Blockchain

Along with being composed of blocks and using a standard protocol, what are three other attributes of a public blockchain?

It has a consensus mechanism.

It is permissionless.

It has no centralized controlling authority

To ensure that any block that is added to the chain is legitimate, without having to place trust in an outside entity, such as a bank or governing body, blockchains use a ___________ mechanism

consensus

A consensus mechanism that involves an algorithm that creates an unpredictable math problem that can only be solved with significant computing power is called a ___ consensus mechanism.

proof-of-work (PoW)

The first widely used blockchain was created in 2008 to support the cryptocurrency called:

Bitcoin

A major drawback of the proof-of-work (PoW) consensus mechanism is that it requires large amounts of Blank______ as the blockchain grows.

computing power

To help ensure the strength of the blockchain, blocks can only be added in certain:

time intervals

Unlike other large accessible databases that are controlled by corporate entities, such as Netflix or Spotify, public blockchains are hosted on a public ledger, which can be considered a huge database, that stores the data for a blockchain and essentially runs as a peer-to-peer network. This means they have no:

controlling central authority

Select three blockchain consensus mechanisms.

proof-of-work (PoW)

proof-of-stake (PoS)

proof-of-authority (PoA)

The most commonly used consensus mechanism, with the drawback that it requires large amounts of computing power (and electricity) as the blockchain grows, is called the proof-of- consensus mechanism.

work

An advantage of the Blank______ consensus mechanism is that it forces all participants to act in their own self-interest, allowing for faster transaction times, and not requiring large amounts of computing power.

proof-of-stake (PoS)

A consensus mechanism that demands large amounts of computing power, with the associated energy demands, is the __ consensus mechanism.

proof-of-work (PoW)

Select the three items that will be included in every block in a blockchain.

- a timestamp

- the unique information identifying the block that precedes it

- a hash

Servers that host the database are known as public ledgers because they are accessible to everyone and do not require that users place their trust in any individual. This means they are ___.

permissionless

Most private corporate blockchains, such as Microsoft Blockchain, use the Blank______ consensus mechanism.

proof-of-authority (PoA)

One potential issue with the point-of-stake (PoS) consensus mechanism is that if an owner purchases over ___ percent of the blocks (coins), that owner could potentially stop any future transactions.

50

Bitcoin

Ethereum

Solana

Store of value (alternative currency)

Store of value (alternative currency), and also to create smart contracts

matches

Store of value (alternative currency), and also to create smart contracts and decentralized applications (dApps)

One potential use of blockchains may be to help with supply tracking to ensure items such as blueberries and romaine lettuce is fresh and clean when shipped and illicit items such as "blood diamonds" are kept off the market.

chain

A cryptocurrency's supply is controlled by a protocol called ______ that distributes control among the users and participants.

a consensus mechanism

PoA consensus mechanisms are often used by private blockchains, such as those used by corporations. PoA stands for proof-of-

authority

Select three consensus mechanisms that some newer blockchains are using.

proof-of-burn (PoB)

proof-of-history (PoH)

proof-of-contribution (PoC)

Choose three reasons why Bitcoin has value.

because some investors believe the price of Bitcoin (BTC) will increase in the future

because it can be used as legal tender in some countries such as El Salvador

because it can be used to purchase certain items such as Teslas

Seeing the success of Bitcoin's blockchain, but wanting to capitalize on the ability to create smart contracts, the developers of the Blank______ blockchain made it more flexible and faster than Bitcoin's blockchain.

Ethereum

Because it was built on a proof-of-work blockchain, Ethereum (Ethereum 1.0) has ______ gas fees than a proof-of-stake cryptocurrency such as Solana.

higher

Digital money that is based on a blockchain is called

crypto

Cryptocurrency creation is determined by the Blank______ used by the blockchain developers.

consensus mechanism

For purposes of security, wallets are typically accessed through a combination of:

public and private keys

Some cryptocurrencies have value just because they store value and have a limited number of blocks. The largest cryptocurrency by market cap is . It is limited to 21 million blocks (coins).

BTC

Choose three methods by which investors buy, sell, and store cryptocurrencies.

through the use of a peer-to-peer exchange

through a cryptocurrency exchange

through the use of wallets

To buy, sell, or use cryptocurrency, you must have access to a secure computer code. These codes (private keys) are stored in cryptocurrency

wallets

A device similar to a USB drive that gives you access to your cryptocurrency is referred to as a cryptocurrency wallet.

hardware

The software that allows an owner to access a cryptocurrency account is called a private ______This typically grants the owner access to their wallet.

key

A cellphone app that provides access to a user's cryptocurrency private key is often called a hot or online

wallet

Writing down your private key and storing it in a secure site is referred to as using:

a paper wallet

The three main types of cryptocurrency exchanges include:

traditional

peer-to-peer (P2P)

brokerage

Select three commonly used types of cryptocurrency wallets.

paper wallets

hardware wallets

online wallets

Most cryptocurrency hardware wallets incorporate a small keypad that requires the user to add a Blank______ before accessing their private key (and their cryptocurrency).

personal identification number (PIN)

Typically, online wallets require the use of a strong password and Blank______ to log into the wallet where your cryptocurrency private keys are stored.

two-factor authentication

Binance, headquartered in the Cayman Islands, and Mandala Exchange in Malta, are by far the largest __.

traditional cryptocurrency exchanges

As more and more individuals become increasingly knowledgeable about cryptocurrency trading, P2P cryptocurrency have grown in popularity.

exchanges

Coinbase is the world's most popular cryptocurrency (exchange) firm.

broker

Scams and fraud, hacking, and simply losing your private key, along with volatility, are associated with buying cryptocurrency.

risks

When scammers describe their big gains and provide a fraudulent link with an easy mechanism to purchase the cryptocurrency and then defraud investors, it is called a ___ .

pig butchering scam

Also called direct trading platforms or over-the-counter (OTC), ___ involve low or no transaction fees.

peer-to-peer (P2P) cryptocurrency exchanges

Most successful hacks that occur today are conducted through:

social engineering

Charging a fee, similar to a premium, for every transaction, Blank______ offer an easy way for cryptocurrency novices to gain trading experience.

cryptocurrency brokerage firms

Select three categories of risks associated with cryptocurrency trading.

scams and fraud

volatility

hacking

One scam, which occurred with a cryptocurrency called Squid, is where developers create a new cryptocurrency, use social media to create hype about the coin, and then delete the blockchain itself, leaving investors with absolutely nothing. This is known as:

rug pull

An advantage of using a peer-to-peer (P2P) cryptocurrency exchange is that:

P2P exchanges have low or no transaction fees

P2P exchanges have low or no transaction fees

social engineering

Because cryptocurrency is very liquid, and it has no intrinsic value other than the faith that holders place in the currency, its price tends to be very ___.

volatile

Unlike coins, NFTs do not reside on one specific ___.

blockchain

To purchase Ethereum with Bitcoin, you would use a wrapped Bitcoin (wBTC) to create what is referred to as a wrapped ___.

token

The price of conducting transactions on blockchains is known as the ___.

gas fee

The biggest risk for cryptocurrency investors remains the extreme of the cryptocurrency market.

changes

Bitcoin and Litecoin, because they are established proof-of-work (PoW) coins, are considered __.

store-of-value coins

If you purchase Ethereum (coins), the transaction operates on the Blank______ blockchain, since it is a native coin.

Ethereum

Aside from a single vulnerability, found and corrected in April 2010, no flaw in the ___ has been discovered.

Bitcoin blockchain

If you wish to purchase Ethereum (ETH) with your Bitcoin (BTC), you would use wBTC, which stands for a Bitcoin token.

wrapped

When first executing decentralized financial (DeFi) transactions, developers were paid in Ethereum, which was recorded as GWEI or one-billionth of an Ethereum coin. GWEI became known as ether or simply ___.

gas

The first major cryptocurrency, Bitcoin, was developed to be an alternative currency that could not be manipulated by any government entity. This is why it is called a store-of- cryptocurrency

value

The largest cryptocurrency by market capitalization, , is accepted by well over 100,000 merchants.

BTC

Like Bitcoin and Litecoin, the Dogecoin blockchain is a Blank______ blockchain.

proof-of-work (PoW)

Developed by Charlie Lee in 2010, the Blank______ blockchain was created to be a faster store-of-value coin than Bitcoin.

LTC

An asset that retains its worth rather than depreciating over time, such as precious metals and fine art, is an example of ___.

store-of-value assets

If all parties want to update a smart contract, they have to build an additional contract, called:

a proxy contract

To remedy the slow transaction time issue associated with PoW blockchains such as Ethereum 1.0 and Bitcoin, ___ blockchains were created, allowing for far faster transactions.

PoS

Assets are wrapped using Ethereum Request for Comments (ERC) protocols. The most commonly used is the ___, which is generally used for contracts that exchange cryptocurrencies.

ERC-20 protocol

Binance's blockchain uses the ___ consensus mechanism.

PoA

The Litecoin blockchain was created to be a faster store-of-value coin than ___ (BTC).

Bitcoin

The native cryptocurrency of the Cardano blockchain is called ___

ADA

Unlike Bitcoin or Ethereum, which are proof-of-work (PoW) blockchains, Solana (SOL) is a proof-of- (PoS) blockchain.

stake

In an attempt to reduce cryptocurrency volatility, developers created Blank______, which are pegged or "tethered" to a less volatile asset such as gold or U.S. dollars.

stablecoins

Select three common means of tethering stablecoins.

collateralize with a corresponding currency

collateralize with non-currency assets

collateralize with cryptocurrency

Binance's blockchain, which it calls a "Smart Chain," uses the ______ consensus mechanism.

proof-of-authority (PoA)

Unlike Bitcoin or Ethereum, which are proof-of-work (PoW) blockchains, Cardano is a proof-of- (PoS) blockchain.

stake

Tether (USDT) is the largest by market capitalization. It is tethered to the U.S. dollar.

stable coin

Because Solana (SOL) is a proof-of-stake (PoS) blockchain, it is very popular for creating Blank______ (NFTs) and as a platform for building applications.

non-fungible tokens

Because it submits to and routinely publishes the results of third-party audits, many investors believe USD Coin (USDC) is a safer than Tether (USDT).

stable coin

Stablecoins are pegged or to a less volatile asset such as gold or U.S. dollars.

tethered

Select three true statements regarding TerraUSD (UST) and Luna.

In May 2022, TerraUSD and Luna collapsed when Bitcoin and Ethereum value dropped precipitously.

UST used smart contracts and algorithms to peg the value of 1 UST to $1 U.S. by overcollateralizing with other cryptocurrencies such as Bitcoin and Ethereum.

In April 2022, it was the third largest stablecoin by market cap.

Which three of the following statements are true regarding Dai (DAI)?

It uses game theory and overcollateralization with Ethereum to ensure its value.

If the price of Ethereum drops precipitously, the value of DAI could also fall.

It is pegged to the U.S. dollar.

Which three of the following statements regarding USD Coin (USDC) are correct?

Many investors believe that it is a safer stablecoin than USDT.

Its developer, Circle Ltd., routinely publishes the results of third-party audits of its collateral.

It is the second-largest stablecoin by market capitalization.

So that investors have confidence in a stablecoin, developers must ___ the stablecoin.

collateralize

Which three of the following statements are true regarding Tether (USDT)?

Tether has been sued for not being able to prove that its stablecoin is not adequately collateralized.

Tether is pegged to the U.S. dollar.

The largest stablecoin by market capitalization is Tether (USDT).

Select three true statements regarding smart contracts.

Once the parameters of the contract are applied to the blockchain, the contract executes automatically.

A smart contract is an agreement where the terms are written on a blockchain.

Once a smart contract is written on the blockchain, the contract cannot be changed.

Traditional finance (TradFi) uses centralized organizations such as banks and credit unions to facilitate transactions for customers. ___ uses smart contracts built on blockchains.

Decentralized finance (DeFi)

Select three true statements regarding smart contracts and DAOs.

DAO, in this context, stands for decentralized autonomous organization.

The DAO governance is decentralized, meaning that any policies must be agreed to by the contributors to the DAO.

A DAO (pronounced "dow") allows anyone with an Internet connection to join together on a smart contract to raise funds.

Sophisticated applications, built on smart contracts that can be accessed anonymously, are called applications (DApps). DApps operate much like any other app on your smartphone or compute

decentralized

Which three of the following statements regarding decentralized finance (DeFi) are correct?

It uses smart contracts built on blockchains to eliminate the requirement of trust and to reduce transaction fees.

Ethereum's blockchain hosts the vast majority of the smart contracts that support DeFi.

Ether (gas fees) is the most common medium of exchange in the smart contracts that support DeFi.

Which three statements are correct regarding decentralized finance (DeFi)?

Currently, most DeFi transactions simply exchange cryptocurrencies.

Decentralized Finance (DeFi) remains in its infancy.

The biggest beneficiaries of DeFi will likely be those who currently do not have access to traditional banks.

The basis of decentralized finance (DeFi) is the contract.

smart

Blockchains with fast transaction times make DApp development more efficient. DApp stands for decentralized ___.

applications

Select three true statements regarding the potential impact of decentralized applications (DApps).

Decentralized applications (DApps) could potentially replace all centralized apps.

One gaming DApp is Alien Worlds, where players can mine or purchase coins called Trilium (TLM) to compete in the Alien World metaverse.

One example of a financial DApp is Orca, which is built on the Solana blockchain.

Select three true statements regarding NFTs.

Most NFTs are pieces of digital art attached to the Ethereum blockchain.

Using the Ethereum Request for Comment 721 protocol (ERC-721), a smart contract wraps the digital artwork.

NFTs give the owner exclusive rights to use the image.

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