Cryptocurrency and Digital Tokens Flashcards
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Read the first 7 Cryptocurrency and Digital Tokens flashcards as text
What is a 'governance token' in the context of decentralized protocols?
Answer: A token that grants holders voting rights over protocol changes and treasury decisions
Governance tokens give holders the ability to propose and vote on protocol upgrades, parameter changes, and treasury allocations in a decentralized autonomous organization.
What defines a 'deflationary' cryptocurrency model?
Answer: A token designed so its circulating supply decreases over time through burns or buybacks
Deflationary tokens use mechanisms like burns, transaction fee destruction, or buybacks to continuously reduce circulating supply, potentially increasing scarcity over time.
Which of the following best describes 'yield farming' in DeFi?
Answer: Moving assets across protocols to maximize returns through liquidity provision and token rewards
Yield farming involves strategically deploying crypto assets across DeFi protocols to earn the highest combination of interest, fees, and incentive token rewards.
What is the primary purpose of a 'token lockup' period following a cryptocurrency presale?
Answer: To prevent early investors from immediately selling and crashing the token price at launch
Lockup periods restrict early investors and team members from selling their tokens immediately after listing, reducing sell pressure and protecting public investors.
In cryptocurrency regulation, what does 'KYC/AML' require exchanges to do?
Answer: Verify user identities and monitor transactions for suspicious activity to prevent financial crimes
KYC (Know Your Customer) and AML (Anti-Money Laundering) regulations require exchanges to verify user identities, maintain records, and report suspicious transactions to relevant authorities.
What is 'slippage' in the context of cryptocurrency trading?
Answer: The difference between the expected price of a trade and the actual execution price
Slippage occurs when market conditions change between order submission and execution, or in AMMs when large trades move the pool's price mid-transaction.
Which feature distinguishes ERC-721 tokens from ERC-20 tokens on Ethereum?
Answer: Each ERC-721 token is unique and non-fungible, unlike interchangeable ERC-20 tokens
ERC-721 defines the NFT standard where each token has a unique ID and cannot be exchanged 1:1 with another token of the same contract, unlike fungible ERC-20 tokens.