Unicorn Academy › Cryptocurrencies

Cryptocurrencies: 45 questions and answers

The questions from the Cryptocurrencies course, each with the correct answer and a short explanation. Learn the topic step by step in the Unicorn Academy app.

1. Beyond bitcoin

What do many cryptocurrencies created after bitcoin do?

They use the blockchain for things other than simple payments too Some copy bitcoin, others have different purposes.

Which element is worth looking at to tell a cryptocurrency apart?

How new units are issued What the network does and who really runs it also matter.

Does a listing on an exchange guarantee a project's soundness?

No, it says nothing about its soundness Many listed projects later disappeared.

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2. Ethereum and smart contracts

When was the Ethereum network launched?

On 30 July 2015 Its cryptocurrency is called ether.

What is a smart contract?

Code on the blockchain that executes automatically Once published, it normally cannot be changed.

How is gas paid on Ethereum?

In ether Gas is the fee for every operation.

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3. Proof of stake

What changed with the Merge of 15 September 2022?

Ethereum switched to proof of stake Energy consumption fell by more than 99%, according to the Ethereum Foundation.

What is the stake?

The cryptocurrency locked up as collateral by validators Anyone who misbehaves loses part of it.

What risk does proof of stake present?

Greater concentration among those holding many coins or large platforms Those with more stake have more weight in the network.

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4. Tokens

What is a token?

A digital unit created with a smart contract on an existing blockchain There is no need to build a new network.

What can a token represent?

Voting rights, access to a service or even nothing concrete The content depends entirely on the project.

Why do tens of thousands of tokens exist?

Because creating one costs very little Most have no real use and no liquid market.

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5. Stablecoins

What is a stablecoin for?

Moving around the cryptocurrency world without suffering volatility It tries to keep a stable value, usually one dollar.

What does the soundness of a reserve-backed stablecoin depend on?

The quality of the reserves and how they are verified The reserves must really exist and be liquid.

Which stablecoins are the most fragile?

Algorithmic ones, without equivalent reserves They rest on automatic mechanisms that can fail.

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6. Decentralised finance

What is DeFi?

The set of financial applications built with smart contracts It includes loans, trading and deposits that pay interest.

Is there always a total absence of human control in DeFi?

No, developers or groups can often change important parameters Decentralisation must be checked project by project.

Is there a deposit guarantee scheme in DeFi?

No High returns depend on risks that are often hidden.

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7. Decentralised exchanges

What does a DEX allow?

Trading tokens from your own wallet through smart contracts There is no need to entrust funds to a platform.

How is the price formed in a liquidity pool?

From the ratio between the two tokens in the pool Trades shift the ratio and therefore the price.

What is impermanent loss?

Having less value than simply holding the tokens when prices move a lot It is the specific risk of those who provide liquidity.

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8. NFTs

What makes an NFT different from an ordinary token?

It is unique and cannot be exchanged one-for-one with another Every NFT has its own characteristics.

Does owning an NFT mean owning the copyright in the work?

Not in itself Often the NFT contains only a link to the file.

What is a typical risk of NFTs?

Low liquidity: there may be no buyer at all Many NFTs became unsellable after the market fell.

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9. Layer 2 and scalability

Why were layer 2s created?

To handle more operations with lower fees The main blockchains have limited capacity.

How does a layer 2 work in general?

It carries out operations off the main chain and records a verifiable summary on it The summary ties the layer 2 to the security of the main chain.

What risk do layer 2s add?

More complex software and operators who in some cases can block operations Greater efficiency, but more possible points of failure.

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10. Bridges and oracles

What is a bridge for?

Transferring tokens from one blockchain to another It locks tokens on one network and issues an equivalent on the other.

Why are bridges frequent targets of attacks?

Because they hold large amounts of funds The biggest thefts in the sector hit bridges.

What happens if an oracle is manipulated?

Smart contracts can take wrong decisions For example they can liquidate loans for no reason.

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11. Tokenomics

What does tokenomics describe?

The economics of a token: supply, allocation and unlocks It explains where tokens come from and when they will reach the market.

Why does the share allocated to founders and early investors matter?

Because when it is unlocked it may be sold and push the price down Scheduled unlocks increase supply on the market.

What does a token that serves only to raise money indicate?

Potentially weak future demand The token must have a real role in the project.

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12. Whitepaper, team and code

What is a whitepaper?

A document presenting the project It describes aims and functioning, without approval by an authority.

What does an anonymous team imply?

A greater risk It is not necessarily a scam, but it makes checks and accountability harder.

Does a code audit remove the risk of bugs?

No, it reduces it but does not remove it Even audited projects have suffered attacks.

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13. Market capitalisation and fully diluted value

How is a cryptocurrency's market capitalisation calculated?

Price multiplied by the units in circulation It is the most quoted measure, but must be read with care.

What does a fully diluted value much higher than the market capitalisation signal?

That a lot of supply will reach the market in the future It also counts units not yet unlocked.

Why is the market capitalisation of thinly traded tokens theoretical?

Because selling even a little can make the price collapse Real liquidity is measured by volumes and order book depth.

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14. Token sales and airdrops

What were the ICOs of 2017 and 2018?

Initial coin offerings, in which a significant share of projects failed or turned out to be fraudulent They raised a lot of money with few protections.

What is an airdrop?

A free distribution of tokens to users who meet certain conditions It serves to raise awareness and distribute the token.

What should you do with unknown tokens in your wallet that invite you to visit a website?

Ignore them They are often used to steal funds.

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15. Staking and returns

What do you get with staking?

Rewards for helping to run a proof of stake network Rewards are paid in the network's cryptocurrency.

If the price falls by more than the rewards, what is the result in euros?

A loss The return is expressed in the same cryptocurrency that is falling.

What do very high staking returns indicate?

Very high risks Return and risk go together.

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