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Quiz: Decentralized Finance (DeFi)

Decentralized Finance (DeFi) is an emerging application of blockchain technology. Test your knowledge of DeFi with this Swyftx Learn quiz.

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Question 1

Decentralized finance (DeFi) provides access to a range of financial products without relying on a central authority.

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Decentralized finance (DeFi) is a platform for accessing decentralized financial services that replicate most of what centralized exchanges and companies offer but in a way that promotes privacy and decentralization.

Question 2

What does decentralized finance involve?

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Decentralized finance offers a vast range of financial services including lending and borrowing assets or currencies from other users, access to decentralized exchanges and applications, and the use of smart contracts on networks like Ethereum and Solana.

Question 3

The Bitcoin blockchain is the foundation for the majority of decentralized finance.

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Ethereum is the foundation for the majority of decentralized finance. Popular DeFi platforms such as Uniswap and PancakeSwap run on the Ethereum blockchain.

Question 4

The most popular use for decentralized applications (dApps) is...

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The most popular use for dApps is decentralized exchanges (DEXs). The most successful DEXs are Uniswap and PancakeSwap (on Ethereum), Serum and Raydium (on Solana), and Osmosis (on Cosmos). Although dApps are used for NFTs, they are primarily used to as NFT marketplaces, which are platforms where buyers and sellers can trade a range of NFTs.

Question 5

DEX stands for Deterministic Expansion

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DEX stands for decentralized exchange, which is an exchange that operates without the need for a third-party intermediary. DEXs do this by using smart contracts that execute trades between anonymous users.

Question 6

What is an Automated Market Maker?

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Automated market makers (AMMs) enable instant trading between one asset and another in a decentralized trading environment. AMMs always ensure that there is enough liquidity for any user’s trade to be performed successfully by utilising assets that have been provided in liquidity pools.

Question 7

A liquidity pool is a decentralized pool of digital assets that is used to provide trading liquidity

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Liquidity pools are decentralized pools of digital assets that are locked within a smart contract. Liquidity providers earn significant rewards by lending their assets to offset risks, such as impermanent loss.

Question 8

The main advantage of a decentralized exchange is...

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Decentralized exchanges (DEXs) operate by connecting to a user’s external software wallet, which the user owns the private keys to. DEXs also boast greater privacy and anonymity due to the lack of KYC protocols, which makes them very popular with those who are concerned about privacy. DEXs also feature a large number of low cap altcoins, which can be diamonds in the rough or very risky investments.

Question 9

Staking is a way to earn rewards through locking up cryptocurrency to secure a blockchain network

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Staking allows users to lock a certain amount of their crypto in a smart contract to help secure that crypto’s blockchain and help verify transactions. In exchange the user is given staking rewards in that coin. 

Question 10

Staking rewards are usually paid out in...

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Staking rewards are generally paid out in the same cryptocurrency that you are staking. For instance, if you are staking ADA, you will get rewarded in ADA. That said, there are some setups where users staking one asset can be paid out in multiple currencies. Cosmos (ATOM) is working on a system called Interchain Staking, which will allow users staking ATOM to receive rewards across multiple chains for helping to secure each network.

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