TOPIC 2 - BITCOIN/BLOCKCHAIN Flashcards
Whats a software protecol that allows multiple parties to operate
Blockchain
What data can be in a blockchain
Anything
Some people think of a blockchain as what
append only transaction ledger
What properties does blockchain have
Being quickly and easily accessed and shared by many parties
What network is a blockchain
a distributed and decentralized network
What does blockchain being “distributed mean”
Removes single point of failure
What does blockchain being decentralized mean
Removes central authority
What does blockchain being immutable mean
Can add to it but hard to alter its history
How are updates given
Packaged in blocks and chained together to allow an audit of prior history
Ledger is broken up into what
Blocks
Every block contains what
A hashed reference to the block before
What does blockchain being cryptographically secured mean
last line is repated as the first line in the next block
What makes up blockchain
Blocks + chain
Every blockchain setup is what
Different
What are transaction participants
Sender and receiver
What are transaction amounts
How much the bitcoin is plus transaction fee
What needs to happen over a purchase
Proof the sender has the amounts being sent
What proof from the seller is needed
Proof the sender is authorizing the transaction
What is another phrase for public key
Verification key
What is a public key
Public addresses - How others transact with you
Another phrase for private key
Signing key
What is a private key
A password
Is it easy to generate a public key and what with
Yes with a private key
To authorize a transaction you do what
Sign over using a digital signature
Other user can verify you have the private key
can observe your signature and public key
What is in a block
A batch of transactions
A hash of the previous and current bock
A nonce
A timestamp
What is a nonce
Random number
Any user can authorize what
A block
Bitcoin blockchain incentive’s users to authorize how
Paying the people with free bitcoin
Authorizing a new block involves what
Proof of work
Blockchains have what protocols
A consensus protocols
what is the consensus protocol
Set of rules that determine what kinds of blocks can become part of the chain
What are consensus protocols designed to do
resist malicious tampering with a blockchain
What is bitcoins proof of work
Bitcoin’s consensus protocol
Proof of work relies on what
A computational lottery to determine which block to add
The participants agree what
That the longest chain of blocks is the “true” blockchain
For an attacker to be guaranteed success they need what
More than 50% of the networks computational power
Why is attacking bitcoin hard
Buying a majority of the computational power is very expensive so very unlikely
Miners group what
Transactions together and make sure they are valid and add a nonce
How do miners compete in the lottery
By trying to get a very small value of the hash by cycling through different nonces
What do miners get that solve the problem
3.125 bitcoins - reward halves every 4 years
Transaction fees
When a miner solves the task they do what
Broadcast it to every time they solve the puzzle
Difficulty of the hashtag problem is re calibrated how often
every 2 weeks
How often should a block be solved
every 10 mins
Whats the proof of work with the lottery
As the hash has so many leading zeros is it very difficult so a hack is highly improbable
Strength of proof of work
Great security
Weakness in proof of work
Electricity cost of mining is enormous and transactions per second are small
name of 2 blockchains
Permissionless blockchains
Permissioned blockchain
Characteristics of a permissionless blockchain
anyone can join the network
Low processing time
Bitcoins blockchain
Characteristics of permissioned blockchains
can put restrictions on who joins
Faster processing time as no proof of work
Bitcoin was once thought of a method for what
Criminal transactions
Has the finance industry came around to bitcoin
Yes
What can blockchain technology do
verification of ownership
Efficient exchange of ownership
What is verification of ownership
Can quickly check the immutable history recorded on a blockchain
What is efficient exchange of ownership
Allows for direct transactions without trusted third party
Everybody treated the same
Why remove the trusted 3rd party
No gatekeeper controls access
No ability to change ledger arbitrarily
No single point failure
Why is no trusted 3rd party good for
Fees
big picture implications of blockchain
Removal of many middle people
Trust in the network rather than government
Near zero transaction costs
Financial inclusion for the unbanked
