Cryptocurrency Flashcards

What is a 'seed phrase' (or recovery phrase) in crypto?

Answer: A series of words that can restore access to a crypto wallet

A seed phrase is a human-readable series of 12 or 24 words that serves as the master backup for a cryptocurrency wallet, allowing recovery of all associated keys.

What is 'slippage' in the context of decentralized exchanges (DEXs)?

Answer: The difference between the expected price and the actual execution price of a trade

Slippage occurs when the price of an asset changes between the time a trade is submitted and when it is executed, often due to low liquidity or high volatility.

Which organization created the Ripple (XRP) cryptocurrency?

Answer: Ripple Labs

Ripple Labs created the XRP Ledger and the XRP token, primarily designed to facilitate fast and low-cost international money transfers.

What is a 'rug pull' in cryptocurrency?

Answer: A scam where developers abandon a project and abscond with investor funds

A rug pull is an exit scam where the creators of a cryptocurrency project suddenly withdraw all liquidity or funds, leaving investors with worthless tokens.

What is the main function of a 'liquidity pool' in a DEX?

Answer: To provide a reserve of tokens enabling automated trading

A liquidity pool is a smart contract holding reserves of two or more tokens that enables automated, permissionless trading on decentralized exchanges via algorithms like AMMs.

What does 'KYC' stand for in the context of cryptocurrency exchanges?

Answer: Know Your Customer

KYC (Know Your Customer) is an identity verification process required by regulated exchanges to comply with anti-money laundering laws and prevent financial crime.

What is 'impermanent loss' in DeFi?

Answer: A temporary loss experienced by liquidity providers when token prices diverge

Impermanent loss is the difference in value between holding tokens in a liquidity pool versus simply holding them, occurring when the price ratio of the deposited assets changes.