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Cryptocurrency and Digital Tokens 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. Which consensus mechanism does Ethereum currently use after 'The Merge' in 2022?

    Answer: Proof of Stake

    Ethereum transitioned from Proof of Work to Proof of Stake via 'The Merge' in September 2022, reducing its energy consumption by ~99.95%.

  2. What is the primary function of a token's 'vesting schedule' in a cryptocurrency project?

    Answer: To release tokens gradually over time to prevent large sell-offs

    Vesting schedules lock tokens and release them incrementally to align team and investor incentives with long-term project health.

  3. What distinguishes a 'security token' from a 'utility token' under US regulatory frameworks?

    Answer: Security tokens represent ownership or investment interest and are subject to SEC regulation

    Security tokens pass the Howey Test—representing an investment of money in a common enterprise with expectation of profits—and therefore fall under SEC jurisdiction.

  4. In the context of cryptocurrency, what is a 'dust attack'?

    Answer: Sending tiny amounts of crypto to wallets to track and de-anonymize owners

    Dust attacks involve sending negligible amounts of cryptocurrency to wallets to analyze transaction patterns and potentially link addresses to real identities.

  5. What does 'tokenomics' primarily refer to?

    Answer: The economic design of a token including supply, distribution, and incentive structures

    Tokenomics encompasses all economic aspects of a token: total supply, emission schedule, allocation, burn mechanisms, and how incentives align stakeholders.

  6. Which type of cryptocurrency wallet stores private keys on a device not connected to the internet?

    Answer: Cold wallet

    Cold wallets (hardware wallets, paper wallets) keep private keys offline, significantly reducing exposure to online hacking threats.

  7. What is the purpose of a 'token burn' mechanism in cryptocurrency?

    Answer: To permanently remove tokens from circulation, reducing supply

    Token burns permanently destroy tokens by sending them to an unspendable address, reducing circulating supply which can create deflationary pressure.