Crypto money

Question 1

What is a coin?

Answer 1

A coin is a change of digital signatures, representing people who have owned the coin.

Question 2

What is Bitcoin?

Answer 2

Bitcoin is a decentralized digital currency. Bitcoin uses peer-to-peer technology to operate with no central authority.

Question 3

Where are transactions stored in Bitcoin?

Answer 3

In the blockchain

Question 4

What are the disadvantages of bitcoin?

Answer 4

• All transactions remain on the block chain forever
• Wallet is vulnerable to theft as it is stored unencrypted
• Bad associations with bitcoin e.g. tax evasion
• High energy consumption

Question 5

How do people create Bitcoin?

Answer 5

1. Everyone tries to solve a puzzle (large mathematical equation)
2. First one to solve the puzzle gets 1 coin
3. The solution of puzzle i defines puzzle i+1
4. Once a puzzle is solved everyone uses it and tries to solve the next one.

Question 6

What is proof-of-work?

Answer 6

Process of validating transactions on a blockchain to confirm transactions, close and open blocks.

Question 7

How do we store the results of solved solutions/puzzles?

Answer 7

Once a solution is found package it up into a “block” and send it to everyone.

Question 8

What does a block contain?

Answer 8

• An identify of who cracked the puzzle
• The required solutions to the previous puzzles
• A reference to the previous blocks/puzzles

Question 9

What is the blockchain?

Answer 9

A series of blocks that refer to one enough in a linear way. Blocks that have been verified are added to the chain.

Question 10

What happens if two people compute a result at the same time?

Answer 10

It depends on which block is trusted more. One block will eventually become longer and more trusted.

Question 11

How is coins transferred?

Answer 11

Alice wants to send a coin to Bob
1. Bob sends his identifier to Alice
2. Alice adds Bob’s identifier and the coin to a transfer a message: ‘transaction’ message
3. Alice signs the transactions with her private key and announces her public key for signature verification
4. Alice broadcasts the transaction for all to see.

Question 12

How is double spending prevented?

Answer 12

A transaction is considered valid only if it is included in a confirmed blockchain.

Question 13

How does one withdraw ecash (digital money)?

Answer 13

1. User generates a random serial number for each coin to deposit
2. User chooses a blinding factor for the serial number for each coin
3. User party then signs each coin with their private key and encrypts with the banks public key
4. Bank validates the transaction then signs each coin with its private key and encrypts with the users public key
5. The user now receives the encrypted coins, checks them and then spends them