Written Questions

Question 1

Please name the six main principles underlying blockchain technology.

Answer 1

1. Distributed Database
2. Peer-to-peer
3. Transparency with Pseudonymity
4. Irreversibility of Records
5. Transaction Speed
6. Computational Logic

Question 2

Explain: Distributed Database

Answer 2

It is a database in which the ledger is replicated in a large number of identical databases. Each participant in a blockchain has access to the entire database and no single participant controls the data or the information. Transaction records of a partner can be verified directly without a need for third-party intermediaries.

Question 3

Explain: Peer-to-peer Transmission

Answer 3

Communication occurs directly between peers without the need for central coordination. Peer nodes simultaneously functioning as both “clients” and “servers” to the other nodes on the network

Question 4

Explain: Transparency with Pseudonymity

Answer 4

Transactions occur between blockchain addresses and are visible to anyone with access to the system. When changes are entered in one copy, all other copies are simultaneously updated. Users on a blockchain have a unique alphanumeric address that identifies them. Users can remain anonymous or provide proof of their identity to others.

Question 5

Explain: Irreversibility of Records

Answer 5

Once a transaction is entered in the database, the records cannot be altered. Various computational algorithms are deployed to ensure that the recording on the database is permanent and available to all others on the network.

Question 6

Explain: Transaction Speed

Answer 6

Transactions on the blockchain-based system are completed and verifiable within seconds without human intervention.

Question 7

Explain: Computational Logic

Answer 7

The digital nature of the ledger means that users can

set up algorithms and rules that automatically trigger transactions between nodes.

Question 8

Please briefly name and explain the two main security issues of the Bitcoin blockchain.

Answer 8

Sybil Attack: Because the identities are based on an anonymous public key, users can run multiple nodes and have many accounts. The Proof of Work mechanism is essential to prevent users from taking advantage of this.

51% Attack: Because the consensus mechanism is effectively a majority vote, an adversary with 51% of computational power of the system can change the protocol, even allow double spending. However, this is not likely to happen on a protocol like Bitcoin.

Question 9

Briefly explain and contrast public and private blockchains. Please also give two real-world examples for each private and public blockchains.

Answer 9

Public blockchain: These blockchains are intended to dispose of the requirement for a middleman and designed to be accessible by anyone with a computer and Internet access. Public blockchains are most applicable where a pure decentralized transaction is needed. Examples are Bitcoin blockchain and others like Ethereum, IOTA, and more.

Private blockchain: In a private blockchain, a company sets up a permission network where all the participants are known and trusted. Access to the network-
ing system is restricted. It is used for internal processes within companies or for processes between a limited set of companies. Examples are: Hyperledger Fabric, Quorum and Ripple.

Question 10

According to IBM, there is an opportunity to use blockchain to solve existing business problems if the use of blockchain fulfills at least one of the three criteria. Please name these three criteria!

Answer 10

• New markets, new services
• Reducing costs
• Supporting regulator compliance

Question 11

Briefly explain the concept of “Smart Contracts”:

Answer 11

Smart contracts are virtual contracts using the Ethereum platform, which are entered into without human intervention. They are based on a sequence of coded events that automatically verify and execute the agreed terms of the contract. The terms therein are recorded in a computer rather than hard-copy legal language. The system involves a decentralized platform run on a custom-built blockchain that has smart contracts and which Ethereum alleges is run “exactly as programmed without any possibility of downtime, censorship, fraud or third-party interference.” There are no intermediaries such as clearing houses in as much as they are linked to DLT.

Question 12

explain hard caps vs soft caps.

Answer 12

A soft cap is typically the least amount of funds a project needs to exist. In other words, it is the amount of capital a team aims to raise at a minimal level. Conversely, the hard cap is the absolute highest limit that the team would take (given the tokens available at the ICO stage).

Question 13

What FOMO means? explain it.

Answer 13

It is a marketing mechanism.

Fear Of Missing Out.

Question 14

According to IBM, critical success factors for blockchain in business network:

Answer 14

• cross-organizational
• consensus
• joint rules

Question 15

According to IBM, critical success factors for blockchain in need for trust:

Answer 15

• immutability
• finality
• provenance

Question 16

Explain what is proof-of-work:

Answer 16

In order to implement a distributed timestamp server on a peer-to-peer basis, you need to use a proof-of-work system.

The proof-of-work involves scanning for a value that when hashed, the hash begins with a number of zero bits. The proof-of-work also solves the problem of determining representation in majority decision making.

Question 17

Describe the concept of blockchain:

Answer 17

Blockchain is a decentralized, continuously growing list of record (called blocks) shared across a peer-to-peer network. This blocks are linked and secured using cryptography.