05 BLockchain 03 Flashcards
FtHow doe Initial coin offerings work?
Investors buy into the offering and in return get new tokens, for example
- Utility tokens that have some use in using the product of the company
- the internal cryptocurrency of the venture
Different to IPOs; ICOs are mostly unregulated
What is Initial Coin Offerings?
ICOs are a new type of crowdfunding, combining aspects of fundraisng with platform building and network growing
What can change the global state ? (Blanace, data,…)
Ethereum
only transsactions can change the global state
* transfer ether between EOAs
* Change contract data by triggering contract accounts
* Initialize contract accounts
What are decentralized applications?
dApps are computer programs that run on a distributed, decentralized network like the Ethereum blockchains
Characteristics of dApps?
Most dApps run on Ethereum
* Smart contracts are the building blocks of dApps
* user interfaces are often similar to other cloud apps
–>Code and data are stored on the blockchain
–>dApps are generally not owned by anyone (though the correspsonding utility tokens are) –>Trust?
Advantages and Disadvantages of dApps?
- dApps cannot be shut down,
- have no downtime and
- are censorship resistant
Contra:
* can be extremely slow
* user experience may (yet) be poor
Proof-of-stake Mechanism
- No mining, randomly chosen validators update the blockchain
- validators are user that deposit some coins at stake
- The stake is typically locked up for some time and cannot be used for transactions
- The probability of being drawn increases in the amount deposited as stake
–>Chosen validators then verify the transactions in the block and update the chain
How are Validators incentivized?
PoS
–>Validators are incentivzed positively and negatively
* As a reward, they typically get newly minded coins and transaction fees
* They can loose their stake if they are dishonest
What is the “Nothing at stake” Problem in PoS?
PoS
suppose there is a fork (two versions of the chain)
* in theory validators have an incentive to keep signing blocks on both versions of the blockchian because they collect fees and newly minted coins on whichever fork eventually ends up winning
–>In PoW this is not possible because you have to spend computing power
What does the “long range attacks mean in the context of PoS?
–>to perform a 51% attack in PoW, you need to manipulate a block of the recent past
–>In PoS theoretically you could stat such an attack much earlier, even at the Genesis block.
–>One solution: always reject forks that differ before some “checkpont”
Was is the Double spend —> Nothing at stake problem?
PoS
The double spender could for example only validate blocks on the fraudulent version, which then would be the longest chain
How transparent are Blockchains?
- Most cryptocurrencies are pseudonymous
- Data on blockchain is usually totally transparent
- Users prefer less transparency
–>Two approaches:- Privacy coins
- Mixers
How does the Lightning Network work=
THe Transaction between the two parties change the balance of the payment channel.
–>THe updated balance is signed by btoh parties using their private keys.
–>No transaction is recorded on the main blockchain
- Eventually the payment channel is closed and the net is broadcasted to the main network
- –>Which results in another single transaction of the main blockchain
What is a Lightning Network?
Is a off-chain solution for smaller payments
* First there is a payment channel opened between two parties by recording a transaction on the main blockchain
Payment channel: is a multi-signature address using both parties keys keeping track of each parties respective balance
Example of zero knowledge proof? (red and blue pills)
One firend A is blind and cannot differentiate between red and blue
–>How can you prove to him that the two are different without telling him which one has what colour?
- you let him change the pills hand behind his back and then tell him wheteher he changed it or not.
- Since you can see the color you can prove to him that they are different withoiut telling him
