Quiz: The Landscape in 2025+

Multiple Choice

Question 1. Which of the following best describes Bitcoin's dominant narrative in 2025?

A. Peer-to-peer electronic cash for daily transactions B. A platform for decentralized applications and smart contracts C. Digital gold and store of value, increasingly held by institutions D. A privacy-focused cryptocurrency for anonymous transactions

Answer: C. While Bitcoin was originally conceived as peer-to-peer electronic cash (the literal title of the white paper), its dominant narrative has shifted to digital gold and store of value, reinforced by ETF approvals and institutional adoption. It does not support smart contracts natively (B), and its base layer transactions are pseudonymous, not anonymous (D).

Question 2. What was the significance of The Merge for Ethereum?

A. It increased Ethereum's transaction throughput to 100,000 transactions per second B. It transitioned Ethereum from proof-of-work to proof-of-stake consensus, reducing energy consumption by approximately 99.95% C. It introduced smart contract functionality to Ethereum for the first time D. It merged the Ethereum and Bitcoin blockchains into a single network

Answer: B. The Merge (September 2022) changed Ethereum's consensus mechanism from proof of work to proof of stake. It did not significantly increase throughput (A) — that is the job of Layer 2 solutions and future upgrades. Smart contracts existed on Ethereum from its launch in 2015 (C). Ethereum and Bitcoin remain entirely separate networks (D).

Question 3. Solana's high transaction throughput comes with which notable tradeoff?

A. It cannot execute smart contracts B. Its tokens are not fungible C. It has experienced multiple network outages due to high hardware requirements and validator concentration D. It requires users to pay fees in U.S. dollars

Answer: C. Solana achieves high throughput through aggressive performance optimization and high validator hardware requirements, resulting in a smaller, more concentrated validator set. This has contributed to multiple full network outages. Solana fully supports smart contracts (A), its SOL token is fungible (B), and fees are paid in SOL, not dollars (D).

Question 4. What distinguishes an optimistic rollup from a ZK-rollup?

A. Optimistic rollups are faster; ZK-rollups are slower B. Optimistic rollups assume transactions are valid unless challenged; ZK-rollups prove validity cryptographically before posting to L1 C. Optimistic rollups run on Ethereum; ZK-rollups run on Bitcoin D. Optimistic rollups are centralized; ZK-rollups are decentralized

Answer: B. Optimistic rollups assume transaction validity and allow a challenge period (typically 7 days) for fraud proofs. ZK-rollups generate cryptographic proofs that mathematically verify batch correctness before posting. Both types can achieve high throughput (A is an oversimplification). Both are primarily built on Ethereum (C is wrong). Both can have varying degrees of decentralization (D is incorrect).

Question 5. Which of the following is NOT a primary function of stablecoins as described in the chapter?

A. Providing dollar access in countries with capital controls B. Serving as the unit of account for DeFi protocols C. Replacing central bank monetary policy D. Functioning as settlement rails for cross-border payments

Answer: C. The chapter identifies dollar access, DeFi's unit of account, and settlement rails as primary stablecoin functions. Stablecoins do not replace central bank monetary policy — they are typically pegged to fiat currencies and depend on the existing monetary system. In fact, stablecoins' value derives from maintaining parity with central bank-issued currency.

Question 6. What is Total Value Locked (TVL) and why is it an imperfect metric?

A. The total market cap of all cryptocurrencies; imperfect because prices are volatile B. The total cryptocurrency deposited in DeFi protocols; imperfect because it double-counts assets deposited across multiple protocols C. The total number of tokens in existence; imperfect because many tokens are inactive D. The total transaction volume on all blockchains; imperfect because it includes wash trading

Answer: B. TVL measures the cryptocurrency deposited in DeFi smart contracts. It is imperfect because the same underlying asset can be deposited, receive a derivative token, and that derivative can be deposited elsewhere — a single dollar of value appears in multiple protocols' TVL counts. This is distinct from market cap (A), token supply (C), or transaction volume (D).

Question 7. The chapter describes the NFT market as having experienced a "boom" and "bust." Which of the following survived the downturn?

A. All major NFT collections maintained their peak valuations B. Digital art platforms serving collectors, gaming assets, and real-world asset tokenization found more sustainable footing C. The speculative flipping model became the dominant long-term use case D. NFT trading volumes returned to 2021 peak levels by 2025

Answer: B. The chapter identifies digital art (for collectors rather than speculators), gaming assets, identity/credentials, and real-world asset tokenization as surviving use cases. Most collections lost nearly all value (A is wrong). Speculative flipping largely collapsed (C is wrong). Volumes remained far below peak levels (D is wrong).

Question 8. What is MiCA?

A. A cryptocurrency created by the European Central Bank B. The EU's comprehensive regulatory framework for crypto-assets, establishing licensing, reserve, and disclosure requirements C. A decentralized exchange operated by the European Union D. A stablecoin backed by a basket of European currencies

Answer: B. The Markets in Crypto-Assets Regulation (MiCA) is the European Union's comprehensive crypto regulatory framework, which began implementation in 2024. It is not a cryptocurrency (A), an exchange (C), or a stablecoin (D). It is legislation that regulates crypto-asset service providers operating within the EU.

Question 9. According to the chapter, approximately how many monthly active developers work in the blockchain ecosystem?

A. 500-1,000 B. 20,000-30,000 C. 500,000-1,000,000 D. 5,000,000+

Answer: B. Electric Capital's developer reports estimate roughly 20,000-30,000 monthly active developers in the blockchain space. This is small compared to major programming ecosystems (JavaScript has millions of developers) but represents consistent growth over time.

Question 10. Which statement best characterizes the chapter's overall assessment of the blockchain ecosystem in 2025?

A. The technology has failed and will likely disappear within a decade B. Blockchain will replace all traditional financial infrastructure within five years C. The ecosystem is real and growing but remains small relative to traditional finance, heavily concentrated, and significantly driven by speculation D. The technology is mature and has achieved mass adoption

Answer: C. The chapter's assessment is deliberately balanced: the ecosystem is "simultaneously smaller than the hype suggests and larger than the skeptics admit." It is real (billions in daily activity), concentrated (Bitcoin and Ethereum dominate), and still significantly speculative. It has neither failed (A) nor achieved the revolutionary disruption promised by its most enthusiastic advocates (B, D).

Short Answer

Question 11. Explain the difference between a Layer 1 blockchain and a Layer 2 solution in two to three sentences. Give one example of each.

Model answer: A Layer 1 blockchain (e.g., Ethereum) is a base protocol that provides its own consensus mechanism and security guarantees. A Layer 2 solution (e.g., Arbitrum) is a protocol built on top of a Layer 1 that processes transactions off the main chain while inheriting the L1's security. The L2 achieves lower costs and higher throughput by executing transactions in a separate environment and periodically posting compressed data or proofs to the L1 for final settlement.

Question 12. The chapter describes three different types of stablecoins represented by USDT, USDC, and DAI. What is the fundamental architectural difference between DAI and the other two?

Model answer: USDT and USDC are centralized, fiat-backed stablecoins — they are issued by private companies (Tether and Circle, respectively) that maintain reserves of traditional assets (primarily U.S. Treasury bills and cash) in bank accounts. DAI is a decentralized, crypto-collateralized stablecoin — it is generated through overcollateralized loans managed by smart contracts on the MakerDAO protocol, with no single company controlling its issuance or able to freeze individual holdings. DAI's backing comes from crypto assets locked in smart contracts rather than dollars in a bank.

Question 13. Name two specific challenges facing DAO governance as described in the chapter.

Model answer: (Any two of the following) (1) Low voter participation — typically only 5-15% of governance tokens vote on proposals, meaning most decisions are made by a small minority of token holders. (2) Concentration of voting power among large holders ("whales") and founding teams, which can undermine the decentralized governance model. (3) High coordination costs — making decisions through on-chain voting is slow and cumbersome compared to traditional organizational structures. (4) Difficulty responding quickly to changing conditions.

Question 14. Why does the chapter suggest that Ethereum's transaction count on its base layer alone is not a complete picture of Ethereum's activity?

Model answer: Ethereum's base layer processes roughly 1-1.2 million transactions per day, but Layer 2 rollups built on Ethereum (such as Arbitrum, Optimism, Base, zkSync, and StarkNet) collectively process several times more transactions. These L2 transactions ultimately settle on Ethereum and inherit its security, so they are part of the Ethereum ecosystem even though they do not appear in base layer transaction counts. By 2025, L2s process more Ethereum-ecosystem transactions than the L1 itself, validating Ethereum's rollup-centric scaling strategy.

Question 15. The chapter states that the crypto ecosystem is "dependent on speculation." Identify one piece of evidence from the chapter that supports this claim and one piece of evidence that suggests the claim is too broad.

Model answer: Supporting evidence: Much of the transaction volume and market cap is driven by trading rather than "real economy" use cases; the NFT market was primarily a speculative mania; market capitalization fluctuates dramatically based on sentiment rather than fundamental adoption metrics. Evidence the claim is too broad: Stablecoins serve genuine non-speculative use cases (dollar access in restricted markets, cross-border payments, settlement); DeFi protocols process billions in real lending and trading; Lightning Network adoption in developing countries addresses genuine payment needs; developer activity represents building, not speculation.