Blockchain and Crypto Essentials Flashcards
Year that blockchain was established?
2009 (first BTC was mined)
How to confirm transaction in double entry ledger accounting?
Confirm on the ledgers of the two businesses, a credit to one and a debit to the other.
What is consensus?
The mechanism and rules by which nodes agree on the validitity of the past and current blockchain as well as the process of how new txs/info can be added
What is blockchain (block definition)?
A series of chronological snapshots of an updated ledger containing information that is secured with cryptography.
How crypto address is created?
Produced by using a hash function on the public key along with information about the network (depending on the blockchain)
Point of public key encryption vs digital signing
Public key encryption: to secure a message itself
Digital signing: to securely determine the point of origin
Each block has a unique number called what?
Height
Process for a proof-of-work transaction
- Transaction is signed with Sally’s private key and sent.
- A node on the network receives the transaction and verifies the sender’s funds, then places it in the mempool.
- The miner gathers transactions from the mempool, verifies each sender’s funds and signature, and places them together into a potential block.
- Miner then searches for a special hash with leading zeroes by changing the nonce (random number, “number only once”), running computation, repeating until result is a valid hash and block (hash must be below difficulty number).
- The miner then sends valid block to a node, which also checks the block and its transactions, then distributes it to other nodes. Processed tx’s are removed from the mempool.
Blockchain interoperability meaning
Separate blockchains being able to interact with each other
What is the Ethereum Foundation?
Basically supports further research and development for Ethereum
How public key is created?
Mathematically derived from the private key using a complex algorithm
Ethereum established when?
Crowdsourcing campaign - 2014
Ethereum Blockchain launched - 2015
How often is the bitcoin mining difficulty adjusted?
Every 2,016 blocks (~2 weeks)
Wallets hold what?
Private keys associated with a public key address, not actual coins/tokens
Year of first paper outlining blockchain
1991
What is triple ledger accounting?
With an established blockchain, companies can each maintain their own business ledgers, but transactions can also be recorded on the distributed blockchain.
Cryptography definition
Practice and study of techniques (like encryption and decryption) for secure communication
How data is encrypted
Using an algorithm, also called a cipher.
How cryptographic hash functions work?
Takes input string of digital data (numbers, letters, images, videos, ebooks) of any size and uses an algorithm to transform it into a fixed-length result, called a hash or digest.
What does it mean that cryptographic hash functions are irreversible?
Attackers cannot reverse engineer a hash to figure out the original inputs.
How proof-of-stake works
Users of a network stake their shares of the network’s currency to become validators, which then are chosen at random to create blocks based on the agreed-upon rules.
When not creating new blocks, validators are responsible for checking and confirming new blocks (called “attesting”).
What does Ethereum offer beyond Bitcoin?
Bitcoin: currency and ledger (record of transactions)
Ethereum: can be programmed and run computation
How cryptography scrambles a message
Put it through an algorithm before sending. Only ones who can read it are those who know the algorithm.
What does it mean that cryptographic hash functions are deterministic?
The same inputs will always yield the same output