Lecture 4

Question 1

How does a soft fork arise?

Answer 1

when 2 minors solve a block at the same time

Question 2

How is it decided which block is accepted?

Answer 2

Longest chain rule, whichever block has another block created on its chain first

Question 3

What is an orphan block?

Answer 3

the invalid block that is not going to continued to be mined on

Question 4

What is a mempool?

Answer 4

where transactions are stored and sorted before being added to the new block

Question 5

What are the limitations of bitcoin?

Answer 5

• size of the block, limits transactions per second (7 a second compared to visa 1700)
• Concern of EDSA and SHA-56 may be broken in the future

Question 6

How do they want to change the protocol?

Answer 6

introduce features on how bitcoin works

Question 7

How is the change in protocol funded and who is their supporter?

Answer 7

Sponsership programme, MIT

Question 8

What is the challenge of the changes of protocol?

Answer 8

Some nodes upgrade, others don’t leading to blockchain forks

Question 9

What is a Bitcoin improvement proposal (BIP)?

Answer 9

the formal process used by the Bitcoin community to propose ideas, suggest changes, and make improvements to Bitcoin

Question 10

Who can propose a BIP?

Answer 10

Anyone, anywhere in the world

Question 11

What is included in the process of a BIP?

Answer 11

Submission, discussion, copy-editing, acceptance then publication on GitHub

Question 12

What does acceptance of a BIP depend on?

Answer 12

User/ Minor adoption

Question 13

What are the characteristics of a soft fork?

Answer 13

-backwards compatible
- non-upgraded nodes will recognise new blocks as valid
- my require a minimum rate of adoption to take effect (51%)

Question 14

What are the characteristics of a hard fork?

Answer 14

• not compatible with older software
• non-upgrades nodes will not recognise new blocks as valid
• they are mandatory

Question 15

What is the purpose of Segwit soft fork?

Answer 15

Addresses malleability and scalability issues, expected to double throughput of network

Question 16

How is Segwit soft fork enabled and what did it contribute to between 2018 and 2020?

Answer 16

enabled by removing transaction signatures from blockchain, contributed to transaction fees dropping

Question 17

What changes did the Taproot soft fork bring in?

Answer 17

• Schorr signatures (rather than ECDSA)
• Smart contacts
• Updates script coding language to transcript

Question 18

What happened in the bitcoin hard fork and what was the consequence?

Answer 18

Bitcoin core upgraded from 0.7 to 0.8, Gavin Anderson disagreed and went back to 0.7 creating a hard fork.
consequence was a case of £10,000 double spending and £26,000 block rewards foregone by minors who worked on 0.8

Question 19

What are the key differences between bitcoin and bitcoin cash?

Answer 19

• bitcoin has 1MB max, cash has 8MB
• Signatures can be discarded from bitcoin chain, on cash must be validated and secured on chain
• Bitcoin has single centralized development team, cash has multiple independent development teams
• BTC has off-chain payment channels, cash has on-chain transactions

Question 20

What is are the 3 elements of the management triangle?

Answer 20

Price, Quality and speed, can only have 2/3

Question 21

What are the 3 elements of the scalability triangle?

Answer 21

Distributed, Fast and Secure, can only have 2/3

Question 22

What are the 3 blockchain categories?

Answer 22

1. Public blockchains - anyone can read, send transactions and participate in consensus process
2. Consortium blockchains - consensus process controlled by pre-selected set of nodes
3. Fully private blockchains - write permissions centralized to one organisation

Question 23

What are the advantages of open blockchains?

Answer 23

• protect users from developers
• organic democracy
• code-law

Question 24

What are the advantages of private blockchains?

Answer 24

• Rules of blockchain can be easily changed
• Validators are known
• Cheaper transactions (fewer node verifications needed

Question 25

What are the 2 main arguments for why code-law may be a good idea?

Answer 25

1. Cost savings - more transparency and better security
   - reduces freedom of choice
   - prevents the market from deciding on optimal amount of consumer protection
2. places responsibility on parties to monitor reducing moral hazard issues

Question 26

What are the questions that code-law has trouble answering?

Answer 26

• Who is liable when a hack or mistake occurs?
• who is responsible for recourse and restitution
• who has a contractual obligation to validate
• who can enforce rulings of disputes

Question 27

What is a 51% attack?

Answer 27

an attack on a blockchain by a group of miners who control more than 50% of the network’s mining hash rate. Attackers with majority network control can interrupt the recording of new blocks by preventing other miners from completing blocks.

Question 28

What are the strategies to organise a 51% attack?

Answer 28

• brute force - invest enough to double existing CPU power (costs £200m)
• Artifice - create a false code that looks like the real one
• Splintering - create lots of forks quickly, causes irreversible chaos
• Temptation - incentivize people to use a malicious version of the code