Ethereum Developer Ethereum Token Standards and DeFi

Question 1

What EIP defines the ERC-20 fungible token standard?

Accepted Answer

EIP-20

Answer

EIP-20 (commonly called ERC-20) defines the standard interface for fungible tokens on Ethereum.

Question 2

What function must an ERC-20 contract implement to allow a spender to transfer tokens on behalf of an owner?

Accepted Answer

approve()

Answer

The `approve()` function grants a spender permission to transfer a specified amount of tokens on the owner's behalf.

Question 3

What is the key distinction between ERC-20 and ERC-721 tokens?

Accepted Answer

ERC-721 tokens are non-fungible and each has a unique ID

Answer

ERC-721 tokens are non-fungible, meaning each token has a unique identifier and cannot be exchanged 1:1 with another.

Question 4

What does AMM stand for in the context of DeFi?

Accepted Answer

Automated Market Maker

Answer

An Automated Market Maker (AMM) uses liquidity pools and mathematical formulas to enable permissionless token swaps without an order book.

Question 5

What formula does Uniswap v2 use to maintain liquidity pool balance?

Accepted Answer

x * y = k

Answer

Uniswap v2 uses the constant product formula `x * y = k`, where x and y are token reserves and k is a constant.

Ethereum Developer Practice Test