CAIA - CIT 9 - Blockchain and Financial Market Innovation

Question 1

A new approach to database architecture is ___ technology or ___ ___ ___ (___).

Answer 1

A new approach to database architecture is blockchain technology or distributed ledger technology (DLT).

Question 2

The terms blockchain and distributed ledger are often used interchangeably; however, ___ is considered the more general term.

Answer 2

The terms blockchain and distributed ledger are often used interchangeably; however, DLT is considered the more general term.

Question 3

The key elements of a DLT network are:

1. D
2. C
3. N

Answer 3

The key elements of a DLT network are:

1. Digital ledger

2. Consensus mechanism to confirm transactions

3. Network of users/node operators

Question 4

Compared to traditional database architectures, 2 of blockchain’s key benefits are:

1. B
2. N

Answer 4

Compared to traditional database architectures, 2 of blockchain’s key benefits are:

1. Broad accessibility

2. No Centralized control

Question 5

The elements of a distributed ledger that enable future efficiency gains are:

1. D
2. I
3. C

Answer 5

The elements of a distributed ledger that enable future efficiency gains are:

1. distributed nature

2. immutability

3. consensus mechanism

Question 6

The ___ of a ledger implies that, once a transaction is added to the ledger, it cannot be changed or deleted.

Answer 6

The immutability of a ledger implies that, once a transaction is added to the ledger, it cannot be changed or deleted.

Question 7

A ___ is a set of characters associated with a block that is easy to verify.

Answer 7

A hash is a set of characters associated with a block that is easy to verify.

Question 8

What are the steps to add a transaction to a blockchain:

1. O
2. B
3. A
4. C
5. T

Answer 8

What are the steps to add a transaction to a blockchain:

1. Owner A is verified: A & B agree to transaction
2. Block is created
3. A & B sign with digital signatures.
4. Cryptographic hash is calculated
5. Transaction is confirmed via consensus mechanism

Question 9

Blockchain may be constructed as ___ or ___and ___or ___.

Answer 9

Blockchain may be constructed as public or private and permissionless or permissioned.

Question 10

With a ___ ___, new transactions are added to the blockchain by any person via a cryptographic consensus mechanism.

Answer 10

With a permissionless network, new transactions are added to the blockchain by any person via a cryptographic consensus mechanism.

Question 11

With a ___ ___, only certain members can control confirmation of transactions.

Answer 11

With a permissioned network, only certain members can control confirmation of transactions.

Question 12

Bitcoin is a ___ network

Answer 12

Bitcoin is a permissionless network

Question 13

Applications of blockchain technology in financial markets will likely use ___, ___blockchains due to these markets’ traits:

1. T
2. C
3. P

Answer 13

Applications of blockchain technology in financial markets will likely use private, permissioned blockchains due to these markets’ traits:

1. trusted intermediaries
2. complete transparency not always desired
3. participants needing to meet regulatory requirements

Question 14

Permissioned systems need (more/less) computing power.

Answer 14

Permissioned systems need less computing power.

Question 15

The bitcoin blockchain uses a ___ ___ ___consensus mechanism.

Answer 15

The bitcoin blockchain uses a proof of work consensus mechanism.

Question 16

A ___ ___ ___consensus mechanism entails individuals validating a transaction, reaching consensus about the data by solving a computer problem, and then adding the block to the blockchain.

Answer 16

A proof of work consensus mechanism entails individuals validating a transaction, reaching consensus about the data by solving a computer problem, and then adding the block to the blockchain.

Question 17

(Newer/Older) blocks are more difficult to change.

Answer 17

Older blocks are more difficult to change.

Question 18

These are the most common potential applications of blockchain technology:

1. D
2. D
3. D
4. S

Answer 18

These are the most common potential applications of blockchain technology:

1. Digital assets

2. Digital currencies

3. Digital record keeping

4. Smart contracts

Question 19

Digital assets should reduce ___ ___ ___.

Answer 19

Digital assets should reduce trade settlement time.

Question 20

There are 2 broad categories of challenges associated with blockchain technology: A) ___ and ___and B) ___

Answer 20

There are 2 broad categories of challenges associated with blockchain technology: A) technical and business and B) regulatory

Question 21

Technical and business challenges include:

1. E
2. L
3. L
4. I
5. P
6. S
7. I
8. S
9. A
10. N
11. I

Answer 21

Technical and business challenges include:

1. Efficiency
2. Legal uncertainty
3. Liquidity
4. Immutability
5. Privacy
6. Scalability
7. Interoperability
8. Security
9. Achieving consensus
10. No standardization
11. Intellectual property

Question 22

Since a ledger is distributed to all blockchain participants, any ___ changes must be approved by all participants

Answer 22

Since a ledger is distributed to all blockchain participants, any protocol changes must be approved by all participants

Question 23

Scaling DL systems represents a challenge, particularly for ___ blockchains.

Answer 23

Scaling DL systems represents a challenge, particularly for permissionless blockchains.

Question 24

The regulatory challenges associated with blockchain technology are ___ and ___ ___

Answer 24

The regulatory challenges associated with blockchain technology are uncertainty and currency control