CFP Blockchain & Cryptocurrency Integration 2

Question 1

A fintech firm wants to issue digital securities on a blockchain. Which regulatory framework in the US most directly governs this activity?

Accepted Answer

Securities Act of 1933 and SEC regulations

Answer

Digital securities (security tokens) fall under SEC jurisdiction and must comply with the Securities Act of 1933, including registration or exemption requirements.

Question 2

What is the primary function of a Layer-2 blockchain solution such as the Lightning Network?

Accepted Answer

To process transactions off-chain and settle final states on the main chain

Answer

Layer-2 solutions process transactions off the main blockchain and periodically settle net results on-chain, dramatically increasing throughput and reducing fees.

Question 3

A DeFi lending protocol uses an Automated Market Maker (AMM). What determines the exchange rate between two assets in an AMM pool?

Accepted Answer

A mathematical formula based on the ratio of assets in the liquidity pool

Answer

AMMs use algorithms like the constant product formula (x*y=k) where prices are determined by the relative quantities of assets in the liquidity pool.

Question 4

Which consensus mechanism is used by Ethereum after 'The Merge' in September 2022?

Accepted Answer

Proof of Stake (PoS)

Answer

Ethereum transitioned from Proof of Work to Proof of Stake with 'The Merge,' reducing energy consumption by approximately 99.95%.

Question 5

In blockchain terminology, what is a '51% attack'?

Accepted Answer

When a single entity gains majority hash power and can rewrite recent transaction history

Answer

A 51% attack occurs when one entity controls over half the network's mining or validation power, enabling double-spend attacks by reorganizing recent blocks.

(CFP) Certified Fintech Practitioner Practice Test

(CFP) Certified Fintech Practitioner Practice Test

CFP Blockchain & Cryptocurrency Integration 2