Blockchain

What is the max number of bitcoins? Will the max number likely be enough?

21 million Yes, the bitcoin and be broken down into smaller fractions like a satoshi.

Off-Ledger Currency

- A currency minted off-ledger and used on-ledger. - An example of this would be using distributed ledgers to manage a national currency.

Hard Fork

- A type of fork that renders previously invalid transactions valid, and vice versa - This type of fork requires all nodes and users to upgrade to the latest version of the protocol software

DAO

- Decentralized Autonomous Organizations - Corporations that run without any human intervention and surrender all forms of control to an incorruptible set of business rules

SHA-256

- SHA-256 is a cryptographic algorithm used by cryptocurrencies such as Bitcoin. - However, it uses a lot of computing power and processing time, forcing miners to form mining pools to capture gains.

bitcoin (lowercase)

- The specific collection of technologies used by Bitcoin's ledger, a particular solution. - Note that the currency is itself one of these technologies, as it provides the miners with the incentive to mine.

What happened at MT. Gox?

-conducted 70% of bitcoin transactions -850,000 Bitcoins were stolen, 100,000 of their own wallet worth $450m -Mark Karpeles stole $290m in bitcoin

Block

Blocks are packages of data (transactions for instance) that carry permanently recorded data on the blockchain network. These blocks, stored in chains based on their hashes, is what blockchain refers to.

The origin of the mining term in cryptocurrencies

Gold mining. Because like gold there is only a limited amount in existance

After release of the white paper, how did Bitcoin become a reality?

In 2009, the first block is mined. The first transaction was made between Nakamoto and Hal Finney

Oracles

Oracles work as a bridge between the real world and the blockchain by providing data to the smart contracts.

Genesis Block

The first or first few blocks of a blockchain

Bitcoin (uppercase)

The well known cryptocurrency, based on the proof-of-work blockchain.

Difficulty

This refers to how difficult a data block of transaction information can be hashed, hence mined, successfully

Proof of Work

- A consensus distribution algorithm that requires an active role in mining data blocks, often consuming resources, such as electricity - The more 'work' you do or the more computational power you provide, the more coins you are rewarded with *This is the consensus mechanism Ethereum is moving away from, due to its waste of computational, hence energy, resources.

Proof of Stake

- A consensus distribution algorithm that rewards earnings based on the number of coins you own or hold - The more you invest in the coin, the more you gain by mining with this protocol *This is the consensus mechanism Ethereum is heading towards, away from proof of work due to its waste of computational, hence energy, resources.

Wallet

- A file that houses private keys - It usually contains a software client which allows access to view and create transactions on a specific blockchain that the wallet is designed for.

Hybrid PoS/PoW

- A hybrid PoS/PoW allows for both Proof of Stake and Proof of Work as consensus distribution algorithms on the network - In this method, a balance between miners and voters (holders) may be achieved, creating a system of community-based governance by both insiders (holders) and outsiders (miners).

Ripple

- A payment network built on distributed ledgers that can be used to transfer any currency - The network consists of payment nodes and gateways operated by authorities - Payments are made using a series of IOUs, and the network is based on trust relationships.

Litecoin

- A peer-to-peer cryptocurrency based on the Scrypt proof-of-work network - Sometimes referred to as the silver of bitcoin's gold.

Permissioned Ledger

- A permissioned ledger is a ledger where actors must have permission to access the ledger. - Permissioned ledgers may have one or many owners. - When a new record is added, the ledger's integrity is checked by a limited consensus process. - This is carried out by trusted actors — government departments or banks, for example — which makes maintaining a shared record much simpler that the consensus process used by unpermissioned ledgers. - Permissioned block chains provide highly-verifiable data sets because the consensus process creates a digital signature, which can be seen by all parties. - A permissioned ledger is usually faster than an unpermissioned ledger.

Soft Fork

- A soft fork differs from a hard fork in that only previously valid transactions are made invalid. - Since old nodes recognize the new blocks as valid, a soft fork is essentially backward-compatible. - This type of fork requires most miners upgrading in order to enforce, while a hard fork requires all nodes to agree on the new version.

Mining

- Act of validating blockchain transactions. - The necessity of validation warrants an incentive for the miners, usually in the form of coins. - Each block is like a miniature lottery for miners. They all guess numbers to find the correct hash of the specific block

Transaction Fee

- All cryptocurrency transactions involve a small transaction fee - These transaction fees add up to account for the block reward that a miner receives when he successfully processes a block

Initial Coin Offering (ICO)

- An event in which a new cryptocurrency sells advance tokens from its overall coinbase, in exchange for upfront capital. - Frequently used for developers of a new cryptocurrency to raise capital.

What are the two services performed by trusted third parties like banks and credit card companies?

- Authentication: who someone is - Duplication: prevent double spending and making sure you have the money you want to transfer

Block Explorer

- Block explorer is an online tool to view all transactions, past and current, on the blockchain. - - Provide useful information such as network hash rate and transaction growth. Here is the first block of bitcoin.

Ethereum

- Blockchain-based decentralized platform for apps that run smart contracts - Aimed at solving issues associated with censorship, fraud and third party interference

Public Address

- Cryptographic hash of a public key - Act as email addresses that can be published anywhere, unlike private keys

Cryptographic Hash Function

- Cryptographic hashes produce a fixed-size and unique hash value from variable-size transaction input - The SHA-256 computational algorithm is an example of a cryptographic hash

Difficulty

- Difficulty, in Proof-of-Work mining, is how hard it is to verify blocks in a blockchain network. - In the Bitcoin network, the difficulty of mining adjusts verifying blocks every 2016 blocks. This is to keep block verification time at ten minutes.

EVM

- Ethereum Virtual Machine - Turing complete virtual machine that allows anyone to execute arbitrary EVM Byte Code. - Every Ethereum node runs on the EVM to maintain consensus across the blockchain

Distributed Ledger

- Ledgers in which data is stored across a network of decentralized nodes. Copies of the ledger gets updated for each node. - Does not have to have its own currency and may be permissioned and private

What happened at Silk Road?

- Online black market for illegal items - FBI shut the site down and seized 26,000 bitcoin worth 3.6m - Seized another 144,000 Bitcoin from the founder worth $28.5M

Double Spend

- Scenario, in the Bitcoin network, where someone tries to send a bitcoin transaction to two different recipients at the same time. - However, once a bitcoin transaction is confirmed, it makes it nearly impossible to double spend it. - The more confirmations that a particular transaction has, the harder it becomes to double spend the bitcoins.

dApp

- Short for decentralized application - Open source, operates autonomously, has its data stored on a blockchain - Incentivized in the form of cryptographic tokens - Operates on a protocol that shows proof of value

Private Key

- String of data that allows you to access the tokens in a specific wallet - Act as passwords that are kept hidden from anyone but the owner of the address

Block Reward

- The reward that is given to a miner which has successfully hashed a transaction block - Block rewards can be a mixture of coins and transaction fees, depending on the policy used by the cryptocurrency in question, and whether all of the coins have already been successfully mined.

Scrypt

- Type of cryptographic algorithm and is used by Litecoin - Compared to SHA256, this is quicker as it does not use up as much processing time

Unpermissioned ledgers

- Unpermissioned ledgers such as Bitcoin have no single owner — indeed, they cannot be owned - The purpose of an unpermissioned ledger is to allow anyone to contribute data to the ledger and for everyone in possession of the ledger to have identical copies. - This creates censorship resistance, which means that no actor can prevent a transaction from being added to the ledger. - Participants maintain the integrity of the ledger by reaching a consensus about its state

51% Attack

- When more than half of the computing power of a cryptocurrency network is controlled by a single entity or group -This entity or group may issue conflicting transactions to harm the network, should they have the malicious intent to do so.

What data is stored in the wallet?

-Bitcoin addresses - public-private key pairs - for each of the wallet owner's addressed -transactions done from/to addresses -User preferences -Reserve keys -Versions number -Key pool: new public and private keys are pre-generated and stored in a queue before use

What is the purpose of a bitcoin wallet?

-Contains the private keys for all the addresses a person owns -wallets also describe the client software used to make transactions (send and receive bitcoins)

ASIC

-Short form for 'Application Specific Integrated Circuit'. - Often compared to GPUs - ASICs are specially made for mining and may offer significant power savings.

What are the 4 main issues of distributed ledger payment system?

1) Limited scalability 2) Privacy concerns 3) Currency volatility 4) Untested consensus

Who are using blockchain to conduct business today?

1) Santander For the past few years, Santander has been actively exploring the possibilities of distributed ledgers, including an investment in Ripple. Current projects cover a range of short-term and long-term situations within payments and related fields.

Who are the top 10 cryptocurrencies?

1. Bitcoin 2. Ether from Ethereum 3. Litecoin 4. Monero 5. Ripple 6. Dogecoin 7. Dash 8. MaidSafeCoin 9. Lisk 10. Storjcoin X Find out more: http://www.hongkiat.com/blog/hottest-cryptocurrencies-to-know/

How does a hashh function become cryptographically secure?

1. Collision‐resistance 2. Hiding 3. Puzzle‐friendliness. (Which is special to the application in the context of crypto-currencies.)

What are the problems with traditional currencies issued by governments & transacted through trusted third parties?

1. Lack of transparency 2. delays in settlements 3. high transaction fees 4. Multiple versions of truth 5. Currency exchange fees 6. exchange rate volatility 7. cyber crime 8. inconsistency of rules / rules change at whims

What are the data fields in a block header? Which fields can be altered?

1. Protocol version 2. Previous block hash: helps create the sequence of the chain 3. Merkle root: takes a hash of all the transitions below in the transaction 4. Timestamp: when the block was created 5. Bits: condensed of the mining difficulty is 6. Nonce: the only one that is allowed to be changed, the winning arbitrary value that produced the successful blockchain

What are the benefits of peer-to-peer cryptocurrencies

1. full transparency 2. full privacy 3. rapid settlement 4. low transactions fees 5. one version of the truth 6. no currency exchange fees because of country 7. volatility (not solved yet) 8. cyber crime unprofitable 9. rules are added

What is considered the first real transaction on Bitcoin in which bitcoins were used to pay for a physical item? 2010 when 10,000 Bitcoins were used to buy a pizza

2010 when 10,000 Bitcoins were used to buy a pizza

Merkle Root Hash

A Merkle root is the hash of all the hashes of all the transactions that are part of a block in a blockchain network (A Merkle root is a simple mathematical way to verify the data on a Merkle tree. * Merkle roots are used in cryptocurrency to make sure data blocks passed between peers on a peer-to-peer network are whole, undamaged, and unaltered. * Merkle roots are central to the computation required to maintain cryptocurrencies like bitcoin and ether.)

Merkle tree

A Merkle tree is a data structure that is used in computer science applications. In bitcoin and other cryptocurrencies​, Merkle trees serve to encode blockchain data more efficiently and securely. They are also referred to as "binary hash trees."

Transaction Block

A collection of transactions gathered into a block that can then be hashed and added to the blockchain.

Collision resistance in hash function

A collision occurs when two distinct inputs produce the same output. A hash function is collision‐resistant if nobody can find a collision.

What is SHA256 Hash?

A cryptographic hash function widely used on the internet and for blockchains. Slightly changing the message completely changes the hash, and the hash is irreversible. What you have to do to find it, is to guess and check. This is where miners come in to find hash for a block.

What is a digital signature?

A cryptographic technique that binds a person to a transaction on the blockchain like a regular signature. It is an approval of both actors seeing and approving a transaction, where no one else should be able to confirm it. It is better than real signatures because it changes every time for new messages.

On-Ledger Currency

A currency minted on-ledger and used on-ledger. An example of this would be the cryptocurrency, Bitcoin.

Digital Signature

A digital code generated by public key encryption that is attached to an electronically transmitted document to verify its contents and the sender's identity

Digital Identity

A digital identity is an online or networked identity adopted or claimed in cyberspace by an individual, organization, or electronic device.

Attestation Ledger

A distributed ledger providing a durable record of agreements, commitments or statements, providing evidence (attestation) that these agreements, commitments or statements were made.

Blockchain

A distributed ledger where transactions are permanently recorded in blocks chained together by their unique identities. The blockchain serves as a historical record of all transactions that ever occurred, from the genesis block to the latest block, hence the name blockchain.

Central Ledger

A ledger maintained by a central agency. The general ledger is the backbone of any accounting system which holds financial and non-financial data for an organization/institution. (ERP system, accounting book, lantmäteriets fastighetsregister)

Peer to Peer

A peer-to-peer network: all nodes are equal; there is no hierarchy; there are no special nodes or master nodes. - decentralized interactions between two parties or more in a highly-interconnected network

Consensus Point

A point - either in time, or defined in terms of a set number or volume of records to be added to the ledger - where peers meet to agree the state of the ledger.

Hash pointer

A pointer to where some information is stored together with a cryptographic hash of the information. Thus, it can be used to verify that the data it points to is valid/unchanged. A pointer, in general, is a reference to some information or data. A standard pointer is similar to a real- world address. It contains information about the location of some information but not about the information itself.

What is a private key?

A private key can be used to decrypt messages encrypted with a matching public key. As the term suggests, private keys are intended to be secret. A public key is only used to encrypt messages not decrypt. A public key is published so that anyone can send a particular receiver a secure message.

Turing Complete

A programming language is, or is not, Turing complete. It needs to be able to do everything that a Turing machine can do, that is be able to compute everything that is computable. For instance If-then-else statements and memory is needed. An example of this is the Ethereum Virtual Machine (EVM).

Byzantine Generals Problem

Describes a situation in which, in order to avoid catastrophic failure of the system, the system's actors must agree on a concerted strategy, but some of these actors are unreliable.

What are the differences between deterministic and non-deterministic smart contract?

Deterministic -can run on their own -the information in contract block chain has enough information to carry out the action without any outside information. non-deterministic -the contract needs outside information

When are you able to trust a block of transactions in the ledger?

Dont trust a new block immediately. Waiting for a couple of blocks to be added on top of it relies that the information in the block is correct. Fraudulent attempts to manipulate the ledger grows slower than all other miners, as frauds probably never will have enough computational power to change this.

Double Spending Problem

Double spending occurs when a sum of money is spent more than once. this is what cryptocurrency aims to solve.

Who has implemented blockchain?

Eleven banks of the R3 consortium have already connected on the centralized Ethereum-based blockchain network. The Estonian government has used blockchain-based technology (keyless signature infrastructure) to authenticate data in their databases since 2013.

Explain some differences between Ethereum and Bitcoin

Eth blocks faster than bitcoin. Every 15 seconds, as opposed to apx 10 minutes. Eth has consensus process of Proof of stake, as opposed to proof of work. Eth is aimed at smart contracts, as opposed to being a currency.

How is the miner's reward amount determined?

First miner won 50 Bitcoins per block mined, then they are rewarded halves every 210,000 blocks mined

Fork

Forks create an alternate version of the blockchain, leaving two blockchains to run simultaneously on different parts of the network

Explain the basics of mining economics

if mining reward > mining cost then miner profits where mining reward = block reward + transaction fees mining cost = hardware cost + operating costs (electricity, land, cooling)

Puzzle friendliness

search puzzle: a mathematical problem which requires searching a very large space in order to find the solution. In particular, a search puzzle has no shortcuts; i.e., there is no way to find a valid solution other than searching that large space.

What data fields are posted in the Blockchain for each bitcoin transaction?

the outputs and inputs for each transaction on the blockchain. The software verifies that the address are not inputs and that they are outputs in the blockchain. To prevent double spending

What does today's centralized ledgers look like?

• Traditional systems rely on central authority to generate trust and transfer value • When money passes between participants, a central counterparty records the transfer to prevent cheating • Participants then undertake costly, time-consuming and duplicative reconciliation with their own systems

What does distributed ledgers look like?

• Trust comes from the process itself rather than from the status of any one player • Participants validate changes collectively, and changes are updated across the network almost immediately • The system has great potential to speed up transaction times, improve transparency and reduce costs

where are bitcoin wallets stored?

An application from a mobile phone, hardware, desktop, or the cloud. (For instance coinbase or cashapp)

Blockchain protocol

A protocol, in computer science, is a set of rules or procedures that govern the transfer of data between two or more electronic devices. This protocol helps in establishing how, in order for computers to exchange information, the information must be structured and how each party will send and receive it. Some examples of familiar internet protocols are TCP/IP, HTTPS, and DNS. The rules that govern a blockchain network are referred to as a protocol. It is essentially the common communication rules that the network plays by.

What is a public key?

A public key is only used to encrypt messages not decrypt. A public key is published so that anyone can send a particular receiver a secure message. A private key can be used to decrypt messages encrypted with a matching public key. As the term suggests, private keys are intended to be secret

Testnet

A test blockchain used by developers to prevent expending assets on the main chain.

Distributed Network

A type of network where processing power and data are spread over the nodes rather than having a centralized data centre

Commitment scheme

Allows one to commit to a value while keeping it hidden, with the ability to reveal the committed value later. Commitments are used to bind a party to a value so that they cannot adapt to other messages in order to gain some kind of inappropriate advantage. Interactions in a commitment scheme take place in two phases: the commit phase during which a value is chosen and specified the reveal phase during which the value is revealed and checked

Cryptocurrency

Also known as tokens, cryptocurrencies are representations of digital assets

Peer

An actor that shares responsibility for maintaining the identity and integrity of the ledger.

Participant

An actor who can access the ledger: read records or add records to.

Agreement Ledger

An agreement ledger is distributed ledger used by two or more parties to negotiate and reach agreement.

Bitcoin

Bitcoin is the first decentralized, open source cryptocurrency that runs on a global peer to peer network, without the need for middlemen and a centralized issuer.

Explain the user facing experience, and the underlying technology in normal transaction vs a bitcoin transaction

Bitcoin: Your smartphone or computer, with the underlying bitcoin protocol Normal: Credit card information, with the underlying banking system.

How are Bitcoins released into circulation?

Bitcoins are released into circulation like gold. From the unmined bitcoins, bitcoins are released to a miner who works hard to earn it.

What is blockchain?

Blockchain is an encrypted, distributed database shared across multiple computers or nodes that are part of a community or system. Sort of a metacomputer.

How blockchain can help in Law?

Blockchains can contain a huge amount of data, including entire contracts. The impact of "smart contracts"—protocols that facilitate or enforce contract performance using blockchain—will have a profound impact for industries. Smart contracts eliminate the middleman, such as a legal firm, as payment will happen based on certain milestones being met. By its very nature, the smart contract is easily enforceable electronically, creating a powerful escrow by taking it out of the control of a single party.

Birthday Paradox

Concerns the probability that, in a set of n randomly chosen people, some pair of them will have the same birthday. 100% is reached at 367 people. Yet, 99.9% probability is reached with just 70 people, and 50% probability with 23 people. The underlying idea is that by adding one more person you are adding many more potential pairs through combinatorics. This includes for hash functions.

Consensus

Consensus is achieved when a majority of participants of the network agree on the validity of the transactions, ensuring that the ledgers are exact copies of each other

How blockchain can help in Government?

Government departments that work in silos cause the exchange of information to be delayed, negatively impacting citizen services. Linking the data between the departments with blockchain ensures that data is released in real time, when both the departments and the citizen consent to sharing data. Blockchain technology could improve transparency and check corruption in governments worldwide.

How does blockchain reduce the possibility of security breaches?

In a traditional implementation, a rogue administrator can potentially change historical transactions because of his or her access levels to the data. However, with a blockchain implementation across data centers, one would need a large number of teams working together across data centers to modify historical data—which greatly reduces the possibility of data tampering. The more widespread the environments, the more difficult it is to tinker with data.

What are the impacts of digital fiat currencies?

Influence of digital fiat currencies will vary depending on the system adopted.

What makes it one of the most exciting technologies?

It allows computers to make decisions, and carry out transactions. Transactions that can be automated, more complex, and more secure. Building trust in the system itself, in a decentralized manner.

Hash

The act of performing a hash function on the output data. This is used for confirming coin transactions.

Hash Rate

Measurement of performance for the mining rig is expressed in guessed hashes per second. The better the computational power, the faster the hash rate.

How blockchain can help in Energy?

Microgeneration of electricity is becoming a huge trend in the power generation business. New energy initiatives such as home power generation and community solar power are filling in gaps of power supply across the world. As microgeneration adds to traditional power suppliers, it fosters creation of an energy market. Smart meters can register produced and consumed electricity in a blockchain, which allows for consumption of the surplus energy in a different location, providing credits or currency to the original producer. The credits can then be redeemed against the grid when the microgenerator needs additional electricity from the grid. The blockchain enforces these contracts in real time or near-real time, allowing for a utility market to be created with minimal red tape.

Name pros and cons of proof of stake consensus process

Pros: Better incentive alignments, requires less resources compared to PoW, 51% attack becomes harder Cons: Theoretically encourages centralization, making the rich richer. (Counterargument is that PoW does this indirectly)

Name pros and cons of proof of work consensus process

Pros: Proven reliability, does not rely on nodes being trustworthy, Cons: Waste of resources, huge startup cost, miners sell coins directly removing loyalty to the network

Advantages of using an ICO

Rapid liquidity Quick network effects Reduce transaction costs

Smart Contracts

Smart contracts encode business rules in a programmable language onto the blockchain and are enforced by the participants of the network.

Solidity

Solidity is Ethereum's programming language for developing smart contracts.

Hiding in hash function

The hiding property asserts that if we are given the output of the hash function y = H(x), there is no feasible way to figure out what the input, x , was.

Distributed consensus protocol

The nodes must agree on exactly which transactions were broadcast and the order in which these transactions happened. This will result in a single, global ledger for the system. • Consensus will be reached on a block-by-block basis (i.e., transactions will be pooled into blocks).

Nonce

The nonce is the number that blockchain miners are solving for. A nonce is an abbreviation for "number only used once," which is a number added to a hashed—or encrypted—block in a blockchain that, when rehashed, meets the difficulty level restrictions.

Block Height

The number of blocks connected on the blockchain.

Consensus Process

The process a group of peers responsible for maintaining a distributed ledger use to reach consensus on the ledger's contents.

Halving

The reward for mining a block is halving every 210000th block, or apx every fourth year. The final halving will take place in the year 2140. Halving is done to keep inflation under control. When printing too much money the value of the currency goes down. Blockchain aims to be more like gold, for every gram of gold that is mined, it is harder to get new. Implying the sustained value in the commodity.

Confirmation

The successful act of hashing a transaction and adding it to the blockchain

How should wallets be secured?

They can be hacked! -keep small amounts in your wallet -cannot recover a forgotten password -create a strong password -backup wallet in many places -encrypt wallet and backups -offline wallets for savings -keep software updated

Explain hierarchy of blockchhain confirmations

Transaction level: A transaction is confirmed by both participants when digital signatures are signed. (apx. 3500 transactions per block in btc) Block level: A block of transactions are verified only when it has been hashed through PoW or PoS. (apx. 650k blocks in btc as of 2020) Ledger level: A ledger of blocks is verified when the majority (51%) of compute or holdings has approved a series of blocks.

How blockchain can help in Defense?

Unauthorized access or modification of critical defense infrastructure, such as operating systems and network firmware, could seriously compromise national security. For most countries, defense infrastructure and computer systems are distributed across different locations. Blockchain technology distributed across multiple data centers can ensure security against attacks on important network and hardware equipment by ensuring consensus-based access for modification.

How blockchain can help in Healthcare?

Using digital signatures on blockchain-based data that allows access only when authorized by multiple people could regulate the availability and maintain the privacy of health records. In addition, a community of people, including hospitals, doctors, patients, and insurance companies, could be part of the overall blockchain, reducing fraud in healthcare payments.