CBCP Decentralized Finance (DeFi) and Tokenization 5

Question 1

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

Accepted Answer

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

Answer

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

Question 2

What does the ERC-4626 standard define?

Accepted Answer

A standard interface for tokenized yield-bearing vaults

Answer

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

Question 3

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

Accepted Answer

Decentralized Autonomous Organization (DAO)

Answer

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

Question 4

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

Accepted Answer

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

Answer

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

Question 5

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

Accepted Answer

Users receive protocol governance tokens as rewards for supplying liquidity

Answer

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

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