Bitcoin: A Peer-to-Peer Electronic Cash System

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Questions and Answers

What is the purpose of the proof-of-work in the Bitcoin network?

To provide a way to timestamp transactions

To make it computationally expensive to modify a past block

To ensure that the majority decision is represented by the longest chain with the greatest proof-of-work effort invested in it (correct)

To allow anyone with an IP address to participate in the decision-making process

What is the relationship between the number of zero bits required in the hash and the average work required?

The average work required is inversely proportional to the number of zero bits required

The average work required is linearly proportional to the number of zero bits required

The average work required is exponential in the number of zero bits required (correct)

The average work required is constant, regardless of the number of zero bits required

How does the proof-of-work solve the problem of determining representation in majority decision making?

By making it one-CPU-one-vote, rather than one-IP-address-one-vote (correct)

By providing a way to timestamp transactions

By making it computationally expensive to modify a past block

By allowing anyone with an IP address to participate in the decision-making process

What is the purpose of chaining blocks together after a block has satisfied the proof-of-work?

To make it more difficult to modify past blocks (C) Signup and view all the answers

What is the relationship between the honest nodes and the longest chain in the Bitcoin network?

The longest chain is the one with the greatest proof-of-work effort invested in it (B) Signup and view all the answers

What is the role of the nonce in the proof-of-work process?

To increment until a value is found that gives the block's hash the required zero bits (A) Signup and view all the answers

What is the main benefit lost if a trusted third party is still required in electronic cash transactions?

Security (C) Signup and view all the answers

How is the double-spending problem addressed in the proposed solution?

Using a peer-to-peer network with proof-of-work (C) Signup and view all the answers

What role does the longest chain play in the Bitcoin system?

Serves as proof of CPU power control (D) Signup and view all the answers

Why is it essential for a majority of CPU power to be controlled by non-cooperating nodes in the Bitcoin network?

To prevent double-spending (C) Signup and view all the answers

What characteristic of the network allows nodes to leave and rejoin at will?

Minimal network structure (B) Signup and view all the answers

In electronic cash transactions, what is the significant advantage of avoiding financial institutions as trusted third parties?

Increased security and independence (D) Signup and view all the answers

Why should a greedy attacker find it more profitable to play by the rules in the blockchain system?

To generate new coins (A) Signup and view all the answers

How are old blocks compacted to save disk space in the blockchain system?

By stubbing off branches of the Merkle Tree (D) Signup and view all the answers

What is the purpose of hashing transactions in a Merkle Tree in the blockchain system?

To facilitate efficient verification of transaction integrity (B) Signup and view all the answers

How much space does a block header with no transactions occupy in the blockchain system?

80 bytes (D) Signup and view all the answers

What is the approximate yearly storage requirement for block headers if blocks are generated every 10 minutes?

4.2MB per year (C) Signup and view all the answers

Why is storage unlikely to be a problem for block headers in the blockchain system despite increasing data?

Moore's Law predicts current growth in computer RAM (A) Signup and view all the answers

What prevents the sender from preparing a chain of blocks ahead of time in blockchain transactions?

The receiver giving the public key to the sender shortly before signing (C) Signup and view all the answers

Under what circumstances does the recipient wait until the transaction has been added to a block in blockchain transactions?

When z blocks have been linked after the transaction is added (A) Signup and view all the answers

What value represents the attacker's potential progress in terms of a Poisson distribution in blockchain transactions?

$z \times q / p$ (D) Signup and view all the answers

How is the probability that the attacker could still catch up calculated in blockchain transactions?

$z 1 - \sum_{k=0} \frac{\lambda^k e^{-\lambda}}{k!}$ (C) Signup and view all the answers

Which parameter is used to convert the calculation of the probability for the attacker catching up into C code?

$\lambda$ (D) Signup and view all the answers

What action does the dishonest sender take after sending a transaction in blockchain transactions?

Start working on a parallel chain with an alternate version of the transaction (C) Signup and view all the answers

What is the main purpose of simplified payment verification as described in the text?

To allow users to verify transactions without running a full network node (D) Signup and view all the answers

What is the main vulnerability of the simplified payment verification method?

It is more vulnerable if the network is overpowered by an attacker (D) Signup and view all the answers

What is the purpose of the Merkle branch mentioned in the text?

To link a transaction to the block it is timestamped in (B) Signup and view all the answers

What strategy does the text suggest to protect against an attacker's fabricated transactions?

Accept alerts from network nodes when they detect an invalid block (A) Signup and view all the answers

What is the purpose of the longest proof-of-work chain mentioned in the text?

To ensure the integrity of the blockchain (B) Signup and view all the answers

How does the simplified payment verification method described in the text differ from a full network node?

It does not require users to download the entire blockchain (C) Signup and view all the answers

Study Notes

Proof-of-Work

Involves scanning for a value that when hashed, meets a required number of zero bits
The average work required is exponential in the number of zero bits required
Can be verified by executing a single hash

Implementation of Proof-of-Work in Timestamp Network

Implemented by incrementing a nonce in the block until a value is found that gives the block's hash the required zero bits
Once the CPU effort has been expended, the block cannot be changed without redoing the work
As later blocks are chained after it, the work to change the block would include redoing all the blocks after it

Proof-of-Work and Majority Decision Making

Solves the problem of determining representation in majority decision making
Prevents anyone from allocating many IPs to subvert the system
Essentially, it's one-CPU-one-vote, where the majority decision is represented by the longest chain