Cryptocurrency & Digital Assets Flashcards
7 cards from real CPT practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Cryptocurrency & Digital Assets flashcards as text
What is the primary purpose of a crypto 'hard fork'?
Answer: To permanently split a blockchain into two separate chains with incompatible protocol rules
A hard fork creates a permanent divergence in the blockchain where nodes running old software can no longer validate blocks produced by upgraded nodes.
Which consensus mechanism does Ethereum currently use after 'The Merge'?
Answer: Proof of Stake
Ethereum transitioned from Proof of Work to Proof of Stake in September 2022 during 'The Merge', reducing energy consumption by approximately 99.95%.
In cryptocurrency trading, what does 'slippage' refer to?
Answer: The difference between the expected price of a trade and the actual executed price
Slippage occurs when market conditions change between order placement and execution, resulting in a different fill price than expected, especially in low-liquidity markets.
What is a 'crypto whale' in the context of digital asset markets?
Answer: An entity holding a large enough position to significantly influence market prices
Crypto whales are individuals or institutions holding such large quantities of a digital asset that their buying or selling activity can move the market price.
What distinguishes a 'utility token' from a 'security token'?
Answer: Utility tokens provide access to a product or service, while security tokens represent an investment contract
Utility tokens grant holders access to a platform's services, while security tokens represent ownership or profit-sharing rights and are subject to securities regulations.
What is the function of a 'mempool' in Bitcoin and similar cryptocurrencies?
Answer: A temporary holding area for unconfirmed transactions waiting to be included in a block
The mempool (memory pool) is where broadcast transactions wait until miners select them for inclusion in the next block, typically prioritizing higher-fee transactions.
Which risk is MOST unique to cryptocurrency markets compared to traditional equity markets?
Answer: Smart contract vulnerabilities leading to direct asset loss
Smart contract bugs or exploits can lead to irreversible loss of funds directly from user wallets or protocols, a risk with no close parallel in traditional equity markets.