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Decentralized Finance (DeFi) and Tokenization 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 Decentralized Finance (DeFi) and Tokenization flashcards as text

  1. How does an algorithmic stablecoin mainly differ from a fiat-collateralized stablecoin like USDC?

    Answer: It keeps its peg through supply-adjustment mechanisms rather than full reserves of fiat held by a custodian

    Algorithmic stablecoins use code-driven minting and burning incentives instead of custodial fiat reserves, as the collapse of TerraUSD showed.

  2. What does the ERC-4626 standard define?

    Answer: A standard interface for tokenized yield-bearing vaults

    ERC-4626 standardizes deposit, withdrawal, and share accounting for yield-bearing vaults, which makes them easier to compose across protocols.

  3. A DeFi protocol's governance is controlled by token holders who vote on proposals executed on-chain. What is this organizational structure called?

    Answer: Decentralized Autonomous Organization (DAO)

    A DAO uses governance tokens and smart contracts to let its community propose and execute protocol changes.

  4. What is the main security risk with cross-chain bridges that use a lock-and-mint model?

    Answer: Large pools of locked collateral become attractive single points of failure if validators or contracts are compromised

    Bridge exploits such as Ronin and Wormhole drained locked collateral and left the wrapped tokens on the other chain unbacked.

  5. In yield farming, what does 'liquidity mining' usually mean?

    Answer: Users receive protocol governance tokens as rewards for supplying liquidity

    Liquidity mining pays LPs in native protocol tokens on top of trading fees, which helps bootstrap liquidity.

  6. A security token uses the ERC-3643 (T-REX) standard. Which feature sets it apart from a plain ERC-20?

    Answer: Transfers are restricted to identity-verified, eligible wallets through on-chain compliance checks

    ERC-3643 builds permissioning and on-chain identity checks into transfers so they comply with securities regulations.

  7. A DeFi protocol takes a large loss when an attacker uses a flash loan to move the spot price on one low-liquidity DEX that the protocol reads as its price feed. What would best mitigate this?

    Answer: Using time-weighted average prices (TWAP) or aggregated decentralized oracles instead of a single spot price

    TWAPs and multi-source oracle aggregation make it expensive to manipulate prices within a single transaction.