6. The Blockchain
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Questions and Answers

What is the primary problem that blockchain seeks to solve?

  • Lack of security in digital transactions
  • The double-spending problem (correct)
  • High transaction fees associated with banks
  • The difficulty of tracking physical assets
  • What role do trusted intermediaries, such as banks, play in traditional transactions?

  • They generate proof of transactions
  • They facilitate regional currency exchanges
  • They prevent fraud in physical cash transactions
  • They act as a proof of possession for digital assets (correct)
  • Which statement best describes the original intent of blockchain technology?

  • To create a centralized authority for cryptocurrency
  • To establish a framework for digital currency regulation
  • To eliminate the need for physical cash entirely
  • To generate computational proof of transaction order (correct)
  • In the context of blockchain, what does the term 'peer-to-peer' indicate?

    <p>Transactions occur directly between buyers and sellers without intermediaries</p> Signup and view all the answers

    What assurance does a digital bank provide in a transaction involving digital currency?

    <p>Confirms the availability of funds before a purchase</p> Signup and view all the answers

    What must be achieved for an attacker to successfully rewrite block 1234?

    <p>The new X must cause SHA(“…X”) to start with '00000'.</p> Signup and view all the answers

    Which of the following statements about finding X is correct?

    <p>The difficulty of finding X increases as more blocks are added.</p> Signup and view all the answers

    What is the effect of a successfully mined block 1234 with a new X value?

    <p>All subsequent blocks must be recalculated to match the new hash.</p> Signup and view all the answers

    How is the security of the blockchain primarily ensured?

    <p>Via the proof-of-work consensus mechanism.</p> Signup and view all the answers

    What is the primary purpose of the SHA256 function in the context of blockchain?

    <p>To ensure the integrity and verifiability of blocks.</p> Signup and view all the answers

    What is the significance of the block ID in a blockchain?

    <p>It serves as a unique identifier for each block.</p> Signup and view all the answers

    What is the primary challenge faced by an attacker in winning consensus within a blockchain network?

    <p>Presenting the longest blockchain to the network.</p> Signup and view all the answers

    Which of the following factors can diminish the chance of an attacker winning in a blockchain network?

    <p>Increasing the number of honest nodes added to the network.</p> Signup and view all the answers

    In the context of blockchain blocks 1234 to 1237, which statement is true?

    <p>Block 1235 does not reference block 1234 correctly.</p> Signup and view all the answers

    How does the Poisson probability model contribute to understanding security in blockchain?

    <p>It demonstrates how attacker success chances change with network size.</p> Signup and view all the answers

    What is primarily established by blockchain technology in contrast to traditional systems?

    <p>Trust in code</p> Signup and view all the answers

    What does the term 'peer-to-peer distributed timestamp server' refer to in the context of blockchain?

    <p>A system that ensures all users have the same transaction record</p> Signup and view all the answers

    What happens in tampering attempt 1 when 'Mis-repeating' occurs?

    <p>Funds are transferred incorrectly due to duplicate records</p> Signup and view all the answers

    What is likely the primary concern that blockchain addresses regarding trust?

    <p>Manipulation and fraud in transactions</p> Signup and view all the answers

    In the computational proof of transactions, how does blockchain verify a transaction?

    <p>Through the use of cryptographic signatures</p> Signup and view all the answers

    What underlying principle does social capital rely on in relation to trust?

    <p>Personal relationships and networking</p> Signup and view all the answers

    Why is tampering attempt 2, 'Re-writing Records', a significant issue?

    <p>It undermines the integrity of the entire transaction history</p> Signup and view all the answers

    What do the terms 'Buyer B' and 'Seller A' represent in the context of blockchain?

    <p>Digital identifiers for individuals in a transaction</p> Signup and view all the answers

    How does the legal classification of cryptoassets differ from traditional physical assets?

    <p>Cryptoassets are categorized as incorporeal rights, recognized by common law as things in action.</p> Signup and view all the answers

    What role does mutual faith play in the recognition of cryptoassets as currency?

    <p>Cryptoassets derive their exchange value from a collective belief in their worth.</p> Signup and view all the answers

    In the context of Bybit v Ho Kai Xin and others, what is the relationship between possession and action regarding cryptoassets?

    <p>The holder of a crypto asset has an incorporeal right that is classified as a thing in action.</p> Signup and view all the answers

    What does the court need to assess regarding societal views toward cryptoassets?

    <p>Whether to recognize mutual faith and its implications on cryptoasset valuation.</p> Signup and view all the answers

    Which statement describes a characteristic of tokens in relation to off-chain assets?

    <p>Tokens are links to real-world assets and enable their tokenization.</p> Signup and view all the answers

    How are smart contracts fundamentally implemented in the context of cryptoassets?

    <p>They are implemented as code on the Ethereum blockchain.</p> Signup and view all the answers

    What conclusion can be drawn about the physical manifestation of cryptoassets?

    <p>The private/public key system is described as a physical manifestation in digital terms.</p> Signup and view all the answers

    What is the main challenge confronted by legislators regarding the nature of cryptoassets?

    <p>Understanding how to regulate assets that are inherently digital and non-physical.</p> Signup and view all the answers

    Study Notes

    Blockchain Definition

    • Key technology which solves the double-spending problem by generating computational proof of the chronological order of transactions.

    Understanding the Double-Spend Problem

    • A double-spend occurs when someone tries to spend the same digital asset (like a cryptocurrency) in two different transactions.

    The Solution

    • The blockchain uses a peer-to-peer distributed timestamp server that creates a shared ledger of transactions across the network, ensuring that each transaction is only recorded once.

    Proof-of-Work (POW) Consensus and Tamper-Proofing

    • The POW consensus mechanism makes it computationally expensive to tamper with the blockchain due to the need to solve complex mathematical problems to add new blocks.
    • The attacker would need to outpace the honest nodes in the network to create a longer blockchain and win consensus.
    • The probability of an attacker succeeding drops exponentially as the number of honest nodes increases and the computational power differential grows.
    • The Bybit v Ho Kai Xin case suggests that while Cryptoassets are not physical assets, they can be defined and identified in the digital world.
    • These Cryptoassets can be traded and valued as holdings, meeting the criteria of the Ainsworth formula for property.
    • While not permanent in the traditional sense, they are identified and valued through their digital manifestation.
    • The court recognizes that their value is based on a collective act of mutual faith similar to traditional currency.
    • Whether this constitutes the court recognizing existing societal faith or creating a new one is a complex question with implications for both law and technology.

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    Description

    This quiz covers the fundamental concepts of blockchain technology, including definitions, the double-spend problem, and consensus mechanisms like Proof-of-Work. Understand how blockchain secures digital transactions and prevents fraud through decentralized systems.

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