Basics from Alden Flashcards
How are bitcoin transactions secured?
multiple processors encrypt and verify, earning coins and transaction fees in the process
Where are bitcoins stored?
Not in any central place - all distributed ledgers in the network
How are bitcoins accessed?
through an encypted private key
How are bitcoin private keys stored?
often on a hardware device, but can be a memorized seed phrase
How does btc have scarcity?
software limited to 21 million coins, protected by decentralization
What threatens bitcoin’s scarcity?
any number of competing cryptocurrencies, including government-backed
How does the network effect enhance bitcoin’s security?
a low network effect in the form of low adoption and low hash rate makes a coin vulnerable to takeover by a single actor with enough processing power
What 2 resources are needed to mine bitcoin?
hardware (special processors) and energy (processing power to solve the puzzles)
How are the resources needed to mine bitcoin adjusted with demand?
the difficulty of the puzzles adapts to demand, up or down
How is the difficulty of the puzzles related to security?
More difficult puzzles increase security of the network
As of 2022, wht advanatages does bitcoin have over other cryptos?
huge network with large hash rate has higher security and trust, first network effect hard to replicate (evidence: not losing a lot of value with FTT crisis)
How do bitcoin exchanges and platforms show an advantage for bitcoin over other coins?
Some take bitcoin only, showing increased trust and network effects. FTT contagion is an example why one would want to avoid other coin scams.
What happens to bitcoin every 4 years?
the number miners earn is cut in half. decreasing supply (and historically increasing prices with sustained demand)
What is the stock-to-flow rate of a commodity?
how many months (years) supply (stock) versus how much is sold in a time period (flow)
How does the 4-year halving affect miners?
inefficient ones (older processors, expensive energy) can’t compete (capitulate)
What bitcoin exchange does Lyn ALden recommend?
Swan Bitcoin
How does the SEC classify Bitcoin?
as a commodity (source: Swan)
How does the SEC classify all other cryptos?
securities (unregistered)
(source: Swan)
What network provides a payment layer on top of bitcoin’s store-of-value layer that may convert it into a medium of exchange?
the Lightning network (source: Lyn Alden, also on Swan)
What is the Dunbar number?
the maximum (humans) in a network, related to size of brain (around 150)
What is ASIC?
application-specific integrated circuit (optimized efficiency for bitcoin algorithm)
Are CPUs or GPUs used for bitcoin?
not any more, too inefficient
What is a 51% attack?
having to do more work than everyone else in the network, to take it over
What is used to encrypt a message?
your public key
What is used to decrypt a message?
your private key
