Cryptocurrency DeFi and Decentralized Protocols 2

Question 1

What is yield farming in DeFi?

Accepted Answer

Moving crypto assets between protocols to maximize returns

Answer

Yield farming involves strategically moving crypto assets across different DeFi protocols to maximize interest, fees, and token rewards.

Question 2

What is TVL (Total Value Locked) a measure of in DeFi?

Accepted Answer

The total dollar value of assets deposited in a DeFi protocol

Answer

TVL represents the aggregate value of all assets deposited in a DeFi protocol, used as a key metric for platform adoption and health.

Question 3

In DeFi lending protocols like Aave or Compound, what is over-collateralization?

Accepted Answer

Providing collateral worth more than the loan amount

Answer

Over-collateralization requires borrowers to deposit collateral worth more than the loan to protect lenders against price volatility.

Question 4

What is a flash loan in DeFi?

Accepted Answer

An uncollateralized loan that must be borrowed and repaid within a single transaction

Answer

A flash loan is an uncollateralized loan that must be borrowed and repaid within the same blockchain transaction, or the entire transaction reverts.

Question 5

What does APY stand for in DeFi yield calculations?

Accepted Answer

Annual Percentage Yield

Answer

APY stands for Annual Percentage Yield, which includes the effect of compounding interest over a year.

Cryptocurrency Practice Test