Deep Dive into XRPL DeFi Review Quiz

What is one benefit of transaction transparency in DeFi systems?

It increases the potential for fraudulent activities.

It allows for hidden fees in transactions.

It makes transactions resistant to censorship and reduces fraud potential.

It limits access to transaction information.

How does risk mitigation differ between traditional finance and DeFi?

DeFi relies on extensive documentation to mitigate risk.

DeFi offers the same level of protection as traditional banks.

In DeFi, Individuals hold the risk and must secure their own accounts.

Traditional finance systems do not involve any risk mitigation.

What is the formula called that AMMs use to calculate a fair exchange rate?

Constrictive Function Formula

Constant Function Formula

Concise Function Formula

Creative Function Formula

What should you look for when choosing a DeFi platform to ensure security?

Utilizing and trusting the platform's security features.

Understanding how security features like multi-signature authentication work.

Avoiding platforms that use encryption techniques.

Only using government-backed platforms.

What should you consider when choosing a consensus mechanism for an EVM sidechain?

Choose the mechanism with the highest fees, making the barrier to entry higher.

Choose a mechanism that offers limited scalability.

Educate yourself on the mechanisms' strengths and weaknesses in terms of security and other factors.

Choose a Proof of Stake (PoS) mechanism for maximum decentralization.

How do AMMs work?

AMMs work by holding currency in order books, then the ledger randomizes a fair exchange rate between the different currencies.

AMMs work by pooling currency in liquidity pools, then algorithmically picking a fair exchange rate between the different currencies.

AMMs work by pooling currency in liquidity pools, then the AMM leadership group picks a fair exchange rate between the different currencies.

AMMs work by pooling currency in liquidity pools, then the AMM community votes on a fair exchange rate between the different currencies.

What do Automated Market Makers (AMMs) do?

AMMs calculate a fair exchange rate between tokens automatically.

AMMs find the best price for buying and selling tokens on a decentralized exchange.

AMMs automatically trade your tokens for you to increase your wealth.

AMMs figure out when the best time to trade your tokens is based on exchange rate fluctuations.

How does DeFi promote innovation in the financial sector?

By encouraging collaboration among developers and easy access to financial services.

By allowing users to trade their currency.

By reducing regulations on developers.

By the use of NFT technology.

Why is the XRPL good for DeFi?

The XRPL’s Proof-of-Work and Proof-of-Stake systems make it difficult to hack.

The XRPL always gets the best exchange rate for trades.

The XRPL can handle a large volume of transactions quickly and cheaply.

The XRPL’s trading algorithm always nets the highest gains per transaction.

How does the XRPL order book differ from a typical AMM?

Trades on the Order Book happen during the hourly auction while an AMM executes trades instantly based on the current formula-based prices.

Trades on the Order Book happen when a marketplace merge (mpm) occurs while an AMM executes trades instantly based on the current formula-based prices.

Trades on the Order Book happen when a buyer's bid matches a seller's ask while an AMM executes trades instantly based on the current formula-based prices.

Trades on the Order Book happen when the buy/sell function cycles while an AMM executes trades instantly based on the current formula-based prices.