Cryptocurrency Smart Contracts and Token Standards 2 — Questions and Answers
Question 1: What is the ERC-20 token standard?
- A standard for non-fungible tokens on Ethereum
- A set of rules defining a common interface for fungible tokens on Ethereum (Correct answer)
- A protocol for cross-chain token transfers
- A standard for decentralized identity on Ethereum
Correct answer: A set of rules defining a common interface for fungible tokens on Ethereum
ERC-20 defines a standard interface for fungible tokens on Ethereum, ensuring interoperability between wallets, DEXs, and dApps.
Question 2: What distinguishes an ERC-721 token from an ERC-20 token?
- ERC-721 tokens are faster to transfer
- ERC-721 tokens are non-fungible, meaning each token is unique and not interchangeable (Correct answer)
- ERC-721 tokens have a fixed supply of 721
- ERC-721 tokens can only be used for governance
Correct answer: ERC-721 tokens are non-fungible, meaning each token is unique and not interchangeable
ERC-721 tokens are non-fungible, meaning each token has unique properties and cannot be exchanged on a 1:1 basis with other tokens.
Question 3: What is the ERC-1155 token standard?
- A standard for stablecoin issuance on Ethereum
- A multi-token standard that supports both fungible and non-fungible tokens in one contract (Correct answer)
- A standard for wrapping Bitcoin on Ethereum
- A governance token standard used by DAOs
Correct answer: A multi-token standard that supports both fungible and non-fungible tokens in one contract
ERC-1155 is a multi-token standard that allows a single contract to manage both fungible and non-fungible tokens, reducing deployment costs.
Question 4: What is an Initial Coin Offering (ICO)?
- A government-approved cryptocurrency exchange license
- A fundraising method where new tokens are sold to investors in exchange for capital (Correct answer)
- A protocol for creating new ERC-20 tokens
- A type of staking reward distribution event
Correct answer: A fundraising method where new tokens are sold to investors in exchange for capital
An ICO is a fundraising mechanism where a project sells newly created tokens to early investors to raise capital for development.
Question 5: What is token vesting in cryptocurrency projects?
- The process of converting tokens into fiat currency
- A schedule that gradually releases tokens to recipients over time (Correct answer)
- The mechanism by which tokens are burned
- A staking period required before earning rewards
Correct answer: A schedule that gradually releases tokens to recipients over time
Token vesting is a time-based release schedule that gradually unlocks tokens for founders, team members, or investors to align long-term incentives.
Question 6: What is the purpose of a token burn mechanism?
- To increase the total supply of a cryptocurrency
- To permanently remove tokens from circulation, often to reduce supply (Correct answer)
- To convert tokens from one standard to another
- To reward long-term holders with bonus tokens
Correct answer: To permanently remove tokens from circulation, often to reduce supply
Token burning permanently removes tokens from circulation by sending them to an unspendable address, often used to create deflationary pressure.
Cryptocurrency Smart Contracts and Token Standards 2
What is the ERC-20 token standard?