Basics of Crypto

Question 1

Bitcoin is a collection of concepts and technologies that form the basis of a digital money ecosystem, including

Answer 1

Decentralized peer to peer network,(public ledger) blockchain, Proof of work concept/distributed mining, verification system

Question 2

How is ownership of bitcoin established

Answer 2

Through digital keys,Bitcoin addresses and digital signatures

Question 3

How are digital keys stored

Answer 3

Digital keys are created and stored offline and consist of a mathematically-related Private-Public key-pair, created using the Elliptic Curve Digital Signature Algorithm (ECDSA).

Question 4

What is a private Key

Answer 4

The Private key (Privkey) is initially generated at random, and is kept secret at all times. It is used by the current owner of bitcoins to digitally sign a Bitcoin transaction, when he authorizes the transfer to the new owner. A transaction’s digital signature confirms ownership, and can be used to verify that the transaction is authentic.

Question 5

What is a public key

Answer 5

It is generated from the Private Key using a one-way cryptographic hash function. It is used by the new owner to validate a transaction’s digital signature.

Question 6

How does the blockchain work? How are bitcoins stored?

Answer 6

All Bitcoin transactions are stored in blocks, which are linked (or “chained”) together in sequence to form the blockchain.

Question 7

What is a cryptographic hash function

Answer 7

is a mathematical function commonly used to verify the integrity of data, by transforming identical data to a unique, representative, fixed-size code. See the diagram for better understanding

Question 8

What are nodes?

Answer 8

peer-to-peer (P2P) network of computers

Question 9

How are nodes treated?

Answer 9

All nodes are treated equally, and no single node is trusted. However, the system is based on the assumption that the majority of computing power (i.e. at least 51%) will be honest nodes

Question 10

What are the steps in Mining

Answer 10

Bundling transactions,verifying,selecting the most recent block, and solving the proof of work problem

Question 11

How long does it take to create a block

Answer 11

10 minutes

Question 12

What is the incentive to mine?

Answer 12

Bitcoin provides a reward in each successfully mined block (plus the transaction fees of the transactions contained in the new block

Question 13

Bitcoin is based on cryptographic technologies such as

Answer 13

Cryptographic hash functions (i.e. SHA-256 and RIPEMD-160) Public Key Cryptography (i.e. ECDSA – the Elliptic Curve Digital Signature Algorithm)

Question 14

Cryptographic has functions are generally used to?

Answer 14

verify block integrity, and establish the chronological order of the blockchain

Question 15

What is the purpose of a public key?

Answer 15

Its main use is for digital signatures

Question 16

What is a bitcoin wallet

Answer 16

Similarly to a credit card, does not contain any bitcoins, but only the Private-Public key-pairs as mechanisms that allow you to access your funds

Question 17

Why is the relationship of private and public keys asymmetric?

Answer 17

Because the public key can be derived from the private key, while the opposite is computationally infeasible

Question 18

Mining pool distribution schemes

Answer 18

PPS, (Paypershare,)PPNS (PayperLast number of shares), Proportional

Question 19

What is the role of digital signatures in Bitcoin?

Answer 19

Bitcoin uses digital signatures to: (a) allow for transaction verification by any Bitcoin node (b) enable decentralized trust in the Bitcoin peer-to-peer network, and (c) associate bitcoins with their owners, through their bitcoin addresses.