AIS ELEC 1 Reviewer: Midterm Chapters 2-3
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Questions and Answers

What is a key advantage of trading in digital currency according to the text?

  • Global reach (correct)
  • Lack of security
  • High transaction fees
  • Governmental backing
  • How are transactions in digital currency recorded?

  • Encrypted in multiple layers
  • Verified by governmental institutions
  • Subject to high fees
  • Permanently added to a ledger (correct)
  • What sets cryptocurrencies apart from traditional payments like cash and credit cards according to the text?

  • Digital and encrypted nature (correct)
  • High susceptibility to theft
  • Heavy reliance on third-party companies
  • Ease of tracking transactions
  • Why are transaction fees for trading in cryptocurrency appealing compared to traditional financial institutions?

    <p>They are much lower</p> Signup and view all the answers

    Which feature of digital currency makes it harder to be stolen compared to physical cash?

    <p>Decentralized nature</p> Signup and view all the answers

    What characteristic of cryptocurrency provides users with direct control over their funds?

    <p>Absence of middlemen</p> Signup and view all the answers

    Why does the text mention that you cannot be 'ripped off' in a cryptocurrency transaction?

    <p>'Digital and encrypted' characteristics</p> Signup and view all the answers

    What role does geographical boundaries play in the acceptance and use of cryptocurrency?

    <p>Are irrelevant to cryptocurrency use</p> Signup and view all the answers

    'You Control Your Money' is highlighted in the text to emphasize what aspect of cryptocurrency?

    <p>'Absence of middleman'</p> Signup and view all the answers

    What do big crypto-exchanges use to record transactions?

    <p>Internal databases that periodically synchronize with the blockchain</p> Signup and view all the answers

    What are alternative hashing algorithms compared to in the text?

    <p>Various types of locks for securing blockchain information</p> Signup and view all the answers

    Which of the following is NOT listed as an alternative hashing algorithm?

    <p>SHA-256</p> Signup and view all the answers

    What is a potential advantage of alternative consensus models like proof-of-stake over proof-of-work?

    <p>Lower latency and less computational power required</p> Signup and view all the answers

    What type of wallets focus only on the most recent or unspent outputs, similar to credit card transactions?

    <p>Thin wallets</p> Signup and view all the answers

    What is the term used in the text to describe the ability of blockchains to communicate with other blockchains?

    <p>Blockchain interoperability</p> Signup and view all the answers

    What are sidechains described as in the text?

    <p>Independent blockchains that connect to their parent chains via a two-way bridge</p> Signup and view all the answers

    What is the purpose of posting bond on blockchains like Tendermint, according to the text?

    <p>To make it costly to fork and potentially improve operability and security</p> Signup and view all the answers

    Which of the following is NOT mentioned in the text as a type of dark pool?

    <p>Peer-to-Peer Dark Pool</p> Signup and view all the answers

    What is the purpose of dark pools, as described in the text?

    <p>To operate internal databases of transactions that periodically synchronize with the blockchain</p> Signup and view all the answers

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