Introduction to Blockchain Technology

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Questions and Answers

What is the primary benefit of using blockchain transactions compared to traditional banking?

They require more documentation.

They are slower to process.

They are faster, more secure, and less expensive. (correct)

They are only accessible by a limited number of users.

Who is responsible for verifying transaction data on the blockchain?

Admins of the network.

Government authorities.

Bank employees.

Miners. (correct)

Which of the following statements about blockchain data is accurate?

The data can be altered by any user.

The data is stored permanently and cannot be changed. (correct)

The data is secure but can be deleted.

The data is stored on a central server only.

What is encryption's role in the context of blockchain?

It protects data from unauthorized access. Signup and view all the answers

What potential challenge may arise from the blockchain's accessibility to anyone?

Risk of data hacking. Signup and view all the answers

Which cryptoasset was the first widely known to utilize blockchain technology?

Bitcoin. Signup and view all the answers

What do analytics in blockchain help protect against?

Blockchain events and risk. Signup and view all the answers

What does a distributed ledger imply in blockchain technology?

It exists on multiple servers accessible by anyone. Signup and view all the answers

How does proof of stake differ from proof of work in terms of energy consumption?

Proof of stake uses less energy than proof of work. Signup and view all the answers

What is one key disadvantage of proof of stake compared to proof of work?

It can lead to centralization of power. Signup and view all the answers

Which mechanism allows validators in proof of stake to earn rewards?

Staking cryptocurrency as collateral. Signup and view all the answers

What happens to a validator's stake if they add a block with inaccurate information?

They lose their stake holdings. Signup and view all the answers

What is required for a participant to potentially be selected as a validator in proof of stake?

They must stake a certain amount of cryptocurrency. Signup and view all the answers

What process allows cryptoasset holders to prove ownership without revealing their private keys?

Blockchain cryptographic signing. Signup and view all the answers

What is the primary function of staking pools in proof of stake systems?

To allow users to combine their coins for transaction verification. Signup and view all the answers

What is the main reason proof of stake blockchain networks have become popular since their inception?

They require less energy for transaction validation. Signup and view all the answers

What is required for hackers to successfully steal assets from a blockchain address?

Access to a pair of keys Signup and view all the answers

Which of the following correctly distinguishes cryptocurrency from fiat currency?

Cryptocurrency is not backed by a physical commodity Signup and view all the answers

How is the value of fiat currency primarily determined?

Holders’ confidence in the issuing government Signup and view all the answers

What is true about the purchasing power of cryptocurrencies?

Their purchasing power is determined by market acceptance Signup and view all the answers

What characteristic of fiat currency differentiates it from cryptocurrency?

Fiat currency is issued by a central authority Signup and view all the answers

In what context could cryptocurrencies be considered more advantageous than fiat currencies?

In locations with limited financial services Signup and view all the answers

Why do cryptocurrencies generally lack inherent value?

They are only valued based on market perception Signup and view all the answers

Which statement is incorrect regarding the nature of cryptocurrency?

Cryptocurrencies must be exchanged for fiat currency Signup and view all the answers

What is the primary function of blockchain miners?

To validate transactions before they are added to the blockchain Signup and view all the answers

What role do private keys play in blockchain security?

They grant control over corresponding account funds Signup and view all the answers

How does the blockchain maintain trust among users?

Through the public access to transaction signatures for verification Signup and view all the answers

What happens when two miners validate blocks simultaneously?

A forked system is created with competing valid blocks Signup and view all the answers

What is a block in the context of blockchain technology?

A group of validated transactions batched together Signup and view all the answers

Which of the following describes the hierarchy of trust in a blockchain?

Miners validate transactions before they are published to maintain system integrity Signup and view all the answers

What does the process of adding new blocks to the blockchain depend on?

The verification of previous blocks Signup and view all the answers

Why is it crucial to protect private keys in blockchain usage?

Exposure to untrusted operators can lead to loss of funds Signup and view all the answers

What is a primary purpose of a white paper in an ICO?

To describe the project for which the ICO is taking place Signup and view all the answers

What differentiates a security token from a utility token?

Security tokens represent ownership similar to shares in an IPO Signup and view all the answers

Which of the following is true about ERC-20 tokens?

They can exist on the Ethereum platform without a native blockchain Signup and view all the answers

What is a significant requirement for carrying out an ICO?

Publicizing key information about the offering Signup and view all the answers

What critical role does 'gas' play in the Ethereum network?

It is required to complete transactions on the blockchain Signup and view all the answers

Who is the creator of Ethereum?

Vitalik Buterin Signup and view all the answers

How do governance tokens typically function within a blockchain ecosystem?

They confer voting rights related to protocol changes Signup and view all the answers

What is a crucial difference between an ICO and an ITO?

ICOs offer cryptocurrency native to a blockchain, while ITOs offer tokens on another blockchain Signup and view all the answers

What is the primary purpose of CBDCs?

To facilitate payments similar to cash Signup and view all the answers

How do CBDCs differ from asset-backed stablecoins?

CBDCs are considered legal tender Signup and view all the answers

What characteristic allows CBDCs to be more controlled compared to permissionless blockchains?

Only select entities can make changes Signup and view all the answers

What happens to the domestic money supply in a country that issues CBDCs?

It splits into two local currencies: cash and CBDCs Signup and view all the answers

What recent event exemplified the risks associated with algorithmic stablecoins?

The decoupling of TerraUSD from its US dollar peg Signup and view all the answers

What method is used to stabilize the value of TerraUSD?

Burning LUNA to mint UST and vice versa Signup and view all the answers

Which of the following represents the potential benefit of utilizing CBDCs?

Lower costs of currency transactions Signup and view all the answers

Why are CBDCs appealing to governments in terms of transaction records?

They allow tracing of immutable transaction records Signup and view all the answers

Study Notes

Certified Cryptoasset AFC Specialist Study Guide

The Certified Cryptoasset AFC Specialist certification is provided by ACAMS.
A task force compiled the study guide.
Contributors were noted.

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Description

This quiz explores key concepts of blockchain technology, including its advantages over traditional banking and the role of encryption and distribution. Test your understanding of how blockchain verifies transactions and its security applications.