FINC 402 Exam 1

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What does it mean to have an open ledger?

Crypto is an example of an open ledger because it allows everyone to see the details of each transaction.

What do miners get for solving the hash?

Financial rewards paid in crypto by the application which is also known as staking

ETH charges a _______ fee for every transaction?

Gas

Each unit of gas has a price which is shown in?

Gwei

What are the blockchain mechanics?

Hash (made up of nonce, code, and last 2 digits of the previous hash)

What are the cons to using POS?

Holds Not as secure as POW

What kind of ledger are bitcoin transactions stored on?

Immutable

When was the bitcoin white paper published?

In 2009 but the first bitcoin transaction was in 2010 for 2 pizzas at 10,000 bitcoin.

What are some inefficiencies of traditional transactions?

It is a lengthy process, there are multiple intermediaries involved, it is not transparent

What is a distributed ledger?

It is a non centralized ledger that puts a pool of transactions into a block with many copies of the same ledger.

What is the significance of barter?

It is peer to peer which is what bitcoin and crypto was based on.

What happens to your transaction if it does not meet the average gas price?

It will not get approved

What are some issues with distributed ledgers?

Latency (not updating instantly) and synchronization

What is a crypto collaterized stablecoin?

Maker DAO and Synthetix

What is bitcoin & crypto?

Medium of exchange

What is another name for miners?

Nodes

What are non collaterized stablecoins?

Not backed by any underlying asset and use algorithmic expansion and contraction of supply to shift price to the peg.

How can we solve the smart contract issue?

Oracles

Who are miners?

People and technology

What are the cons to charging a gas fee

People may be less likely to buy ETH if they must pay an additional fee and the fee applies to all transactions big or small

What is POS?

Proof of stake

What is the only identifier on public ledgers?

Public keys

What is the hashing algorithm?

SHA-256

What serves as collateral for a loan?

Securities

How did Bankman Fried make his money?

Sent people to Japan bc of spread, ex: "buy in London, sell it in NY"

What is hashing?

Solving the code for an encrypted transaction which results in a stake

Which cryptocurrency has had large controversy?

Tether because it has been proven that there were false statements about dollar backings and losses

What is a gas limit?

The amount of gas a user is willing to pay for a transaction

What is the double spend problem?

The idea that someone purchases something with money that has already been spent elsewhere. Virtually impossible for someone to double spend a bitcoin.

What are two examples of fungible tokens?

US dollars and GBO tokens

What are the cons for using proof of work?

Uses A LOT of energy Costly

What are the pros to using POS?

Uses way less energy (more sustainable) Cheaper

Who created Ethereum?

Vitalik Buterin in 2015

What is a utility token?

fungible tokens that are required to utilize some function of a smart contract system or have intrinsic value proposition defined by respective smart contract system Ex cases for utility tokens: collateral, represent stake, pay app fees, etc.

What do margin requirements do?

govern how much equity the trader must have in total

Margin Call

if the stock prices drops such that the margin is below the maintenance margin level, the trader must add cash or securities to the margin account

How does oracles solve the smart contract issue?

it is a data source that reports information outside of the eth ledger

What are the three characteristics of money?

medium of exchange, unit of account, store of value

What are the benefits to using proof of work?

non hackable extremely secure impossible for hackers to change historical blocks

Hashing is a?

one way function

What is an equity token?

represents ownership of an asset or pool of assets that involves compounding, uniswap, and set protocol

What is the initial margin?

required 50% at original purchase

What is the law of one price?

the notion that a good should sell for the same price in all markets

Margin

the portion contributed by investor

What is spread?

the spread/different interest rates

What is volatility?

time series of past market prices

How does the ERC-20 interface work?

total supply, balance of (address), transfer from, approve amount? Associated with fungible tokens

What is buying on margin?

using a loan to finance a portion of the purchase price

How did bitcoin solve the double spending problem?

using a peer to peer distributed timestamp showing all transactions and proof of money in the account to finalize the transaction

Hyperinflation

A very rapid rise in the price level; an extremely high rate of inflation. (When interest or purchases of crypto rise, the price per share rises)

What is margin?

% equity in margin account

What is the probability of guessing a nonce?

(1/16)^17

What are the three types of stablecoins?

1) Fiat collaterized 2) Crypto collaterized 3) Non collaterized

What things can a distributed ledger store?

1) Financial transactions 2) Property Records 3) Shipments and inventory 4) Grades

What are five issues of the current banking system?

1) Transactions take a long time 2) Limited access (can't always borrow/not everyone has a bank) 3) Centralized control (one entity controlling interest rates, etc) 4) inefficiency 5) opacity (banks are not transparent

How much gas does one transfer on ETH require?

21,000 gas

What is the reward for miners?

6.25 bitcoin or about 20,000 usd

What is a private key?

A key that associates you with your metamask account. This is a unique identifier that can only be accessed by the user. If password is lost, the account is lost.

What is a nonce?

A number 1-3 that makes the hash equally divisible by three. (must have this to calculate the hash)

What is a smart contract?

A program code that runs on top of a blockchain.

Where bitcoin was designed to be a method of payment, what was ethereum designed to be?

A smart contract platform

What is blockchain?

A technology

What percentage of bitcoin are lost due to lost private keys?

About 20%

ETH is?

Algorithmically encoded and enforced

What are the benefits to charging a gas fee?

Allows the system to run properly

How do you calculate margin?

Amt gained or lost/amt invested. Formula: (N X P) - loan amount/ (N X P)

What is the standard proof of work mining machine?

Antminer S17

What is the benefit of standard ERC-20 AND ERC-721?

App developers can code for one interface and support every possible token that implements that interface.

What is a fiat collaterized stablecoin?

Backed by an off chain reserve of target asset Ex's: Tether (no audit) USDC backed by Coinbase and Circle

Who invented NFT'S?

Bankman Fried

Why didn't the bitcoin arbitrage contract work?

Because prices varied

Which cryptocurrency is associated with POW?

Bitcoin

What was the first cryptocurrency?

Bitcoin, invented by Satoshi Nakamoto in 2009

What is an example of an NFT?

Bored Ape

What is arbitrage surrounding cryptocurrency?

Buying crypto for one price and then exchanging it using different parameters at a different price to make a profit. (offshoring to another country for tax exemptions, etc) buy and sell two or more currencies risk free

How was the issue of synchronization with distributed ledgers solved?

By miners

Tether and USDC are both?

Centralized

What is an example of an oracle?

Chainlink

What does a hash do and where is it contained?

Connects transactions in current time to the previous block to be stored on the last line of code on each block

What are dapps?

Decentralized applications that allow peer to peer contact with no interference.

What two problems does bitcoin solve?

Double spending and eliminating intermediaries

What is the standard for fungible tokens?

ERC-20

What is the standard for NFT'S?

ERC-721

All contracts run on the __________ blockchain?

ETH

Which crypto is considering switching from POW to POS?

ETH

What is an append only ledger?

Each data entry is linked to the previous entry via a hash

What are the types of tokens?

Equity and Utility and governace

What is an immutable ledger?

Essentially an unhackable ledger which requires over 50% of miners to agree to change a block.

What are some problems with bitcoin?

Extremely volatile Highly unstable Very expensive to purchase Finite amount no intrinsic value have to report every transaction to the IRS

What is proof of work?

The verification system that requires miners to verify transactions by solving hash using the nonce

What is the problem with smart contracts?

They are isolated from information that is outside of the ETH ledger

What is a governace token?

They represent % ownership and voting rights

What are stablecoins?

Tokens intended to maintain price parity with some target asset.

What are some pros to ETH?

You get what you put in, convenient, unbiased, and transparent.

Which country is an example of hyperinflation?

Zimbabwe

unit of account

a means for comparing the values of goods and services

store of value

an item that people can use to transfer purchasing power from the present to the future

medium of exchange

anything that is used to determine value during the exchange of goods and services

What are cryptocurrencies?

digital tokens

maintenence margin

during the life of the loan, trader must maintain a certain level of margin


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