CSE446: Blockchain Consensus Algorithms

Questions and Answers

What is a significant limitation of Proof of Work (PoW) regarding resource consumption?

It is energy efficient due to reduced hashing needs.

It requires no computation power.

It involves low energy consumption.

It leads to high energy consumption as network difficulty increases. (correct)

Which scenario exemplifies the absence of a penalty in Proof of Work (PoW) algorithms?

A miner reports another miner's malicious behavior.

A miner successfully participates in block validation.

A miner colludes with others in selfish mining. (correct)

A miner contributes to the network by forwarding all transactions.

In relation to Denial-of-Service (DoS) attacks, what is a potential motive for a malicious miner?

To aggregate block rewards from performing mining alone.

To ensure higher transaction fees for legitimate miners.

To disrupt the functionality of the blockchain network. (correct)

To increase the efficiency of block validation.

What characteristic of PoW algorithms contributes to the potential for selfish mining?

They do not penalize dishonest behavior. Signup and view all the answers

Which consensus algorithm is a direct alternative to Proof of Work (PoW), aiming to address its limitations?

Proof of Stake (PoS) Signup and view all the answers

Why is high energy consumption considered a major limitation of Proof of Work (PoW)?

It increases costs and environmental impact. Signup and view all the answers

What is a primary consequence of miners engaging in Denial-of-Service attacks on a blockchain?

It can render the blockchain network inoperative. Signup and view all the answers

Which of the following is true about the economic incentives within Proof of Work (PoW) mechanisms?

They reward altruistic behavior without penalizing negative actions. Signup and view all the answers

What does finality in cryptocurrency transactions signify?

Transactions become immutable after a certain block confirmation. Signup and view all the answers

What is the main disadvantage of high latency in a blockchain network?

It can adversely affect businesses accepting crypto payments. Signup and view all the answers

In Proof of Stake, what must nodes provide to participate in block creation?

A certain number of coins and a locked stake. Signup and view all the answers

What happens to a staker's stake in Proof of Stake if they misbehave?

They can lose their staked amount. Signup and view all the answers

Why is it necessary to have low latency in cryptocurrency payment systems?

To prevent excessive waiting times that hinder usability. Signup and view all the answers

What does it mean for PoW-based blockchains to exhibit probabilistic transaction finality?

Transaction finality increases with the addition of more blocks confirmed. Signup and view all the answers

What role does a stakeholder serve once they escrow their stake in Proof of Stake?

They become part of an exclusive group for block creation. Signup and view all the answers

How is the finality of a Bitcoin transaction typically achieved?

By waiting for six subsequent blocks to be confirmed. Signup and view all the answers

What is a significant challenge faced by the Proof of Stake algorithm?

Generating initial coins Signup and view all the answers

What is the bootstrapping problem in the context of a PoS system?

Generating initial coins for stakeholders Signup and view all the answers

Which method involves creating coins before launching a PoS system?

Pre-mining Signup and view all the answers

How can the bootstrapping issue be solved using a transition method?

By establishing a PoW mechanism before switching to PoS Signup and view all the answers

What is essential for ensuring security in a PoS algorithm?

Fair distribution of coins among stakeholders Signup and view all the answers

What is an Initial Public Offering (IPO) in the context of pre-mining?

A fundraising mechanism by selling pre-mined coins Signup and view all the answers

Which of the following describes the role of the Staker Selection Algorithm?

To select which stakers will validate transactions or blocks Signup and view all the answers

What does PoW stand for in the context of cryptocurrency?

Proof of Work Signup and view all the answers

What is the primary benefit for stakeholders in a Proof of Stake system when producing blocks?

They are rewarded with transaction fees or new currencies. Signup and view all the answers

In Proof of Stake, how is the likelihood of a staker being selected to produce a block determined?

By the staked amount in relation to others. Signup and view all the answers

What role does the escrow account play in the Proof of Stake mechanism?

It holds the staked amounts of users securely. Signup and view all the answers

Which of the following is NOT a reward mechanism for validators in a Proof of Stake system?

Earning a percentage of the total network transaction amounts. Signup and view all the answers

What can be inferred about the relationship between the size of a stakeholder's stake and their potential rewards?

Larger stakes may lead to more frequent rewards. Signup and view all the answers

What does the term 'Staker Selection Algorithm' imply in a Proof of Stake system?

It determines staker eligibility based on the size of their stake. Signup and view all the answers

How does proof of stake differ from proof of work in terms of validation rewards?

Proof of stake can reward participants with transaction fees or new coins. Signup and view all the answers

What does the term 'set of validators' refer to in the context of a Proof of Stake system?

Individuals or entities that have staked a significant amount and are eligible to produce blocks. Signup and view all the answers

What primarily distinguishes Delegated Proof of Stake (DPoS) from traditional Proof of Stake (PoS) algorithms?

DPoS involves selecting a group of delegates who create blocks. Signup and view all the answers

How are leaders selected for proposing blocks in DPoS?

The selection process varies by the blockchain system. Signup and view all the answers

In the context of block production in EOS, how many Block Producers (BPs) are involved?

21 BPs are selected for each round. Signup and view all the answers

What happens if a Block Producer (BP) misbehaves in the EOS DPoS system?

The BP is penalized and removed from the validator set. Signup and view all the answers

Which aspect of block validation in EOS is necessary for a block to be confirmed?

A (+2/3) majority of the BPs must reach consensus. Signup and view all the answers

What role do the delegates play in the DPoS system?

Delegates compete to gain votes and create blocks. Signup and view all the answers

Which mechanism is used in DPoS to encourage users to vote for delegates?

Delegates offer different incentives to voters. Signup and view all the answers

What is the main consequence of having a small number of validators in a DPoS system?

Faster consensus finality or block confirmation times. Signup and view all the answers

Study Notes

Revised Syllabus: Theory & Lab

After midterm weeks cover blockchain consensus algorithms, Ethereum, and Hyperledger Fabric.
Highlights include security, privacy issues, and assessments in Dapp development.

Revised Distribution of Marks

Theory: 75% (Quiz: 15%, Assignment: 20%, Final Exam: 40%)
Lab: 25%

Limitations of Proof of Work (PoW)

High energy consumption linked to hash computation, worsening with increased network difficulty.
Absence of penalties allows misbehaving miners, enabling selfish mining and Denial-of-Service attacks.
Delays in transaction finality lead to uncertainty; transactions become immutable only over time, negatively impacting businesses.

Proof of Stake (PoS) Overview

Participants must prove ownership of coins and lock them as a stake to generate blocks.
Stakeholders can lose their stakes for misbehavior, incentivizing protocol adherence.
Block generation is proportional to stake size, rewarding stakeholders through transaction fees or new currency issuance.

Bootstrapping Issues in PoS

Initial coin generation is critical for PoS functionality, tackled through:
- Pre-mining: Coins are mined before launch and sold through IPO/ICO.
- PoW to PoS transition: Initial distribution via PoW, then transition to PoS (as practiced by Ethereum).

Delegated Proof of Stake (DPoS) Features

DPoS selects validators based on reputation and user votes, differing from traditional PoS.
A leader is chosen from delegates for each round to propose new blocks.
Validators, competing for votes, can distribute rewards to incentivize voter support.

DPoS System Example: EOS

EOS utilizes 21 Block Producers (BPs) selected by token holder votes.
Blocks produced in rounds, with BPs creating blocks in a pseudo-random order.
Consensus required from at least a two-thirds majority of BPs for block validation and confirmation.

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Description

This quiz focuses on Lecture 11 of CSE446, exploring various consensus algorithms used in blockchain technology. You'll assess your understanding of Ethereum, Hyperledger Fabric, and the associated security and privacy issues within these frameworks. Prepare to evaluate the strengths and weaknesses that come with different consensus approaches.