Cryptocurrency Cryptocurrency 4

Question 1

What is the 'Lightning Network' designed to solve?

Accepted Answer

Bitcoin's slow transaction speed and scalability issues

Answer

The Lightning Network is a Layer 2 payment protocol built on Bitcoin that enables fast, low-cost transactions by creating off-chain payment channels.

Question 2

What is a 'stablecoin'?

Accepted Answer

A crypto asset designed to maintain a stable value, often pegged to a fiat currency

Answer

Stablecoins are cryptocurrencies designed to minimize price volatility by pegging their value to a stable asset like the US dollar, gold, or through algorithmic mechanisms.

Question 3

What happened to the Terra (LUNA) ecosystem in May 2022?

Accepted Answer

Its algorithmic stablecoin UST lost its peg, causing a catastrophic collapse

Answer

In May 2022, the TerraUSD (UST) algorithmic stablecoin lost its dollar peg, triggering a death spiral that wiped out nearly $40 billion in market capitalization within days.

Question 4

What is 'cold storage' in cryptocurrency?

Accepted Answer

Storing private keys on a device that is never connected to the internet

Answer

Cold storage refers to keeping cryptocurrency private keys completely offline (e.g., hardware wallets or paper wallets) to protect them from online hacks and theft.

Question 5

What is the purpose of an Initial Coin Offering (ICO)?

Accepted Answer

To raise capital for a new cryptocurrency project by selling tokens to investors

Answer

An ICO is a fundraising method where a new cryptocurrency project sells its tokens to early investors to raise development capital, similar to an IPO in traditional finance.

Cryptocurrency Practice Test

Cryptocurrency Practice Test

Cryptocurrency Cryptocurrency 4