How Does DeFi Differ From Traditional Finance?

Found in: How does DeFi differ from traditional finance?

Traditional finance and Decentralized Finance have a few key differentiators. Take this lesson quiz and confirm you know the differences between the two systems.

What is one of the advantages that DeFi has over traditional finance systems?

A) DeFi has tighter geographical restrictions.

B) DeFi requires complicated documentation.

C) DeFi is more transparent.

D) DeFi doesn’t require an account.

What does DeFi stand for, and what is its primary goal?

A) DeFi stands for Digital Finance, aiming to centralize financial services.

B) DeFi stands for Decentralized Finance, aiming to remove all financial intermediaries.

C) DeFi stands for De-established Finance, aiming to increase geographical restrictions.

D) DeFi stands for Designated Finance, aiming to limit financial innovation.

How does DeFi promote innovation in the financial sector?

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

B) By allowing users to trade their currency.

C) By reducing regulations on developers.

D) By the use of NFT technology.

What is one benefit of transaction transparency in DeFi systems?

A) It increases the potential for fraudulent activities.

B) It allows for hidden fees in transactions.

C) It makes transactions resistant to censorship and reduces fraud potential.

D) It limits access to transaction information.

How does risk mitigation differ between traditional finance and DeFi?

A) DeFi relies on extensive documentation to mitigate risk.

B) DeFi offers the same level of protection as traditional banks.

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

D) Traditional finance systems do not involve any risk mitigation.

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