Crypto Currency Ref
Merkle Trees are designed to help hide the trace the origination point of a transaction without having to download the entire Bitcoin blockchain.
FALSE
The bitcoind program implements the Bitcoin protocol for remote procedure call (RPC) use for all coins forked from Bitcoin.
FALSE
Definition of cryptography
1 : secret writing 2 : the enciphering and deciphering of messages in secret code or cipher also : the computerized encoding and decoding of information 3 : cryptanalysis
Secure Payment Protocol (BIP70)
1. - Address (wallet automatically retrieves address and amount issued) 2. - broadacasting ( verified and rebroadcasting ) 3. - refunds (easy refunds )
How Bitcoin mining works:
1. A group of transactions are bundled into a memory pool (mempool). 2. Miners verify each transaction in the mempool is legitimate by solving a mathematical puzzle. 3. The first miner to solve the puzzle gets rewarded with newly minted bitcoin (the block reward) and network transaction fees. 4. The verified mempool, now called a [?], is attached to the blockchain. BLOCK
The following process illustrates how digital signature works:
1. Generate the hash of the data. 2. Produce digital signature. 3. Send to recipient. 4. The receiver checks the hash value generated by the sender. 5. Regenerate hash value from the data and match with hash sent by the sender
Tokens and Coins are the same thing in cryptocurrency.
FALSE
Transforming a Plain Text message to Cipher Text There are two primary ways in which a plain text can be modified to obtain cipher text: Substitution Technique and Transposition Technique.
1. Substitution Technique: Substitution technique involves the replacement of the letters by other letters and symbols. In a more straightforward way, the characters of plaintext are replaced, and other substitute characters, numbers and symbols are used at their place. 2. Transposition Technique: In transposition technique, the identity of the characters remains unchanged, but their positions are changed to create the ciphertext.
How Many Satoshis Are In One Bitcoins?
100,000,000
How Many Bitcoins Are Currently Mined With Every New Block?
12.5
What year was Bitcoin created?
2009
How Bitcoin mining works: 1. A group of transactions are bundled into a memory pool (mempool). 2. Miners verify each transaction in the mempool is legitimate by solving a mathematical puzzle.
3. The first miner to solve the puzzle gets rewarded with newly minted bitcoin (the block reward) and network transaction fees. 4. The verified mempool, now called a block, is attached to the blockchain.
When Bitcoin Was First Launched In 2009, How Many Bitcoins Were Mined In Every Block?
50
Consensus Protocol
A Consensus protocol is a set of rules that govern how a system operates. The rules establish the basic functioning of the different parts, how they interact with each other, and what conditions are necessary for a robust implementation.
Which Of The Following Is A True Statement About Digital Signatures?
A Digital Signature Proves That The Correct Private Key Was Used To Confirm The Authenticity Of Data.
WTF is a Merkle Tree?
A Merkle Tree is a method for storing data accurately and securely. This data structure is used with blockchain-based cryptocurrencies such as Bitcoin. The reason why it is called a "Merkle Tree" is because it was invented by a man named Ralph Merkle, and because the actual shape of a Merkle Tree vaguely resembles a tree.
What Is A Bitcoin Payment Processor?
A Service That Accepts Bitcoin Payments From Your Customers On Your Behalf, Forward The Received Funds To You In Either Bitcoin, Local Currency Or Both.
What Is A Multi Sig Wallet?
A Wallet That Requires 2 Or More Signatures In Order For Funds To Be Spent.
What does Cipher mean?
A cipher is a method of hiding words or text with encryption by replacing original letters with other letters, numbers and symbols through substitution or transposition. A combination of substitution and transposition is also often employed. Cipher also refers to the encrypted text, cryptography system or encryption key for the original text. Encrypted text is also known as ciphertext. Plaintext is the original, unencrypted text.
How Cryptocurrency Public Ledgers Work
A cryptocurrency is an encrypted, decentralized digital currency that facilitates the exchange of value by transfer of cryptotokens between network participants. The public ledger is used as a record-keeping system that maintains participants' identities in secure and (pseudo-)anonymous form, their respective cryptocurrency balances, and a record book of all the genuine transactions executed between network participants.
digital signature
A digital signature can be used to unlock outputs, because it shows that we know the private key of an address.
What is Asymmetric Encryption?
A form of computerized cryptography using a dual encryption key to guise electronic message
What does Symmetric Encryption mean?
A form of computerized cryptography using a singular encryption key to guise an electronic message
Gensis Block
A genesis block is the first block of a block chain. The block was created on or after January 3, 2009
What does Hash Function mean?
A hash function takes a group of characters (called a key) and maps it to a value of a certain length (called a hash value or hash). The hash value is representative of the original string of characters, but is normally smaller than the original. Hashing is done for indexing and locating items in databases because it is easier to find the shorter hash value than the longer string. Hashing is also used in encryption. This term is also known as a hashing algorithm or message digest function.
What does Hash Function mean in the cryptocurrency space?
A hash function takes a group of characters and maps it to value of a certain length.
WTF is a hash function?
A hashing function is simply a mathematical function that can take any form of data or any size (numbers, alphabets, media files) and produce a fixed-length output for that particular input. And this output or digest of the hashing function is called Hash.
POS
A key advantage of the Proof of Stake system is higher energy efficiency. By cutting out the energy-intensive mining process, Proof of Stake systems may prove to be a much greener option compared to Proof of Work systems. Additionally, the economic incentives provided by Proof of Stake systems may do a better job of promoting network health. Under a Proof of Work system, a miner could potentially own zero of the coins they are mining, seeking only to maximize their own profits. In a Proof of Stake system, on the other hand, validators must own and support the currency they are verifying.
What does Cipher mean?
A method of hiding words or text by replacing original letters with other letters, numbers and symbols through substitution or transposition.
What is a decryption algorithm?
A method of unencrypting the data.
Block Production
A new block is produced every 10 minutes (equal to 144 blocks per day).
WTF is a node?
A node is any computer that connects to the blockchain network, for instance, any computer connected to the Bitcoin network can be regarded as a Bitcoin node. A full node is a node that fully enforces all of the rules of the blockchain, while a light client (also known as lightweight node) is referencing a trusted full node's copy of the blockchain.
Consensus protocols
A protocol is a set of rules that govern how a system operates. The rules establish the basic functioning of the different parts, how they interact with each other, and what conditions are necessary for a robust implementation. The different parts of a protocol are not sensitive to order or chronology — it doesn't matter which part goes first. A protocol also doesn't tell the system how to produce a result. It doesn't have an objective and doesn't produce an output.
Tokens refer to any cryptocurrency that has a standalone, independent blockchain.
FALSE
What Is A UTXO?
A set of coins That Are Currently Held At An Address.
coinbase transaction
A special kind of transaction, called a coinbase transaction, has no inputs. It is created by miners, and there is one coinbase transaction per block. Because each block comes with a reward of newly created Bitcoins (e.g. 50 BTC for the first 210,000 blocks), the first transaction of a block is, with few exceptions, the transaction that grants those coins to their recipient (the miner). In addition to the newly created Bitcoins, the coinbase transaction is also used for assigning the recipient of any transaction fees that were paid within the other transactions being included in the same block. The coinbase transaction can assign the entire reward to a single Bitcoin address, or split it in portions among multiple addresses, just like any other transaction. Coinbase transactions always contain outputs totalling the sum of the block reward plus all transaction fees collected from the other transactions in the same block. The coinbase transaction in block zero cannot be spent. This is due to a quirk of the reference client implementation that would open the potential for a block chain fork if some nodes accepted the spend and others did not.
When backing Up Your Bitcoin Wallet, As Long As You Copy Your Addresses, Your Bitcoins Are Safe.
FALSE
With distributed consensus, different legal entities can have a master but remain in consensus. Three conditions are critical to support this scenario:
All parties controlling an instance of a database need to come to an agreement on the order of transactions, and commit the transactions to the database in that order. No single party should be able to change or influence the order of transactions. This is a concept called immutability. Stopping the transactions across the community is impossible.
What Is The Secure Payment Protocol In Bitcoin?
An Extension To The Bitcoin Protocol That Derives Private Keys From Addresses In Order To Increase Security.
What does Encryption Algorithm mean?
An encryption algorithm is a component for electronic data transport security
encryption algorithm
An encryption algorithm is a component for electronic data transport security. Actual mathematical steps are taken and enlisted when developing algorithms for encryption purposes, and varying block ciphers are used to encrypt electronic data or numbers. Encryption algorithms help prevent data fraud, such as that perpetrated by hackers who illegally obtain electronic financial information. These algorithms are a part of any company's risk management protocols and are often found in software applications.
Put the following digital signature process flow items in order. 1. The receiver checks the hash value generated by the sender 2. Produce digital signature 3. Generate the hash of the data 4. Regenerate hash value from the data and match with hash sent by the sender 5. Send to recipient
Answer: 3,2,5,1,4
What Does The Acronym ASIC Stand For?
Application Specific Integrated Circuit.
A bank has a website and the website url begins with 'https'. The bank sends and receives payments as part of its business. A client gets the public key from the bank web site and sends passwords and other confidential details to Bank after encrypting it with a public key and the Bank deciphers the details with a private key of the client. What word describes the above.
Asymetric Encryption
The puzzles that are solved under a POW system are [?], meaning it is difficult for miners to solve but the correct answer is easily verified by the network.
Asymmetric
asymmetric encryption
Asymmetric Encryption is a form of Encryption where keys come in pairs. What one key encrypts, only the other can decrypt. Frequently (but not necessarily), the keys are interchangeable, in the sense that if key A encrypts a message, then B can decrypt it, and if key B encrypts a message, then key A can decrypt it. While common, this property is not essential to asymmetric encryption.
Asymmetric Encryption
Asymmetric Encryption is also known as Public Key Cryptography, since users typically create a matching key pair, and make one public while keeping the other secret. Users can "sign" messages by encrypting them with their private keys. This is effective since any message recipient can verify that the user's public key can decrypt the message, and thus prove that the user's secret key was used to encrypt it. If the user's secret key is, in fact, secret, then it follows that the user, and not some impostor, really sent the message. Users can send secret messages by encrypting a message with the recipient's public key. In this case, only the intended recipient can decrypt the message, since only that user should have access to the required secret key.
Asymmetric cryptography
Asymmetric cryptography which can be also called as public key cryptography, uses private and public keys for encryption and decryption of the data. The keys are simply large numbers which are paired together however they are asymmetric means not identical. Public Key is One of the key in the pair can be shared with everyone whereas Private key is the other key in the pair is kept secret; it is called the private key. Any key can be used to encrypt a message then the other key which is not used for encryption is used for decryption.
Difference Between Symmetric and Asymmetric Encryption
Asymmetric encryption takes relatively more time than the symmetric encryption
Difference Between Symmetric and Asymmetric Encryption
Asymmetric encryption was introduced to complement the inherent problem of the need to share the key in symmetrical encryption model, eliminating the need to share the key by using a pair of public-private keys.
Asymmetric Encryption
Asymmetric key encryption helps to resolve a key exchange problem of symmetric key Cryptography. In Asymmetric encryption, Two keys are used to encrypt plain text in asymmetrical encryption. Through the internet or big network, the secret keys are exchanged. It is necessary to notice that anyone with a secret key can decrypt the message, so asymmetric encryption is using two corresponding keys to increase safety.
Role of Consensus Mechanism
At the core of any distributed ledger technology (DLT), there are consensus mechanisms. These mechanisms are the procedures and rules govern how the nodes in a distributed ledger network validate transactions. Another thing that DLT technology is to decide which nodes are chosen for the validation purpose. So, when a new block is generated, it chooses the nodes and assigns them the task to validate the block. All of these are governed by the consensus mechanism chosen by the distributed network.
Why Is The Bitcoin Network As A Whole Considered More Secure When More Hash Power is Added?
Because It Increases The Cost For An Attacker To Reach Over 50% Of The Global Hash Rate.
What Is One Reason Why Web Based Wallets Are Less Secure Than Cold Wallet?
Because The Private Keys Must Be Available On An Internet Connected Machine.
Why do we use digital signatures in Bitcoin?
Because when you make a transaction, you need to unlock the outputs you're trying to use.
Why do we use digital signatures in Bitcoin?
Because when you make a transaction, you need to unlock the outputs you're trying to use. This is done by showing that you "own" the output, and you do this by showing that you know the private key of the address the output is locked to: But if you put your private key in to the transaction data, everyone on the network will be able to see it: And if anyone gets your private key, they can use it to unlock and spend any other outputs that have been locked to that same address.
Permissionless distributed ledger systems are open to everyone for making transactions, validating blocks, and making other forms of interaction with the network.
TRUE
consensus-mechanisms-explained-pow-vs-pos
Behind many cryptoassets, there is a consensus mechanism. The purpose of a consensus mechanism is to verify that information being added to the ledger is valid i.e. the network is in consensus. This ensures that the next block being added represents the most current transactions on the network, preventing double spending and other invalid data from being appended to the blockchain. In addition, the consensus mechanism keeps the network from being derailed through constant forking. There have been a number of different consensus mechanisms devised, each with their own pros and cons. They all serve the same core purpose as described above, but differ in methodology. The primary difference between varying consensus mechanisms is the way in which they delegate and reward the verification of transactions.
Bitcoin Clients
Bitcoin Cients are the actual interfaces to the network
Bitcoin mining pools
Bitcoin mining pools are a way for Bitcoin miners to pool their resources together and share their hashing power while splitting the reward equally according to the amount of shares they contributed to solving a block. Bitcoin mining pools are a way for Bitcoin miners to pool their resources together and share their hashing power while splitting the reward equally according to the amount of shares they contributed to solving a block.
peer-to-peer
Blockchain is a peer-to-peer ledger system that allows peers to transact between them without any centralized authority.
Mining Hardware
CPU GPU FPGA = Field Programmable Gate Array ASIC = Application Specific integrated Circuit
An increasing concern with blockchain networks utilizing Proof of Work systems is the risk of [?].
Centralization
Burning Crypto
Coin burn in cryptocurrencies means sending some of the coins of native cryptocurrency or some other currency to a public address from which those particular coins can never be spent because the private keys of such an address are unobtainable.
Coins
Coins refer to any cryptocurrency that has a standalone, independent blockchain — like Bitcoin.
Which is the most secure way to store bitcoins? 1. Hot wallet 2. Cold wallet 3. Warm Wallet 4. Ice wallet
Cold Wallet
Cold Wallet
Cold wallets are represented by digital asset wallets that are offline, i.e. not exposed to the Internet. They take the form of paper wallets or hardware wallet.
Cryptocurrencies are:
Cryptocurrencies are an Internet-based medium of exchange that uses cryptographic functions to execute financial transactions. Cryptocurrencies use the blockchain technology to be decentralized and to ensure transparent and immutable transactions.
Cryptocurre usage
Cryptocurrencies are more used for payment, its use as a means of speculation and a store of value dwarfs the payment aspects. Cryptocurrencies gave birth to an incredibly dynamic, fast-growing market for investors and speculators.
What Is Cryptography?
Cryptography Is The Science Of Secure Communication In The Presence Of Untrusted Third Parties.
Decryption (further explained)
Data may be encrypted to make it difficult for someone to steal the information. Some companies also encrypt data for general protection of company data and trade secrets. If this data needs to be viewable, it may require decryption. If a decryption passcode or key is not available, special software may be needed to decrypt the data using algorithms to crack the decryption and make the data readable.
Bitcoin Is A Form Of What Network.
Decentralised.
Decryption
Decryption is the process of taking encoded or encrypted text or other data and converting it back into text that you or the computer can read and understand. This term could be used to describe a method of unencrypting the data manually or unencrypting the data using the proper codes or keys.
A Bitcoin Transaction Can Only Be Signed On A Machine Connected To The Bitcoin Network.
FALSE
BIP Stands For Bitcoin Improvement Protocol.
FALSE
Blockchain is a centralized ledger system that allows peers to transact between themselves.
FALSE
deterministic wallets
Deterministic Wallets Can Generate Many Unique Private Keys And Addresses From A Single Master Seed.
Which is not a key difference between a Digital Signature and a Digital Certificate?
Digital Signature and Digital Certificate both are used for ensuring the authenticity of the digital document although these are absolutely different things. A document is digitally signed to protect it from tampering while Digital Certificate increases the trustworthiness of the website.
Which Of The Following Is Not True About Digital Signatures?
Digital Signatures Can Easily Be Forged By Skilled Hackers.
Distributed system
Distributed systems, from the control's perspective, are decentralized, whereas from the location's perspective, they are distributed. This means that no single entity is the owner or authority of the system and the system doesn't have just one location—it is widely distributed. DLT and its type, such as blockchain, are such distributed systems, where control is not with one entity. Hence, no single entity can alter or modify the system (decentralized). Also, DLT and blockchain are based on the P2P network, where nodes (peers or participants) are independent and globally spread (distributed).
Distributed yet centralized system
Distributed yet centralized system is the category of system wherein the system is distributed, from the location's perspective, yet the system is controlled by a central authority or central entity. For example, cloud service providers offer various services such as compute, storage, SaaS, PaaS, IaaS, and so on. These services are offered via servers and databases that are distributed. However, the entire system is controlled by the cloud service provider. Such a system can be termed a distributed yet centralized system.
Block size
Each Bitcoin Block Can Contain A Maximum Data Size Of. 1MB.
What is the difference between a Digital Signature and an Electronic Signature?
Electronic signature and digital signature are often used interchangeably but the truth is that these two concepts are different. The main difference between the two is that digital signature is mainly used to secure documents and is authorized by certification authorities while electronic signature is often associated with a contract where the signer has got the intention to do so
ECDSA
Elliptic Curve Digital Signature Algorithm
So how can we unlock outputs without giving our private key away?
Enter the digital signature.
What's stopping someone from using a digital signature to unlock other outputs at a given address?
Every digital signature is unique to that transaction.
All Bitcoin Exchanges Allow Users To Trade Fiat Currencies For Bitcoin.
False
Bitcoin Can Be Written With Either A Capital Or A Lower Case B Since Both Bitcoin And bitcoin Mean The Same Thing.
False
Bitcoin Isn't Limited In Its Supply.
False
Blockchain.Info Is The Only Website That Allows Querying Address And Transaction Information.
False
Cryptographic Hashes Can Be Reversed Using Advanced Cryptography.
False
Deterministic Wallets Require The Use Of A Determined Passphrase For Encryption.
False
Every Dollar You Have In Your Bank Account Is Backed By A Paper Note In The Bank's Vault.
False
In The Event Of An Emergency, The Bitcoin Foundation Can Mint Millions Of Dollars Worth Of Bitcoin For Public Distribution, just Like The US Federal Reserve.
False
It Is Always Possible To Reverse A Bitcoin Transaction By Selecting Undo Option In Your Bitcoin Client.
False
It's Not Possible To Buy Bitcoins With A Credit Card.
False
It's Still Profitable To Mine Bitcoins Using A Home Computer.
False
Merchants Who Accept Bitcoin are Required To Manually Convert Their Bitcoin To Their Local Currency After Every Sale.
False
Mt.Gox Was An Early Bitcoin Exchange That Shut Down Because The Bitcoin Network Failed.
False
Only Developers Who Are Authorised By The Bitcoin Foundation Are Able To Propose New BIPs.
False
Symmetric Encryption Uses One Key To Encrypt Data And Another Key To Decrypt Data.
False
The Balance Of Every Bitcoin Account Is Kept Private By The Blockchain.
False
The Bitcoin Foundation Is A For Profit Organisation.
False
The Bitcoin Foundation Is The Official Body That Decides On Updates To The Bitcoin Protocol.
False
The Value Of Bitcoin Is Set By Bitcoin Miners.
False
The act of burning cryptocurrency is equivalent to pressing the delete key on your your keyboard to delete a string of text.
False
The purpose of a consensus mechanism is to verify that information being added to the ledger is not duplicated in the network.
False
It Is Possible To Determine Other Addresses Owned By The Same Person By Investigating That Address's Transaction History.
False.
The Bitcoin Difficulty Is Adjusted Every Two Weeks At Midnight Sunday.
False.
store of value
For Which Of The Following Functions Of Money Is Gold Used Most Often.
The encryption of asymmetric key is a central mechanism in bitcoin operations and cryptocurrencies in general. Almost all of the existing tokens are exchanged through this mechanism. The public key is included in the encryption of the message, and the private key is used to decrypt it. Depending on the type of cryptographic system used, the public key is obtained from an encryption of the private key or vice versa.
For example, the public key that you use to transfer your bitcoins is created from the private key by applying a series of a cryptographic hash. If we compare the payment in bitcoin to the payment by credit card, your public key corresponds to the number on your credit card which can be freely shared with anyone. Your private key corresponds to your secret code which should not be disclosed since it gives you the possibility to validate transactions and therefore to spend your bitcoins.
What Of The Following Is Not An Example Of An Asset Based On A Centralised Ledger.
Gold
What's stopping someone from using a digital signature to unlock other outputs at a given address?
Good question. After all, if the private key will unlock any output locked to an address, why can't someone take the digital signature and use it to do the same thing? Answer: Because every digital signature is unique to that transaction.
Which Property Of Money Is Not Necessary For An Asset To Be Used As A Medium Of Exchange For Commerce?
Government Backing.
A [?] wallet is a physical device that allows you to store the private keys in offline storage which enables you to verify the transaction details on the device screen.
HARDWARE
Hardware Wallets
Hardware wallets are the safest solution to keep your crypto safe and maintaining high levels of security is essential in the cryptosphere.
Which Of The Following Is The Safest Way To Receive Bitcoin From Someone?
Have Them Give You A Sealed Paper Wallet That Has The Expected Amount Of Bitcoin On It.
Identify the missing word(s) in the following sentence. A key advantage of the Proof of Stake system is [?].
Higher energy efficiency
Hot Wallet
Hot wallets, such as exchanges or software wallets, are connected to the Internet making them appealing targets for hackers. Moreover, in this case, a third-party controls the private keys to the assets in the wallet.
You Should Pay A Fee When Sending A Bitcoin Transaction Or It May Not Arrive At Its Destination.
TRUE
Fake Transactions
If fake transactions were to occur on blockchain-based digital currencies, then it could destroy the trust of the entire currency. After all, one of the main reasons why people choose to use blockchain currencies such as Bitcoin is because they trust that the blockchain is accurate, and that no fake transactions or units of currency are being created.
SHA-256
In Bitcoin's blockchain hashes are much more significant and are much more complicated because it uses one-way hash functions like SHA-256 which are very difficult to break. The US National Security Agency (NSA) developed the SHA-256 hashing algorithm in 2001 which is the primary hash function used by Bitcoin's blockchain.
Decentralized system
In a decentralized system, there could be multiple entities controlling the system. There is no single point of control, and the control is shared between various independent entities.
When was the genesis block of Bitcoin was created?
January 2009
Light Clients
Light Clients allow the end user to interact with the bitcoin blockchain and to make and confirm transactions without committing disk space.
Why Are Merkle Trees So Important?
Merkle Trees are so important because they make it impossible for people to create fake transactions, and they radically speed up the time it takes to verify transactions. If Merkle Trees did not exist, and if multiple layers of hashes were not required, resulting in Merkle Roots, then it would be significantly easier for hackers to create fake transactions.
Merkle Tree Structure
Merkle Trees provides a structure for all transactions on an individual block to be organized well, and so that the authenticity of every transaction can be independently verified. Essentially, Merkle Trees are designed to help prevent fraud and to make it easy for people to tell that fake transactions are not occurring without having to download the entire Bitcoin blockchain. On any given block on the Bitcoin blockchain, or on any other cryptocurrency's blockchain, there may be hundreds, or even thousands of transactions. However, for the purpose of this article, imagine that there are only four.
MMT Theory explained
Modern Monetary Theory (MMT) is a heterodox macroeconomic framework that says monetarily sovereign countries like the U.S., U.K., Japan and Canada are not operationally constrained by revenues when it comes to federal government spending. In other words, such governments do not need taxes or borrowing for spending since they can print as much as they need and are the monopoly issuers of the currency.
Governing Body
No Organisation Has Authority Over The Price Of Bitcoin.
Centralized system
One entity controls the entire system, where an entity can be a person or an enterprise.
A particular type of hashing function being used is sometimes also referred to as hashing algorithm, and these hashing algorithms (functions) can be of two types:
One-way function: That easily produces output in one direction for a given input but is impossible to find the input even if the output is known. So going back isn't possible Two-way function: A function that's easy to go back and forth when either the input or output is known. Such usage ensures that it is not possible to generate the input even if the output is known. Another characteristic of one-way functions is that if you slightly change the input, the output is completely changed.
In Bitcoin's blockchain, a hash is complicated because it uses:
One-way hash functions like SHA-256
[?] wallets are online services that enable you to access your crypto assets from any browser that's connected to the internet.
Online
What is Proof of Work?
Proof-of-work is the system Bitcoin's blockchain network uses to create and hash blocks together. When the computer in a network must use proof-of-work for mining, it needs to solve a complicated mathematical problem. If a computer (called a "node" in the network) successfully solves the problem, it must then be verified by the other nodes in the network. If it does, the transaction is verified and completed, and the miner whose node solved it is rewarded with Bitcoins.
What type of ledger does Bitcoin use?
Public Ledger
A [?] wallet is an offline mechanism for storing crypto assets which involves printing the private keys and its corresponding addresses in hard-copy.
Paper
Permissioned Networks
Permissioned networks are private networks. They are designed to work in a closed ecosystem where the user needs to have access granted through a KYC procedure. The users once validated can access the features of the permissioned network or permissioned distributed ledger systems. In a permissioned network, the validation nodes do the heavy lifting as they are responsible for validating the transactions within the network. The network can also be designed to restrict a few users to have limited access to the network functionalities. This feature is very useful for businesses who want to take advantage of blockchain, but do not want to make their data public to everyone. After all, for a business, it is important to protect their important business data. That's what makes them unique and keep their market position safe from their competitors.
Permissionless distributed ledger system
Permissionless distributed ledger systems or networks are public networks. By definition, users do not need permission to participate in the permissionless network. The distributed ledger system is open to everyone for making transactions, validating blocks, and making other forms of interaction with the network.
The most popular blockchain consensus mechanisms are the Proof of Work (PoW) and Proof of Stake (PoS) systems.
Proof of Stake systems have the same purpose of validating transactions and achieving consensus, however, the process is quite different than in Proof of Work systems.
WTF is Ralph Merkle?
Ralph Merkle is an American computer scientist who is known as one of the fathers of modern public key cryptography that is integral to cryptocurrencies. In addition to being know for the Merkle Tree, which is named after him, he is also known for Merkle's Puzzles, and the Merkle-Hellman Knapsack Cryptosystem.
When initializing your hardware wallet for the first time, you will be prompted to write down 24 words. These 24 words are called a [?] and are a human readable back-up from which all your private keys are derived.
Recovery Phrase
What Is The Main Advantage That Mining Pools Provide Over Solo Mining?
Reduced Variance Of Payouts From Mined Blocks.
Identify the missing word(s) in the following sentence. [?] wallets are applications for managing cryptocurrencies that can be installed on your computer or smartphone.
SOFTWARE
The purpose of POS and POW is to:
Validate transactions and achieve consensus.
What is an ASIC Bitcoin Miner?
Since it's now impossible to profitably mine Bitcoin with your computer, you'll need specialized hardware called ASICs. Originally, Bitcoin's creator intended for Bitcoin to be mined on CPUs (your laptop or desktop computer). However, Bitcoin miners discovered they could get more hashing power from graphic cards. Graphic cards were then surpassed by ASICs (Application Specific Integrated Circuits). Think of a Bitcoin ASIC as specialized Bitcoin mining computers, Bitcoin mining machines, or "bitcoin generators". Nowadays all serious Bitcoin mining is performed on dedicated Bitcoin mining hardware ASICs, usually in thermally-regulated data-centres with low-cost electricity.
Bitcoin Halveing
Sometimes referred to as "the Halvening", is the predetermined moment when Bitcoin's block subsidy gets cut in half. The halving of Bitcoin's block subsidy occurs every 210,000 blocks (approximately every four years) and is a key feature of Bitcoin. It is because of the Halving that there is a capped supply of 21 million bitcoin that will ever exist. The Halving will continue to occur every 210,000 blocks until the block subsidy reaches 1 satoshi — the smallest unit of bitcoin at 0.00000001 BTC. As Bitcoin's codebase parameters currently state, at that point the next block subsidy will simply drop to zero, and miners will only collect transaction fees.
Why Is Specialised Hardware Required In Order To Mine Bitcoins Profitably?
Specialised Hardware Is Much More Efficient To Mine Bitcoin That General Purpose Computers.
Which are methods for transforming a Plain Text message to Cipher Text?
Substitution & Transposition Techniques
Symmetric encryption
Symmetric encryption is a form of computerized cryptography using a singular encryption key to guise an electronic message. Its data conversion uses a mathematical algorithm along with a secret key, which results in the inability to make sense out of a message. Symmetric encrpytion is a two-way algorithm because the mathematical algorithm is reversed when decrypting the message along with using the same secret key. Symmetric encryption is also known as private-key encryption and secure-key encryption.
Difference Between Symmetric and Asymmetric Encryption
Symmetric encryption is an old technique while asymmetric encryption is relatively new.
Difference Between Symmetric and Asymmetric Encryption
Symmetric encryption uses a single key that needs to be shared among the people who need to receive the message while asymmetrical encryption uses a pair of public key and a private key to encrypt and decrypt messages when communicating.
Addresses And Keys Created With One Bitcoin Application Cannot Be Exported Or Imported Into Another Bitcoin Application.
TRUE
An Encryption Algorithm Transforms Plain Text Into Cipher Text Using A Key.
TRUE
At some point, the bitcoin block reward subsidy will end and bitcoin miners will only receive transaction fees.
TRUE
Bitcoin miners maintain the blockchain by adding new blocks roughly every 10 minutes.
TRUE
Coins refer to any cryptocurrency that has a standalone, independent blockchain.
TRUE
Cryptocurrencies can be used as a store of value.
TRUE
Cryptocurrencies can be used as medium of exchange (to buy something).
TRUE
DLT technology decides which nodes are chosen and assigns them the task to validate the block.
TRUE
Hash usage ensures that it is not possible to generate the input even if the output is known.
TRUE
If you are keeping your crypto assets on an exchange, you are entrusting a third party with these private keys and mandating them to serve as a safeguard.
TRUE
It Is Recommended That Merchants Who Accept Bitcoin For Their Products Or Services Should Keep Their Products Priced In Their Local Currency.
TRUE
It's better for the health of the Bitcoin network to mine with smaller pools
TRUE
It's now impossible to profitably mine Bitcoin with your personal computer, you'll need specialized hardware called ASICs.
TRUE
Merkle Trees are important because they make it impossible for people to create fake transactions, and they radically speed up the time it takes to verify transactions. If Merkle Trees did not exist, and if multiple layers of hashes were not required, resulting in Merkle Roots, then it would be significantly easier for hackers to create fake transactions
TRUE
One Bitcoin Can Currently Be Subdivided into At Most 100 Million Sub Units.
TRUE
What Does Every Block Not Include.
The Hash Of The Transactions In The Block.
How do Merkle Trees work?
The Merkle tree is an ingenious invention, and it is a major part of the reason why cryptocurrencies like Bitcoin can function effectively. To understand how a Merkle Tree works, you need to first understand how a blockchain works. A blockchain is an open-source ledger that keeps track of every single transaction for a digital currency like Bitcoin.
Central Idea of Modern Monetary Theory
The central idea of MMT is that governments with a fiat currency system can and should print (or create with a few keystrokes in today's digital age) as much money as they need to spend because they cannot go broke or be insolvent unless a political decision to do so is taken.
Key Differences Between Digital Signature and Digital Certificate:
The digital signature proves the authenticity of the digital document. A digital certificate identifies a website. • A digital certificate is digitally signed and can be used to sign other documents digitally. The digital signature of CA is verified on the digital certificate. • The digital certificate creation process includes key generation, registration, verification and creation steps. In contrast, a digital signature process includes encryption and decryption of the message at the sender's and receiver's end respectively.
Define cryptography.
The enciphering and deciphering of messages in secret code.
The Key to Successful Asymmetric Encryption
The key to successful use of Asymmetric Encryption is a Key Management system, which implements a Public Key Infrastructure. Without this, it is difficult to establish the reliability of public keys, or even to conveniently find suitable ones.
What is the Bitcoin Halving?
The predetermined moment when Bitcoin's block subsidy gets cut in half.
Purpose of Consens Mechanism
The purpose of a consensus mechanism is to verify that information being added to the ledger is valid i.e. the network is in consensus.
The type of puzzle miners must solve has a few key features that define the Proof of Work system:
The puzzles have no skill involved, they require brute force. This ensures certain miners do not gain an unfair advantage over others. The only way for a miner to improve their odds of solving a puzzle is to acquire additional computational power; something that is very energy and capital intensive. Read about the computational power required to gain majority control of the Bitcoin Blockchain in Blockchain Security.
Proof of Work
The system Bitcoin's blockchain network uses this to create and hash blocks together. The computer in a network must use this concept for mining, as it needs to solve a complicated mathematical problem
"Not your keys, not your bitcoins"
The way most individuals first get into cryptocurrency is by purchasing coins on an exchange platform, and leaving them there, especially if they have intentions to trade. If you are keeping your crypto assets on an exchange, you are entrusting a third party with these private keys and mandating them to serve as a safeguard. While exchanges provide some basic levels of security, the fact is that most trading platforms are not security companies, and you are entrusting them to keep your private keys protected with whatever measures they choose to implement. You're also trusting the exchange platform not to have malicious usage of your assets. Your are basically not in charge, and hoping for the best.
Consensus mechanisms all serve the same core purpose, but differ in methodology. The primary difference between varying consensus mechanisms is
The way they delegate and reward the verfication of transactions
Bitcoin Mining Pools
There are many good Bitcoin mining pools to choose from. Although it's tempting to pick the most popular one, it's better for the health of the network to mine with smaller pools so as to avoid potentially harmful concentration of hashing power. The hash rate distribution is best when split among more Bitcoin mining pools.
Consensus Mechanisms
There have been a number of different consensus mechanisms devised, each with their own pros and cons. They all serve the same core purpose as described above, but differ in methodology. The primary difference between varying consensus mechanisms is the way in which they delegate and reward the verification of transactions.
Why Do Bitcoin Addresses Use An Alphabet Of Only 58 Characters Instead Of The Full 62?
To Avoid People Mistaking The Numeral 1 For The Lowercase I, And The Capital O From The Numeral 0.
Proof of activity
To avoid hyperinflation (what happens when too much of a currency floods the system) bitcoin will only ever produce 21m bitcoins. That means, at some point, the bitcoin block reward subsidy will end and bitcoin miners will only receive transaction fees.
Coins refer to any cryptocurrency that has a standalone, independent blockchain — like Bitcoin.
Tokens are a unique outlay of broader smart contracts platforms like Ethereum that enable users to create, issue, and manage tokens that are derivatives of the primary blockchain. Tokens occupy a unique corner of the cryptocurrency market where they function as "utility" tokens within an application's ecosystem for incentivizing certain behaviour or paying fees.
Tokens
Tokens are a unique outlay of broader smart contracts platforms like Ethereum that enable users to create, issue, and manage tokens that are derivatives of the primary blockchain. Tokens occupy a unique corner of the cryptocurrency market where they function as "utility" tokens within an application's ecosystem for incentivizing certain behaviour or paying fees.
How are transactions verified with Bitcoin?
Transactions are cryptographically signed record that reassign ownership of Bitcoins to new addresses.
bitcoind
bitcoind is a program that implements the Bitcoin protocol for remote procedure call (RPC) use.
Transaction Verification
Transactions are cryptographically signed records that reassign ownership of Bitcoins to new addresses. Transactions have inputs - records which reference the funds from other previous transactions - and outputs - records which determine the new owner of the transferred Bitcoins, and which will be referenced as inputs in future transactions as those funds are respent. Each input must have a cryptographic digital signature that unlocks the funds from the prior transaction. Only the person possessing the appropriate private key is able to create a satisfactory signature; this in effect ensures that funds can only be spent by their owners. Each output determines which Bitcoin address (or other criteria, see Script) is the recipient of the funds. In a transaction, the sum of all inputs must be equal to or greater than the sum of all outputs. If the inputs exceed the outputs, the difference is considered a transaction fee, and is redeemable by whoever first includes the transaction into the block chain.
After A Hard Fork, Both Bitcoin SPV And Full Node Client Software Must Be Upgraded For Safety.
True
BIPs Are Technical Documents That Address Issues For Change In The Bitcoin Core Client.
True
Bitcoin Miners Maintain The Blockchain By Adding New Blocks Roughly Every 10 Minutes.
True
Bitcoin Payment Processors Offer A Way For Merchants To Accept Bitcoin From Their Customers Without Needing To Deal With The Actual Bitcoins Themselves.
True
Bitcoind Is The Piece Of Software Normally Used By Miners To Calculate Bitcoin To Generate New Blocks.
True
Cold Wallets Are Not Present On Web Servers Or On Computers, They Are Otherwise Kept Offline.
True
Deterministic Wallets Can Generate Many Unique Private Keys And Addresses From A Single Master Seed.
True
If 99% Of Bitcoin Nodes Are Destroyed, The Bitcoin Network Will Survive Since Only One Full Node Is Required To Rebuild The Network.
True
If You Accidentally Mistype A Single Character In A Bitcoin Address When Sending Bitcoin, The Coins Will Be Sent To The Mistyped Address.
True
Lightweight Bitcoin Clients Do Not Have A Local Copy Of The Bitcoin Blockchain.
True
Many altcoins add features that their own creators believe enhance the original vision of a fully distributed and virtual currency.
True
SPV Stands For Simplified Payment Verification.
True
Some Bitcoin Exchanges Allow Users To Trade Fiat Currencies For Bitcoin.
True
The Bitcoin Hashing Algorithm Is SHA-256.
True
The Secure Payment Protocol Provides A Mechanism For Refunding Overpayments Without The User Having To Contact Customer Support.
True
A 51% Attack Is Where A Single Entity Contributes The Majority Of The Hash Rate To The Network.
True.
A Cryptographic Hash Is A One Way Mathematical Function.
True.
Brain Wallets Are Memorised Secrets That Are Used As The Private Key Or Wallet Associated With A Bitcoin Address Or Wallet.
True.
Most BIPs Are Proposals For Improvements To The Bitcoin Protocol?
True.
Satoshi Nakamoto Invented A Way To Achieve Decentralised Consensus.
True.
SHA-256 hash function is used because of these properties:
Unique hash value: For every input, it produces a unique output High hashing speed: For each given input the computation is fast. Secure hash function: It is almost computationally infeasible to reverse the function and make it two-way. Bitcoin is simply a digital ledger of hashes that utilizes proof of work combined with SHA-256 to obtain mathematical traceability and unbreakability. The process through which this is ensured is called Bitcoin mining that utilizes Bitcoin hashes generated through SHA-256 function at various steps of mining.
UTXO Is An Acronym For The Terms.
Unspent Transaction Outputs.
What Does The WIF Acronym Stand For?
Wallet Import Format.
Recevory Phrase
When initializing your hardware wallet for the first time, you will be prompted to write down 24 words on a Recovery sheet. These 24 words are called a recovery phrase and are a human readable back-up from which all your private keys are derived. They are used to restore access to your crypto assets on another Ledger device or any other compatible wallet.
The puzzles that are solved under a POW system require [A], they require [B].
[A]no skill, [B] brute force
Deterministic Wallets
only back up once and can be recovered in the future
Types of Distributed Ledger Technologies There are primarily three types of distributed ledger technologies out there.
• Permissioned • Permissionless • Hybrid
Bitcoin prices are influenced by the following factors:
• The supply of bitcoin and market demand for it • The cost of producing a bitcoin through the mining process • The rewards issued to bitcoin miners for verifying transactions to the blockchain • The number of competing cryptocurrencies • The exchanges it trades on • Regulations governing its sale • Its internal governance