Cryptocurrency Cryptocurrency 3

Question 1

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

Accepted Answer

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

Answer

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.

Question 2

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

Accepted Answer

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

Answer

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.

Question 3

Which organization created the Ripple (XRP) cryptocurrency?

Accepted Answer

Ripple Labs

Answer

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

Question 4

What is a 'rug pull' in cryptocurrency?

Accepted Answer

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

Answer

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.

Question 5

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

Accepted Answer

To provide a reserve of tokens enabling automated trading

Answer

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.

Cryptocurrency Practice Test

Cryptocurrency Practice Test

Cryptocurrency Cryptocurrency 3