Free CAIA Level I Digital Assets Practice Questions
Digital assets on CAIA Level I cover blockchain technology, smart contracts, decentralized finance (DeFi), Bitcoin and Ethereum fundamentals, tokenization of assets, and institutional portfolio allocation frameworks for digital assets.
Sample Questions
Question 1
Easy
A smart contract is best described as:
Solution
C is correct.
A smart contract is a program stored on a blockchain that automatically executes predefined actions when specified conditions are satisfied. It removes the need for intermediaries by encoding agreement terms directly into code.
A smart contract is a program stored on a blockchain that automatically executes predefined actions when specified conditions are satisfied. It removes the need for intermediaries by encoding agreement terms directly into code.
Question 2
Medium
In decentralized finance (DeFi), composability refers to the ability to:
Solution
A is correct.
Composability in DeFi refers to the property that allows different protocols and smart contracts to interact seamlessly and be combined to build more complex financial applications. This is often described as "money Legos" because developers can stack protocols on top of each other.
Composability in DeFi refers to the property that allows different protocols and smart contracts to interact seamlessly and be combined to build more complex financial applications. This is often described as "money Legos" because developers can stack protocols on top of each other.
Question 3
Hard
An investor deposits tokens into a protocol that pools them to provide trading liquidity for swaps, to lend to borrowers, and to help secure a Proof of Stake network, aiming to maximize total return across these uses. How is this activity best described?
Solution
A is correct. Yield farming maximizes return by deploying deposited assets across DeFi uses such as liquidity provision, lending pools, and staking. Staking specifically earns rewards for pledging assets to validate transactions on a Proof of Stake network, while liquidity and lending generate fee and interest income.