Practical lecture 1 Flashcards
what are some characteristics of cash?
- no middleman
- are made peer-to-peer
- resistant to censorship
- can verify uniqueness
What is a potential problem with digital assets?
Double spending problem
What is a solution to the double spending problem?
Trusted bookkeeper
What is the deffered net settlement system?
Bank A holds money in correspondent with bank B before the transaction
What is real time gross settlement?
Banks hold reserves in the central bank
What is a bank called if it has an account with the central bank in the UK?
Clearing bank
How do smaller or foreign banks access central bank reserves?
Have to open an account with a clearing bank
How does a centralized system work?
all individual nodes directly linked to centralized server
How does a decentralized system work?
all individual nodes indirectly connected to centralized server through servers connected to centralized server
How does a distributed system work?
all individual nodes linked to each other with no centralized server
What is the goal of Byzantine general problem?
How to enforce trust in a distributed system
what is the solution to the problem of setting up accounts needs permission?
Use public key as account number
what is the public key derived from?
The private key
what is the public key a hexadecimal equivalent of?
email address
What is the private key a hexadecimal equivalent of?
Password
What is the solution to the problem of a single central bookkeeper?
Replicate the books - anyone with access to computer and internet can join network of bookkeepers
What is the solution to the problem of transaction ordering?
Blocks - slowing down data entry process, blocks created every 10 mins on avg
what is the solution to the problem of who can create blocks and how often?
Proof of work
what is the solution to the problem of incentivising block creators?
Transaction fees - block creator gets commission for each transaction
what is the solution to the problem of how to bootstrap?
Block rewards
what is the solution to the problem of more hashing, faster blocks and more monetary supply?
Difficulty - faster past mining increases difficulty, decreases target hash
what is the solution to the problem of block ordering?
A block chain - each block refers to the previous blocks hash which cannot be predicted
what is the solution to the problem of block clashes?
longest chain rule
what is the solution to the problem of double spending?
Wait about 6 blocks
