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Blockchain Application for business > Chapter A2. Tech Basics of Blockchain Technology > Flashcards

Chapter A2. Tech Basics of Blockchain Technology Flashcards

1
Q

Bitcoin provides all these desirable properties:

A

Decentralized consensus, ordering,
immutability, fast verification, privacy, integrity, and incentives.

Note: Privacy via public-key cryptography, integrity via digitally signed transactions, ordering and
immutability via chain of hashed blocks and proof of work, fast verification to prevent double
spend via use of UTXOs and Merkle trees, distributed consensus via proof of work and
longest-chain adoption, and incentives from mining rewards and transaction fees

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2
Q

Two security issues of Bitcoin blockchain:

A

1) Sybil Attack: With Bitcoin, because identities are based on anonymous public keys, a user can run multiple nodes and have many accounts. The proof of work mechanism is essential to prevent users from taking advantage of this - their voice in the system is proportional to their computational power.
2) 51% Attack: Because the consensus mechanism “longest chain adoption” is effectively a majority vote, an adversary controlling 51% of the computation power of the system can subvert the protocol, even allow double spend. This is considered an unlikely scenario for a sufficiently widely-adopted protocol like Bitcoin.

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3
Q

The Bitcoin Protocol (Transactions) uses…

A

a peer to peer network of computers

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4
Q

Bitcoin:

Transactions are _________ using _______ cryptography so that it can be verified which public address generated the transaction.

Each transaction is _______ (previously ____ bitcoins) and _____ (going to other addresses plus residual _____ transaction output (UTXO))

A

Transactions are digitally signed using public-key cryptography so that it can be verified which public address generated the transaction.

Each transaction is a collection of inputs (previously unspent bitcoins) and outputs (going to other addresses plus residual unspent transaction output (UTXO).

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5
Q

The Bitcoin Protocol (Blocks)

A

Nodes collect a number of transactions (about 800-1000) and put them into a “block”.

For each transaction, it is important to verify that it involves only unspent coins before allowing it to be added to a block.

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6
Q

The Bitcoin Protocol (Merkle Tree)

A

The transaction stored in each block are stored in a data structure called the Merkle tree that makes it computationally efficient to search through blocks and confirm membership.

Verifying membership of a leaf node requires a log number of computations.

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7
Q

Blockchain capabilities:

1) ______ Currency
2) ______ Ledger
3) ______ Computer

A

1) Decentralized Currency
2) Decentralized Ledger
3) Decentralized Computer

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8
Q

Distributed Ledger Technology is …

A

A type of immutable database to record transactions in chronological order (typically, in the form of a blockchain), that is shared, replicated and synchronized.

It has grown to be commonly used to describe blockchain in finance industry.

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9
Q

Ethereum

A

Is the second generation blockchain.

Live since 2015.

Native token: ETH.

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10
Q

Blockchain Distributed Consensus - Consensus requirements:

A
  • Agreement - all nodes agree on same value
  • Validity - the value that is decided on must be proposed by some node
  • Termination - all nodes eventually decide
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11
Q

Ethereum Smart Contracts

A
  • A smart contract is itself a transaction with a special address
  • Typically written using Solidity, an object-oriented language
  • Variables: Functions, Events
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12
Q

Permissionless and permissioned blockchain, explain it.

A

1) Permissionless (public, anonymous users, slow, proof of work, proof of stake, proof of importance, proof of time-elapsed) - examples: bitcoin, ethreum, cosmos
2) Permissioned (private/consortium/public, identified users, fast, consensus protocols) - examples: Hyperledger Fabric, R3 (Corda), Ripple, Quorum.

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13
Q

Blockchain and Distributed Ledger Technologies:

capabilities and properties

A
  • Value Transfer
  • Trustless interactions
  • Transparency that can be balanced with privacy
  • Immutable Data Storage
  • Temporal ordering
  • Programmable Smart Contracts - Code is run with greater transparency and trust than with server-based cloud computing
  • Robustness due to Decentralized operation
  • Anonymity, confidentiality
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14
Q

The Bitcoin Protocol (proof of Work)

A

All nodes on the network try to create a block. There is a “lottery” that selects one node every ten minutes or so to be the “miner” of the next block.

The lottery is implemented by having all computers try, in parallel, to solve a hard cryptographic puzzle called the “Proof of Work” puzzle.

The difficulty of the puzzle is automatically adjusted over time so that it is harder to solve when there are more nodes - on average 10 minutes to pick a winner.

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15
Q

Hyperledge Fabric:

A
  • all users have to be permissionned in (identified) - no need to slow proof of work.
  • different channels
  • chain code
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16
Q

Stable Coins:

A

While early cryptocurrencies have shown very high volatility in their prices due to speculative trading, there is a need for alternatives that offer a stable price. A number of different approaches are possible to ensure this:
● Fiat-backed stable coins: USDC, Tether, Libra (proposed)
● Algorithmic stable coins: Dai (MakerDAO), Ampleforth

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17
Q

The ideal properties of cryptographic hash function include the following characteristics:
Select one or more:

a. Privacy
b. Secure
c. Deterministic
d. Low Collision

A

b, c and d

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18
Q

Permissionless blockchains are…
Select one or more:

a. Private
b. Public
c. Slow
d. Fast

A

b and c

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19
Q

Distributed Ledger Technology is a type of immutable database to record transactions in chronological order (typically, in the form of a blockchain), that is…

Select one or more:

a. replicated
b. shared
c. synchronized
d. centralized

A

a, b and c

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20
Q

The ideal properties of cryptographic hash function include the following characteristics:

Select one or more:

a. Cost-effective
b. Fast
c. Discontinuous
d. Continuous

A

b and c

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21
Q

Via ________, coins can be moved from one blockchain to another and moved back again.

A

sidechains

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22
Q

The ________ states that any distributed system cannot have consistency, availability, and partition tolerance simultaneously.

A

CAP Theorem

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23
Q

A _________ is a set of steps that are taken by most or all nodes in a blockchain to agree on a proposed state or value.

A

consensus mechanism

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24
Q

Any application or database that is shared by the public is a __________.

A

shared ledger

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25
Q

Proof of Work, Proof of Stake and Proof of Capacity are ______.

A

consensus algorithms

26
Q

Benefits of blockchain technology include…

Select one or more:

a. Cost savings
b. Decentralized trust
c. Scalability
d. Centralized trust

A

a and b

27
Q

A distributed ledger…

Select one or more:

a. always consists of blocks of transactions
b. is always public
c. is always a blockchain
d. stores records contiguously instead of sorting them into blocks

A

d

28
Q

Challenges of blockchain technology include…

Select one or more:

a. Cost savings
b. Decentralization
c. Transparency
d. Scalability

A

d

29
Q

Part of blockchain’s benefits are cost savings and scalability.

Select one:
True
False

A

False

30
Q

All blockchains are distributed ledgers, but not all distributed ledgers are a blockchain.

Select one:
True
False

A

True

31
Q

What is/are characteristic(s) private blockchains?

Select one or more:

a. Part of the blockchain is private, part of it is public
b. Open only to a consortium / group of individuals / organizations
c. Also called permissionless / unpermissioned ledger
d. The ledger is shared only among the members of the group

A

b and d

32
Q

Peer-to-peer means…

Select one or more:

a. no third party for transactions
b. a ledger is spread across the network
c. direct exchange
d. no central controller

A

a, c and d

33
Q

What is/are characteristic(s) of public blockchains?

Select one or more:

a. Distributed consensus mechanism
b. Anyone can participate
c. It is controlled by a single entity
d. All users maintain a copy of the ledger

A

a, b and d

34
Q

The primary challenge of distributed systems is the coordination between nodes and fault tolerance.

Select one:
True
False

A

True

35
Q

Blockchain’s feature of immutability means that once records are added to the blockchain, they cannot be changed.

Select one:
True
False

A

True

36
Q

When was Bitcoin invented? and when was its practical implementation?

A

2008 and 2009

37
Q

What are the main benefits and challenges of blockchain?

A

benefits: decentralized trust, cost savings, transparency and efficiency
challenges: scalability and privacy

38
Q

Is a blockchain a distributed system?

A

yes, blockchain is a distributed system as its core. It is a distributed ledger which can be centralized or decentralized. It is a decentralized-distributed system.

39
Q

__________ are a computing paradigm whereby two or more nodes work with each other in a coordinated fashion to achieve a common outcome

A

distributed systems are a computing paradigm whereby two or more nodes work with each other in a coordinated fashion to achieve a common outcome

40
Q

Nodes can be….

A

honest, faulty, or malicious and they have memory and a processor.

41
Q

A node that exhibits irrational behavior is also knows as….

A

Byzantine node.

42
Q

CAP theorem states that ….

A

a distributed system cannot have all three of the much desired properties, that is, consistency, availability and partition tolerance.

43
Q

two fundamental e-cash issues need to be addreses:

A
  • accountability&raquo_space; required to ensure that cash is spendable only once (double-spend problem)
  • anonymity&raquo_space; is required to protect user’s privacy,
44
Q

secret sharing is a concept…

A

that enables the detection of double spending.

45
Q

blind signatures …

A

allow for signing a document without seeing it.

46
Q

What was the first practical implementation of an eletcronic cash (e-cash) system?

A

Bitcoin.

47
Q

Proof of Work

A

a type of consensus mechanism that relies on proof that adequate computational resources have been spent before proposing a value for acceptance by the network. It is the only algorithm that has proven to be astonishingly successful against any collusion attacks on a blockchain network, such as Sybil attack.

48
Q

What is append-only (blockchain property)?

A

it means that data can only be added to the blockchain in time-ordered sequential order, which implies that once date ia dded to the blockchain, it is almost impossible to change that data and can be considered practically immutable.

49
Q

What is the most critical attribute of a blockchain?

A

It is updatable only via consensus. This is what gives i the power of decentralization. No central authority is in control of updating the ledger.

50
Q

What is a genesis block?

A

it is the first block in the blockchain that is hardcoded at the time the blockchain was first started.

51
Q

What is a nouce?

A

a number that is generated and used only once.

52
Q

What is the Merkle tree used for?

A

to validate the large data structures securely and efficiently. It is used to allow efficient verification of transactions.

53
Q

where is the merkle root present in the blockchain?

A

Merkle root in a blockchain is present in the block header section of a block, which is the hash os all transaction in a block.

54
Q

What is a turing complete language? Is Bitcoin a turing complete?

A

it means that it can perform any computation.

Not, bitcoin’s scripting language is not Turing complete, wheread Ethereum Solidity is.

55
Q

Virtual machine allows _____ to be run on a blockchain as _____.

A

Virtual machine allows turing complete code to be run on a blockchain as smart contracts.

56
Q

Virtual machines are available in all blockchains

TRUE OR FALSE

A

FALSE&raquo_space; Not available on all blockchains.

57
Q

smart contract…

explain the benefits.

A

these programs run on top of the blockchain and encapsulate the business logic to be executed when certain conditions are met. It is enforceable and automatically executable.

it provides flexibility, speed, security and automation for real-world scenarios that lead to a completely trustworthy system with significant cost reductions.

58
Q

Blockchain tiers:

A
  • Blockchain 1.0: (2009-2010) invention of Bitcoin and primarily used for cryptocurrencies
  • Blockchain 2.0: (2010) used by financial services and smart contracts. (ethereum, hyperledger …)
  • Blockchain 3.0: (2012) used in government, health, media, the arts and justice (ethereum, hyperledger …)
  • Blockchain X: It will be an open and distributed ledger with general-purpose rational agents running on a blockchain
59
Q

requirements consensus mechanism:

A
  • agreement
  • termination
  • validity
  • fault tolerant
  • integrity
60
Q

consensus mechanism is…

A

a set of steps that are taken by most or all nodes in a blockchain to agree on a proposed state or value

Blockchain Application for business (14 decks)

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