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Cryptocurrency > Cryptocurrency - Technology Back End > Flashcards

Cryptocurrency - Technology Back End Flashcards

1
Q

What are the 4 main parts for dApps?

A

“1) Frontend (what you see in the browser)
2) Backend (application logic) which is mostly smart contracts for a dApp
3) Data Storage (typical database, decentralized solution like IPFS)
4) Naming System - Ethereum naming system (ENS)”

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2
Q

If “the public” finds out that codes are not decentralized, what will they likely do to the project/protocol?

A

**They will most likely leave the projects as they know the owners can manipulate the code later.

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3
Q

Whatis the “Ethereum Naming System (ENS)”?

A

“Ethereum Naming System (ENS)” translates Ethereum address so it’s human readable. ENS is a decentralized name service dApp.
For example this address 0xC18360217D8F7Ab5e7c516566761Ea12Ce7F9D72 with ENS could be connected to the myens.eth name.

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4
Q

What is “Arweave”?

A

“Arweave” are decentralized storage providers. These run on a network of nodes. If some nodes go out, it will not damage the data stored as a whole.

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5
Q

How does the “Crypto Wallet” work?

A

Crypto Wallets are used as an interface for accessing the Cryptocurrency. Crypto Wallets use Public Keys and Private Keys to access the Cryptocurrencies.
Cryptocurrency is stored on the blockchain. It contains a specific address, the Public Keys and Private Keys are used to access that address.

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6
Q

What is a “Blockchain”?

A

An ordered set of data elements containing a link to it’s predecessor/successor. Each link is a Cryptographic hash of the previous block. This will create an unalterable chain of blocks with their ID’s which will go back to the original block.

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7
Q

How does the “Blockchain” become “Decentralized”?

A

At the basic levels, several nodes are used with all of them being linked (Uses Cryptographic hash functions for legitimacy). This created a slow distributed database that is resistant to tampering and require no trust among participants.

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8
Q

What are 5 types of Goods/Services that can be used for Blockchain?

A

1) Global Financial Infrastructure
2) Voting
3) Insurance Policies
4) Custodial Records
5) Crypto

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9
Q

What is “Peer-to-Peer (P2P)” networks in terms of Blockchain?

A

Peer-to-Peer (P2P) Networks are used to connect the different nodes/peers of the distributed blockhain. After data is propogated, all the nodes should have the same blockhain in the same state.

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10
Q

What is “Ethereum”?

A

“Ethereum” is an open source globally decentralized computing infrasturce that executes programs called “Smart Contracts”. It uses the “Blockchain” to sycnronize/store system states. It also uses the “Blockchain” as a “Cryptocurrency” called $ETH.
Bassically, Ethereum is a world computer that executes applications on top of a Blockchain.

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11
Q

What are the currency “Units” called for “$ETH”?

A

1) Wei - 1 wei
2) Gwei - 10^9 wei
3) Ether ($ETH) - 10^18 wei

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12
Q

Ownership of “$ETH” is established by which 3 technologies?

A

1) Private Keys
2) Ethereum Address
3) Digital Signatures

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13
Q

How does ownership of “$ETH” work?

A

Account addresses (EOAs) derive derectly from private keys. Private Keys will uniquly dermine a Single Ethereum Address. Access and control of the funds are done through “Digital Signatures”.

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14
Q

How are “Tokens” used on the Ethereum Network?

A

“Tokens” are handle at the “Smart Contract” level on Ethereum Network. Tokens are separate from the $ETH currency.

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15
Q

What is used to ease the interaction of different “Tokens” with separate rules?

A

Token Standards
“Token Standards” defines common interfaces for contracts to interact with dApps.

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16
Q

What are the 2 most used “Token Standards”?

A

ERC20 - This is a standard used for fungible tokens.
ERC721 - This is a standard used for non-fungible tokens.

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17
Q

What are 4 reasons to hold “Stablecoins”?

A

1) Lower the volatility in a portfolio.
2) Help to preserve your portfolio from losing too much money and to immediately access the portfolio if you want to by in.
3) You cain hold fiat on-chain and no one knows about it or can take it from you.
4) Use dApps with dollar pegged assets.

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18
Q

What are 3 traits that make up a “Stablecoin”?

A

1) Price Stability (Collateralized)
2) Decentralized
3) Capital Efficient

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19
Q

What are 3 largest “Stablecoins” that are pegged by the US Dollar?

A

1) $USDC
2) $USDT
3) $BUSD

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20
Q

What the method used to “Collaterize” a “Stablecoin” or a newly created “Stablecoin”?

A

Lock Up
When coins are added to the “Stablecoin”, they will become temporarily inacccessible for regular transactions. The coins can be used again when either the “Lock Up” period ends or certain conditions are met.

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21
Q

What are “Algo Stablecoins”?

A

These are a type of “Stablecoin” that are not collateralized. They maintain it’s pegged price value through algorithmic mechanisms. “Algo Stablecoins” are a high risk asset.
Note - In the past, these types of “Stablecoins” have collapsed in the past. Example is $LUNA.

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22
Q

What are the safest “Stablecoins” to invest in?

A

The safest “Stablecoins” to hold are the ones that are fiat-collateralized. Examples of those are: $USDC, $USDT, & $BUSD.

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23
Q

In Ethereum, what is the unit of “gwei” equal to?

A

1 gwei is equal to:
10 to the power of negative 9
(10^-9)
1 gwei is equal to 0.000000001 $ETH
1 $ETH is equal to 1 000 000 000 gwei

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24
Q

What is the requirement of “Gas” needed for a standard “Ethereum” transaction?

A

21 000 units of Gas

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25
Q

If you put in a “Gas Limit” that is higher than the amount that was consumed, would you get the unused “Gas” back?

A

Yes.
Example: You put 30 000 “Gas Limit” for an Ethereum transfer, but only 21 000 units of gas was used. You would get the unused “Gas” back (9 000).

26
Q

What is the event on “Ethereum” that changed the transaction fee calculation in August 2021?

A

London Upgrade in August 2021

27
Q

What is the calculation of “Gas Fees” before the “London Upgrade”?

A

Gas price was 100 gwei.
Gas Units (Limit) * Gas price per unit
“Example: 21000 * 100 = 2100000 gwei (0.0021 $ETH)”

28
Q

What is the calculation of “Gas Fees” after the “London Upgrade”?

A

Gas price is: 50 gwei base fee and 10 gwei priority fee.
Calculation: Gas Units (Limit) * (base fee + priority fee)
Example: “21000 * (50 + 10) = 1260000 gwei (0.00126 $ETH)

29
Q

In the “Blockchain”, what is the term used to describe a batch of “Transactions” used maintain a synced state in the “Blockchain”?

A

Blocks
Many “Transactions” are committed, agreed on, and synced in “Blocks”.

30
Q

In Ethereum, before the “London Upgrade” what types of “Blocks” were used to process a batch of “Transactions”?

A

Fixed-sized Blocks
When the Blockchain was in high demand, the “Block” sizes were in full capacity. Users on the Blockchain would have to wait until the demands were reduced.

31
Q

In Ethereum, after the “London Upgrade” what types of “Blocks” were introduced to process a batch of “Transactions”?

A

Variable-sized Blocks
All blocks have a target size of 15 million gas, but this can change based on network demand. Up to 30 million gas can be used (2x the target block size).

32
Q

In Ethereum, what will increase the “Base Fee” in terms of “Blocks”?

A

If the “Block Size” is greater than the target Block Size.

33
Q

In Ethereum, what will decrease the “Base Fee” in terms of “Blocks”?

A

If the “Block Size” is less than the target Block Size.

34
Q

In Ethereum, what mechanism in “Blocks” is included into the calculation of “Gas Fees” for “Transactions”?

A

Base Fee
The “Base Fee” is calculated by comparing the size of the previous “Block” with the target size. The base fee can increase to a max of “12.5%” if the target block is exceeded.

35
Q

Can “Gas Fees” spike insanely high when there’s high demand in the blockchain?

A

Yes

36
Q

Before the “London Upgrade”, how would miners receive payments for completing “Transactions”?

A

They would receive the total “Gas Fee”.

37
Q

Afer the “London Upgrade”, what was introduced for miner/stakers to receive payments for completing “Transactions” on the “Blockchain”?

A

Priority Fee (Tip)
With the Priority Fee, miners/stakers are incentivized to include a “Transaction” onto a “Block”. The higher the tip the higher the prioritization.

38
Q

In terms of “Blockchain”, what does the term “Max Fee” mean?

A

Max Fee is the max limit the User is willing to pay for their transaction to be executed. The operational paramater is also called “maxFeePerGas”.

39
Q

For a “Transaction” to be executed, does the “Max Fee” need to be greater than or equal to the sum of: “base fee + priority fee (Tip)”? Also if you set the Max Fee higher than the “Gas Fee”, will you get the unused Fee back?

A

Yes, and Yes.
Calculations:
“max fee >= base fee + priority fee”
“refund = max fee - (base fee + priority fee)

40
Q

What is the main goal of obtaining a “Cold Wallet”?

A

To provide a secure way of protecting your Private Keys offline. Your private keys located in a offline storage device. This protects your private keys from online attacks.

41
Q

If you transfer your funds to a “Token / Smart Contract”. Is there a chance of losing your tokens?

A

Yes, the “Smart Contract” itself can get hacked. Then your funds in that “Smart Contract” can get compromised.

42
Q

What are 3 good brands that have good “Crypto / Cold Wallets”?

A

1) Ledger
2) Trezor
3) Lattice Grid

43
Q

What happens if you lose your “Cold Wallet”?

A

Nothing, the wallet just holds your private key. You can recover your private key using the seed phase and put it on a a new device.

44
Q

With “Metamask”, do you need install “EVM compatible chain apps” on the “Hardware Wallet?

A

No, Metamask can be used to switch between networks.

45
Q

In “Blockchain”, what is used for comsumer and dApp visibility of data in the “Blockchain”? Also to send transactions onto different networks?

A

Remote Procedure Call (RPC) Nodes

46
Q

Which types of exchanges is more secure to use, Centrallized Exchanges or Decentralized Exchanges?

A

Decentralized Exchanges
Decentralized Exchanges is more secure as you hold control over your private keys.

47
Q

What are the 2 main reasons why you would use “Centralized Exchanges”?

A

1) On-ramp/Off-ramp fiat money
2) If the coins are only available on the Central Exchanges.

48
Q

Are large cap coins avaialbe on serveral Centralized/Decentralized exchanges?

A

Yes

49
Q

Small cap tokens are usually available where?

A

Small cap tokens are usually available on “Decentralized Exchanges (DEX)” or on their original Blockchain.

50
Q

What actually matters regarding the price of Price of a Token/Coin?

A

What actually matters is the “Price multiplied by the number of coins”. This represents the value of the particular project or company.

51
Q

For a Token/Coin, what is the term used for the maximum number of coins that can be in existance?

A

Maximum Supply
This get set when the token contract gets deployed on the Blockchain. It’s important to cap the supply to avoid inflation. Coins can also be take out of circulation forever and reduce the maximun supply.

52
Q

For a Token/Coin, what is the term used for the number of tokens that currently exists? Either I circulation or locked.

A

Totally Supply
It is the sum of coins that have already been mined/issued minus the total of number of coins burned.

53
Q

For a Token/Coin, what is the term used for the number of coins that are available in the different markets? This does not include the coins that are locked up or held.

A

Circulating Supply

54
Q

For a Token/Coin, what is the term used for the number of coins that mke it into circulation when the token contract is deployed?

A

Initial Supply

55
Q

For a Token/Coin, what is the term used for the process of which tokens are created in released into circulation?

A

Token Emission
This will also give the unlock dates that can be crucial when buy into a small or mid cap token.

56
Q

For a Token/Coin, what is the term used for reducing the number tokens supply from circulation?

A

Burn
This will make the tokens more vauluable and more scarce.

57
Q

For a Token/Coin, what is the term used for increasing the number of tokens into circulation?

A

Mint

58
Q

For a Token/Coin, what is a mechanisum used to prevent people from selling a particular token in an exchange? Usually you’ll get a reward.

A

Lock/unlock

59
Q

For a Token/Coin, what is the term used that represents the current market value of a particular token or project?

A

Market Cap (MC)
Calculation: Price of the token multiplied by the “Circulating Supply”.

60
Q

For a Token/Coin, what is the term used that represents the company’s value after all stock options are exercised and all securities are converted into stock?

A

Fully Diluted Valuation (FDV)
Calculation: Price of the token multiplied by the maxumum supply.
Example: For Bitcoin, if price of Bitcoin is $30000 and maximum supply is 21000000: “21 000 000 x 30 000 = 630 000 000 000”

61
Q

What are some basic rules to consider for investing?

A

”
- If emission is high then expect sell pressure on the coin.

  • If there is an unlock where let’s say 20% of the coins will be released on the market then expect sell pressure on the coin.
  • When FDV is much higher than MC then expect high emission over the long run as well.
  • Always compare FDV and MC with a timeline and emission schedule considered.
  • If there is a significant burn event then expect buy pressure on the coin.
  • Low and stable emission is a good sign. Projects have to find a balance to emit enough tokens to reward their early users but they shouldn’t emit too much because that will dilute the project.
  • If coins get locked that causes buy pressure on the coin.
    “

Cryptocurrency (3 decks)

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