Eccouncil 312-82 EC-Council Blockchain Fintech Certification (BFC) Exam Practice Test

Answer : B

A soft fork is a change to a blockchain protocol that is backward-compatible, meaning it does not result in the creation of a new chain and does not require all client nodes to upgrade. Nodes that do not upgrade can still participate in the network, although they may not have access to all new features introduced by the soft fork.

Key Details:

Backward Compatibility: In a soft fork, updated nodes enforce the new rules, while non-updated nodes continue to follow the older protocol but remain part of the same blockchain. This contrasts with hard forks, where incompatibility leads to the creation of a new chain.

Use Cases: Soft forks are commonly used to implement protocol upgrades or adjustments that do not fundamentally alter the structure of the blockchain, such as increasing block size limits or adding new features that are optional.

Examples: An example of a soft fork is the Segregated Witness (SegWit) update on the Bitcoin blockchain, which was implemented to increase block capacity without splitting the chain.

Thus, B. Soft fork is the correct answer, as it refers to a backward-compatible update that does not require a new chain or mandatory upgrades from all nodes.

Answer : D

The smallest subunit of Ether is called a Wei. Ether (ETH) is divided into several subunits for precision in transactions, with Wei being the smallest, equivalent to 101810^{-18}1018 Ether.

Key Details:

Subunits of Ether: The Ethereum network uses smaller units to facilitate transactions that require a higher degree of accuracy. The most commonly used subunits are Gwei (billion Wei), but Wei represents the smallest possible division.

Importance in Transactions: Wei ensures that Ether can be broken down into very small units, allowing for microtransactions and precise gas calculations, which are essential in smart contract executions.

Naming Convention: This denomination was named in honor of Wei Dai, a cryptographer who proposed b-money, an early concept of digital currency.

Therefore, D. Wei is the correct answer, as it is the smallest unit of Ether.

Answer : D

Smart Contracts are self-executing programs that automate transactions and eliminate the need for intermediaries. They operate on blockchain networks and are coded to execute specific actions when predetermined conditions are met.

Key Details:

Transaction Automation: Smart contracts automatically execute the terms of a contract once the agreed-upon conditions are fulfilled. This reduces manual processing and ensures transparency and trust between parties.

Elimination of Intermediaries: By running on a decentralized network, smart contracts eliminate the need for third-party intermediaries, such as lawyers or notaries, reducing transaction costs and increasing efficiency.

Application Across Industries: Smart contracts are used in various sectors, from finance and supply chain to insurance and real estate, due to their ability to enforce terms without human intervention.

Therefore, D. Smart contracts is the correct answer, as they facilitate automated transactions and remove the need for intermediaries.

Answer : C, D

The Financial Action Task Force (FATF) defines Virtual Asset Service Providers (VASPs) in its guidelines to include entities that engage in the exchange of virtual assets for fiat currency and the transfer of virtual assets. This categorization is part of the FATF's efforts to regulate and monitor the flow of virtual assets to mitigate risks associated with illicit activities.

Key Details:

Exchange and Conversion Services: FATF recognizes companies that offer exchange services between virtual assets and fiat currencies as VASPs. These services are critical for converting virtual assets into forms that can be readily used in traditional markets.

Transfer Services: VASPs that facilitate the transfer of virtual assets are also within the FATF's regulatory scope. This includes services that manage, transfer, or act as intermediaries in the movement of virtual assets between users, ensuring these transactions are conducted transparently and within regulatory frameworks.

Therefore, C. Exchange virtual assets for fiat currency and D. Transfer virtual assets are the correct answers, as they align with the FATF's definition of VASPs.

Answer : D

Smart Contracts are self-executing computer programs that automatically enforce, verify, and facilitate the terms of a contract when certain conditions are met. These programs run on blockchain networks and eliminate the need for intermediaries by automating transactions based on predefined rules coded into the contract.

Key Details:

Automation and Trust: Smart contracts are crucial in blockchain technology because they enable trustless transactions, meaning parties can transact directly without relying on intermediaries. The code controls the execution, and transactions are transparent and irreversible.

Use Cases: Smart contracts are foundational to decentralized finance (DeFi) applications, supply chain management, digital identity, and more. They facilitate various operations such as lending, borrowing, insurance, and automated asset transfers.

Example in Ethereum: Ethereum popularized smart contracts by providing a platform with Turing-complete scripting capabilities. This allowed developers to create sophisticated decentralized applications that execute on the blockchain.

In conclusion, D. Smart contracts is the correct answer as it refers to the technology that automates transactions and eliminates the need for intermediaries.

Answer : B

A Type II DApp is a decentralized application that uses both the blockchain and protocol of a Type I DApp. Type I DApps are the foundational blockchain-based platforms, such as Ethereum, that operate with their own blockchain. Type II DApps build on these platforms, using the existing blockchain and protocol, but offering specific functionalities or services.

Key Details:

Type I DApps: These are fundamental blockchain platforms, like Bitcoin or Ethereum, which have their own blockchain and provide a foundation for other applications.

Characteristics of Type II DApps: Type II DApps leverage the infrastructure of Type I DApps but add additional functionality through smart contracts or protocols. For example, protocols such as ERC-20 tokens or ERC-721 NFTs are built on Ethereum and utilize Ethereum's underlying blockchain and consensus protocol.

Integration: By utilizing both the blockchain and protocol of a Type I DApp, Type II DApps inherit the security, decentralization, and features of the underlying Type I platform, which simplifies their development and ensures compatibility.

In summary, B. Using the blockchain and protocol of a type I accurately describes the categorization of Type II DApps.

Answer : A

Augur is a decentralized, blockchain-based predictions market built on the Ethereum network. It enables users to create and participate in markets based on the outcome of real-world events, using smart contracts to automate the process and secure transactions.

Key Details:

Ethereum-Based: Augur utilizes the Ethereum blockchain to facilitate the creation and settlement of prediction markets. It leverages Ethereum's smart contracts to ensure transparency, immutability, and trustless interactions.

Decentralized Prediction Market: In Augur, users can bet on the outcome of various events, ranging from sports to elections. The decentralized nature of the platform ensures that no central authority controls the markets, providing a level of censorship resistance.

Token Usage: Augur uses a token called REP (Reputation) that holders use to report and dispute outcomes of events on the platform. This ensures that the market outcomes are validated in a decentralized manner.

Thus, A. Augur is the correct answer, as it is a blockchain-based prediction market built on Ethereum.