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Lesson # 3
Understanding Stablecoins, Inflation & On-Chain Money
Blockchain Basics
1. What is a primary risk of algorithmic stablecoins like UST?
A. Excessive reliance on fiat reserves
B. Low scalability and decentralization
C. Peg maintenance depends on volatile mechanisms
D. Dependence on centralized banks
2. In token economies, what is one major method used to counteract inflation?
A. Issuing bonds
B. Increasing interest rates
C. Token burns to reduce supply
D. Fiat reserve injections
3. Why did TerraUSD (UST) collapse in 2022?
A. It was hacked through a smart contract exploit
B. Its backing with real-world assets failed
C. Arbitrage incentives broke down during a liquidity crisis
D. MakerDAO governance voted to shut it down
4. What role do oracles play in DeFi protocols like Maker or Aave?
A. They enable smart contracts to make governance decisions
B. They enforce collateral liquidation rules
C. They fetch off-chain data like asset prices to trigger contract logic
D. They lock funds during staking
5. If you deposit $1,000 worth of ETH and borrow $500 in DAI, what is your collateralization ratio?
A. 50%
B. 100%
C. 150%
D. 200%