Blockchain Flashcards
(24 cards)
What is Blockchain?
Decentralised (run by multiple people instead of one) ledger of transactions, replecated over a trustless peer-to-peer network
3 reasons why no centralised authority is good
1) No trust required 2) No censorship over purchases 3) A single authority means a potentially single point of failure
What is Bitcoin?
A cryptocurrency that doesn’t require any centralised bank
What verifies Bitcoin transaction?
Network nodes
To receive bitcoin, a user has to provide a bitcoin ___
To receive bitcoin, a user has to provide a bitcoin address
For each payment, each user has one ____
For each payment, each user has one address
Why not one address per user?
History of transactions can be linked to this address and identify user
Bitcoin doesn’t ensure anonymity. How might a user be profiled?
If unspent bitcoin from different transactions (different addresses) are spent in the same transaction (i.e. connecting multiple addressed together in oene transaction)
What is each bitcoin address associated to?
Each bitcoin address is associated to a public/private key pair. Private key only known to the user that owns the address
What’s inside a bitcoin wallet?
A bitcoin wallet contains public/private keys of user’s addresses
Each bitcoin address has a private key. Who is this used by, what’s it used for?
Bitcoin address private key is used by owner of address, creates a digital signature of the transaction for proving ownership
Each transaction has two lists, what are they?
Input List (amount of bitcoins that have been received in previous transactions) and Output List (the bitcoin that can be spent)
What is double spending?
Spending the same bitcoins more than once
What is the result of mining?
New blocks are created, a block will list confirmed transactions that happened roughly at the same time
How is Double Spending fraud avoided when multiple branches occur?
“Proof of Work”. Mining is a difficult process, takes work to find a solution that makes new blocks valid, the work involved proves block are valid
What can sometimes happen during mining?
More than one block is produced at the same time, causing branching.
What is branch resolution? On what branches does this take place?
A mechanism that allows generated blocks on a branch to be rolled back, and those transactions cancelled. Branch rollback is done on every branch except the longest one
How is Double Spending fraud avoided when multiple branches occur?
If a fraud manages to get a transaction included in a shorter branch, and then tries to spend the same bitcoins in another transaction on the longer branch, the first transaction will be rolled back and prevent the double-spend.
What’s the rule of thumb for avoiding branch resolution rollback?
Looking at a transaction, wait for 6 blocks to be created after it for it to be considered complete
What is hashpower?
Number of hash worked out in a second
What are mining pools?
Pools of miners that work together. Increased horsepower = higher chance of mining blocks.
How does the difficulty of mining ensure immutability?
You could argue a miner with a lot of hashpower could make any branch they like longer, and cause other branches with confirmed transactions to be rolled back. But, having all the hashpower to do that is almost impossible, so it won’t happen, and so bloackhain is immutable
What are the 5 advantages of blockchain?
1) decentralised and available to public 2) trustless network 3) provides some anonymity 4) immutable 5) no single point of failure
Wht are the 5 disadvantages of blockchain?
1) High transaction fees 2) Not yet a stabalised currency 3) Blockchain lacks regulations 4) Slow transaction confirmation
