Cryptocurrency Smart Contracts and dApps 5 — Questions and Answers
Question 1: What is 'MEV' (Maximal Extractable Value) in blockchain networks?
- The maximum block reward validators can earn through honest block production
- Profit extracted by reordering, inserting, or censoring transactions within a block (Correct answer)
- The highest gas price a user has ever paid for a transaction
- Total fees distributed to liquidity providers in an AMM pool
Correct answer: Profit extracted by reordering, inserting, or censoring transactions within a block
MEV refers to extra profit that block producers (or searchers) can capture by manipulating the order of transactions — through front-running, sandwich attacks, or liquidation sniping.
Question 2: Which Layer 2 scaling solution bundles many transactions off-chain and posts a validity proof to Ethereum?
- State channels
- Optimistic rollup
- ZK rollup (Correct answer)
- Plasma
Correct answer: ZK rollup
ZK (zero-knowledge) rollups compress transactions off-chain and submit a cryptographic validity proof to Ethereum Layer 1, allowing instant finality without a fraud-proof challenge period.
Question 3: What is the function of 'Chainlink VRF' in smart contract development?
- It validates that randomness used in a contract is provably fair and tamper-resistant (Correct answer)
- It connects smart contracts to traditional banking APIs for fiat settlements
- It provides real-time price feeds for DeFi lending protocols
- It bridges ERC-20 tokens between Ethereum and other blockchains
Correct answer: It validates that randomness used in a contract is provably fair and tamper-resistant
Chainlink VRF (Verifiable Random Function) generates random numbers with cryptographic proof that the output was not manipulated, enabling fair on-chain lotteries, NFT trait reveals, and games.
Question 4: In Solidity, what is the purpose of the 'payable' keyword on a function?
- It restricts the function so only paid subscribers can call it
- It allows the function to receive ETH along with the call (Correct answer)
- It causes the function to automatically refund excess ETH to the caller
- It marks the function as callable only during contract deployment
Correct answer: It allows the function to receive ETH along with the call
Without the 'payable' modifier, a Solidity function will revert if ETH is sent to it; adding 'payable' lets the function accept and hold incoming ETH.
Question 5: What is a 'timelock controller' commonly used for in DeFi protocols?
- Locking liquidity provider tokens for a minimum staking period
- Delaying execution of governance decisions to give users time to react or exit (Correct answer)
- Scheduling automatic token burns at predetermined block heights
- Preventing users from transferring tokens within the first 24 hours of purchase
Correct answer: Delaying execution of governance decisions to give users time to react or exit
A timelock enforces a mandatory waiting period between a proposal passing and its on-chain execution, giving the community and security researchers a window to detect and respond to malicious changes.
Question 6: What does the acronym 'dApp' stand for?
- Distributed Application
- Decentralized Application (Correct answer)
- Digital Asset Protocol
- Delegated Approval Program
Correct answer: Decentralized Application
A decentralized application (dApp) runs its backend logic on a decentralized network (typically smart contracts on a blockchain) rather than centralized servers.
Question 7: What is 'liquidity mining' (also called yield farming) in DeFi?
- Using GPU rigs to mine new tokens by solving hash puzzles for a DeFi protocol
- Earning protocol governance tokens as rewards for supplying liquidity to a DeFi platform (Correct answer)
- Paying a protocol fee to access premium liquidity pools with lower slippage
- Borrowing assets against staked LP tokens to reinvest in higher-yield pools
Correct answer: Earning protocol governance tokens as rewards for supplying liquidity to a DeFi platform
Liquidity mining incentivizes users to deposit assets into DeFi protocols by distributing native governance tokens as additional yield on top of trading fees.
Cryptocurrency Smart Contracts and dApps 5
What is 'MEV' (Maximal Extractable Value) in blockchain networks?