Cryptocurrency Smart Contracts and dApps 4 — Questions and Answers
Question 1: What is a 'multisig wallet' and why is it used in dApp governance?
- A wallet that requires multiple private-key signatures to authorize a transaction, reducing single-point-of-failure risk (Correct answer)
- A wallet that splits funds across multiple blockchains automatically
- A hardware device that stores multiple seed phrases simultaneously
- A smart contract that batches user transactions to save gas
Correct answer: A wallet that requires multiple private-key signatures to authorize a transaction, reducing single-point-of-failure risk
Multisig wallets require M-of-N keyholders to sign before a transaction executes, making it much harder for a single compromised key to steal treasury funds or change protocol parameters.
Question 2: Which programming language compiles to EVM bytecode and is primarily used for Ethereum smart contracts?
- Rust
- Vyper only
- Solidity (Correct answer)
- TypeScript
Correct answer: Solidity
Solidity is the dominant high-level language for Ethereum smart contracts; it compiles to EVM bytecode and features a JavaScript-like syntax.
Question 3: What is 'EIP-1559' and how did it change Ethereum transaction fees?
- It introduced proof-of-stake consensus, replacing miners with validators
- It split fees into a burned base fee and a priority tip, making gas costs more predictable (Correct answer)
- It raised the block gas limit to support more transactions per second
- It added support for account abstraction and meta-transactions
Correct answer: It split fees into a burned base fee and a priority tip, making gas costs more predictable
EIP-1559 introduced a protocol-set base fee that is burned each block plus an optional priority tip to validators, smoothing fee volatility and making ETH deflationary under high usage.
Question 4: What is 'account abstraction' (ERC-4337) designed to enable?
- Faster block finality by removing the need for validator signatures
- Smart contract wallets that can pay gas in any token, support social recovery, and bundle transactions (Correct answer)
- Automatic conversion of ETH to stablecoins during market downturns
- Cross-chain token bridging without third-party relayers
Correct answer: Smart contract wallets that can pay gas in any token, support social recovery, and bundle transactions
ERC-4337 lets smart contracts act as user accounts, enabling features like gas payment in ERC-20 tokens, multi-call batching, and key-recovery mechanisms without protocol changes.
Question 5: In a DAO governed by a smart contract, what typically happens when a proposal passes?
- A company lawyer files the decision with a court for enforcement
- The smart contract automatically executes the on-chain actions defined in the proposal after a timelock (Correct answer)
- Validators manually review and approve the transaction before execution
- The founding team verifies the vote count and initiates the change off-chain
Correct answer: The smart contract automatically executes the on-chain actions defined in the proposal after a timelock
On-chain governance contracts automatically execute approved proposals (treasury transfers, parameter changes) after a mandatory timelock period, removing the need for trusted intermediaries.
Question 6: What does 'TVL' (Total Value Locked) measure in DeFi?
- The total market cap of all DeFi governance tokens
- The aggregate USD value of assets deposited into DeFi protocols' smart contracts (Correct answer)
- The maximum amount a single user can deposit in one transaction
- The total gas fees collected by all DeFi protocols in a given period
Correct answer: The aggregate USD value of assets deposited into DeFi protocols' smart contracts
TVL is the sum of all assets held in a protocol's smart contracts at current market prices, commonly used as a benchmark for a DeFi project's adoption and liquidity depth.
Question 7: What is a 'token approval' and why can excessive approvals be risky?
- A regulatory license required before listing a token on a DEX
- Permission granted to a smart contract to spend a specified (or unlimited) amount of a user's ERC-20 tokens (Correct answer)
- A validator vote to whitelist a new token for staking rewards
- A signature that freezes tokens in escrow until a trade completes
Correct answer: Permission granted to a smart contract to spend a specified (or unlimited) amount of a user's ERC-20 tokens
ERC-20 approvals authorize a contract to transfer tokens on the user's behalf; unlimited approvals remain valid indefinitely, so a later exploit of the approved contract can drain approved balances.
Cryptocurrency Smart Contracts and dApps 4
What is a 'multisig wallet' and why is it used in dApp governance?