5.2 Digital currency

Question 1

What is Digital Currency?

Answer 1

A digital currency is a type of currency that
* exists only in electronic form
* is not backed by any physical commodity or government.
* Used for Transactions

Question 2

What is Cryptocurrency?

Answer 2

• a type of digital currency that overcomes security and confidentiality issues, operate on a decentralised network
• uses cryptography (coding information to secure it and prevent unauthorized access) to maintain track of transactions
• uses block-chaining

Question 3

Difference between digital currency and cryptocurrency?

Answer 3

• Cryptocurrency uses cryptography to track transactions
• Digital currency uses a central banking system whereas cryptocurrency is decentralised
• Crypto-currency uses block-chaining

Question 4

Blockchain defination

Answer 4

• Acts like a ledger by tracking each transaction, It keeps a series of timestamped records that cannot be altered
• made up of “blocks” of transactions that are linked together in a “chain” using cryptographic algorithms
• is a decentralised technology

Question 5

Blockchain structure

Answer 5

1. Data
2. Hash Value
3. Previous hash value

Question 6

What happens if one of the blocks in a blockchain is hacked making it altered? e.g. block 4

Answer 6

• Any change in a block will cause the hash value to be changed
• This means the blocks beyond it (block 5, block 6 and beyond) will now be invaild because the chain was brocken between the block that was hacked (block 4) and the block after (block 5)