
What is a 'wrapped token' such as Wrapped Bitcoin (WBTC)?
Answer: A token pegged to another cryptocurrency's value, issued on a different blockchain to enable cross-chain use
Wrapped tokens are pegged 1:1 to another asset, held in custody, and minted on a target blockchain to bring that asset's value into a different ecosystem (e.g., WBTC brings BTC into Ethereum's DeFi).
What is the 'halving' event in Bitcoin's protocol?
Answer: A scheduled event approximately every four years that cuts the block subsidy reward to miners in half
Bitcoin's halving occurs every 210,000 blocks (~4 years), reducing the block reward by 50% to enforce its disinflationary supply schedule toward the 21 million cap.
In the context of NFTs, what does 'royalty enforcement' refer to?
Answer: A mechanism built into a smart contract that automatically pays the original creator a percentage of each secondary sale
NFT royalty enforcement uses smart contract logic to automatically route a creator-specified percentage of secondary sale proceeds back to the original minter.
What distinguishes a 'cold wallet' from a 'hot wallet' in cryptocurrency asset management?
Answer: Cold wallets are kept offline and disconnected from the internet, while hot wallets remain connected online
Cold wallets (hardware or paper) store private keys offline, making them immune to remote hacking, while hot wallets maintain internet connectivity for convenience at the cost of greater attack surface.