digital currency

Question 1

digital currency

Answer 1

• currency that exists in electronic form only
• it has no physical form and is essentially a database
• can be transferred between accounts during transactions
• uses a central banking system

Question 2

central banking system

Answer 2

• must pass though a central bank before reaching the recipient
• problems: confidentiality and security

Question 3

cryptography

Answer 3

• a form of digital currency that uses a chain of decentralised computers to control and monitor transactions
• uses cryptography to track transactions and the amount of money in the system is monitored
• traditional digital currency is regulated by central banks and governments
• this means all transactions and
  exchange rates are determined by these two bodies. - - all the rules are set by the cryptocurrency community itself.
• cryptocurrency transactions are publicly
  available

Question 4

blockchaining

Answer 4

a decentralised database where all
transactions are stored; it consists of a number of
interconnected computers but not a central server

Question 5

cryptography

Answer 5

– the protection of data/information by use of
coding; it usually involves encryption and decryption

Question 6

blockchain uses

Answer 6

• cryptocurrency (digital currency) exchanges
• smart contracts
• research (particularly within pharmaceutical companies)
• politics
• education.

Question 7

blockchain: process

Answer 7

• all transaction data is stored on all computers in the blockchain network.
• whenever a new transaction takes place, a new block is created
• each block contains:
  1. a hash value: a unique value generated by an
  algorithm
  2. data: name of sender and recipient,
  amount of money, etc
  3. previous hash value
• hash value includes a time stamp

Question 8

time stamp

Answer 8

• a digital record of the date and time that a data
  block is created in blockchain networks

Question 9

genesis block

Answer 9

• Block 1 is known as the genesis block since it doesn’t point to any previous block

Question 10

proof-of-work

Answer 10

– the algorithm used in blockchain networks
to confirm a transaction and to produce new blocks to add to the chain
- special users called miners complete and
monitor transactions on the network for a reward

Question 11

benefits of blockchain

Answer 11

• hard to hack into the blockchain since
  they have to attack every single block in the chain at the same time.
• it only takes one block to break the link for any transaction to be terminated.
• when a new block is created, it is sent to each computer in the blockchain and is checked for correctness before being added to the blockchain.
• if a new network user is created, they get a copy of everything in the whole blockchain system.