Final Assessment

Which best describes the Bitcoin ledger?

public

private

anonymous

store of value

What limits the size of a transaction?

the user

the ledger

wallets

economics

Which part of the transaction do the transaction processors create?

the coins

the signatures

the script

none of it

_________ refers to the act of signing a coin to create a transaction and submitting that transaction to the network before re-signing the same coin to create a different transaction which pays to a different recipient.

Double spending

Multi-Signature

Digital signatures

Spending attack

In order for a change to be made to transactions already confirmed on the ledger what would have to be done?

The transaction would need to be re-sent with a higher fee.

The user would send a modification order to miners who correct the transaction on the ledger

The block in which the transaction was hashed along with all following blocks would need to have the Proof of Work redone and accepted by the network.

Bitcoin miners could agree to remove or change transactional records without any limitations depending on how much time has passed since the transaction was accepted into a block and timestamped by the network.

A block serves which purpose?

To prevent someone from sending a transaction

A time-stamping mechanism that records order of transactions on the ledger.

A way to manage decentralisation of the network

As a way to change previous transaction records.

By providing the solution to a block, Bitcoin miners demonstrate:

That they have the most hashpower.

That they are better connected within the Bitcoin network.

That they have done the work necessary to prove the block valid.

That they have the most nodes.

How are Bitcoin network rules enforced?

Network rules are enforced by listening nodes signalling for which rules are valid or invalid.

Network rules are enforced by nodes using hashpower to produce and vote for compliant blocks.

Blocks that don’t follow network rules are orphaned.

Bitcoin’s rules are set by developers who tell miners how to govern the system.

A 51% attack can be executed when a dishonest node controls 51% or more hashpower. By doing what does a node become dishonest?

Double spending its own transactions or confirming a transaction with invalid rules.

Stealing other user’s coins by diverting transactions.

A node only needs to have 51% or more hashpower for it to be a dishonest node.

By creating blocks that exclude valid transactions.

10. As transaction __________ i) grows commensurate with network usage, individual node operators will invest in __________ ii) that increases their capacity to validate all available transactions and gain access to a larger pool of fee revenue.

i) value ii) more nodes

i) number ii) hash power

i) fee revenue ii) infrastructure

i) value, ii) hash power

11. Nodes can leave and re-join the network at any time and there is no central governance required for this to occur. When a node re-joins the network, they connect to other nodes and request the records of ________________i) that have been seen on the network since they were disconnected. The nodes then validate the information and rejoin the competition from the __________ ii) .

i) all transactions and blocks, ii) most recently discovered block

i)the largest transactions, ii) last block prior to disconnection

i) other nodes blocks, ii) beginning

i) Unspent Transaction Outputs, ii) first block

12. With block announcements, nodes will accept the _________ i) they receive which builds upon the _________ ii) as the next block in the chain, and will begin building their next block upon it. Occasionally, blocks are discovered simultaneously, leading to one of those blocks being __________ iii).

i) largest block, ii) designated chain, iii) deleted

i) first valid block, ii) longest proof-of-work chain, iii) orphaned

i) oldest block, ii) existing chain, iii) returned

i) Most valuable, ii) longest chain, iii) designated a twin block

13. What answer best describes some of the limitations that traditional and online payment processors face today and how does Bitcoin solve them?

Mediation costs and processing fees make micropayments unprofitable for traditional payment processors while non reversible transactions allow for fraud. Bitcoin solves these problems by using large blocks to process large quantities of transactions including micropayments of $1 or less and provides reversible transactions.

Mediation costs and processing fees make micropayments unprofitable for payment processors while reversible transactions allow for fraud. Bitcoin solves these problems by providing off-chain micropayment solutions and non-reversible transactions.

Mediation costs and processing fees make micropayments unprofitable for payment processors while reversible transactions allow for fraud. Bitcoin solves these problems by using large blocks to process large quantities of transactions including micropayments of $1 or less and provides non-reversible transactions.

Mediation costs and processing fees make micropayments unprofitable for payment processors because they don’t generate economic growth.

14. What is the main contributor to high transactional costs in regards to payment processors that does not exist in Bitcoin?

There are no trusted third parties in Bitcoin as each user operates a node allowing for the decentralization of trust and cheaper transactions.

Trusted third parties are inherently expensive and Bitcoin does not require them.

Trusted third parties are inherently expensive and are unwelcome in Bitcoin.

The security and fraud protection merchants are provided by trusted third parties is expensive but unavailable in Bitcoin.

15. Cryptographic knowledge proofs allow the customer to establish a firm basis of control over the money being used in a transaction. Bitcoin achieves this by using __________ i) and a simple but fully featured________ ii). Bitcoin signatures are simple for the receiving party to validate and can be stored on the Bitcoin public ledger with efficiency and very low overheads. Because the sending party can __________ iii) the coins themselves without using a third party to hold funds and manage the transfer, transactions are very fast and simple.

i) digital signatures, ii) scripting language, iii) establish control over

i) proof-of-work, ii) blockchain, iii) validate

i) private keys, ii) wallet, iii) hold

i) nodes, ii) blockchain, iii) create

16. Besides the excessive cost there also exists significant __________ i) to using trusted third parties, as customers identity details often end up being stored in large merchant databases with their corresponding payment details. Merchants do not often spend the time or money needed to adequately _____________ ii) created situations where thousands or millions of customer details have been leaked, causing widespread __________ iii).

i) risk, ii) back up their data which has, iii) data and financial losses

i) time loss, ii) insure from loss resulting from attacks has, loss

i) privacy and security risk, ii) secure information and breaches have, iii) financial and identity theft

i) security risks, ii) prevent against security breaches, iii) transaction reversement

17. How does Bitcoin solve the double-spending problem?

By using a peer-to-peer distributed timestamp server to generate computational proof of the existence and validity of transactions.

By using watchtowers to spot any attempts by users to double spend.

By using Replace By Fee to insure that users are able to receive their transaction before a double spend can be performed.

Double spends can never be eliminated.

18. How can Bitcoin protect both those looking to spend as well as those looking to receive bitcoins?

By being a settlement layer and migrating risk to off-chain payment systems.

It is anonymous to protect those looking to profit off of illegal business activities from detection and prosecution by law enforcement.

By being digital gold to protect users from monetary debasement.

By providing authenticity of payment, irreversibility, and using script to add conditional clauses for transfer to protect from fraud.

19. Thanks to the practically irreversible nature of ___________ i), sellers who receive payments over the Bitcoin network can ___________ ii) of the funds received without needing to revert to __________ iii).

i) proof-of-work, ii) order the return, iii) the legal system for payment disputes

i) the Elliptic Curve Digital Signature Algorithm, ii) verify the authenticity, iii) a trusted third party

i) bitcoins, ii) profit off, iii) financial institutions that take a percentage of the payment amount

i) Bitcoin, ii) earn interest off, iii) decentralized finance

20. As transactions are created, network nodes assemble them into ________ i) against which they perform ________ ii) . When a valid _______ iii) is found, the block becomes a ___________ iv) for all of the transactions it includes.

i) block templates, ii) proof-of-work, iii) proof-of-work solution, iv) proof of existence timestamp

i) the blockchain, ii) hashpower, iii) proof-of-work, iv) proof-of-existence

i) blocks, ii) hashing, iii) hash solution, iv) proof-of-work timestamp

i) block templates, ii) proof-of-work, iii) timestamp, iv) proof of existence

21. Transactions are built by attaching unspent digital coins called ______________ to a transaction as inputs.

bitcoins

satoshi tokens

unspent transaction outputs

digital signatures

22. What is referred to as the Bitcoin Ledger?

The combined Directed Acyclic Graphs that represent the history of all transactions that have been recorded on the network.

The entire chain of blocks starting from the Bitcoin’s Genesis block until now.

A way of storing bitcoin transactions without using excessive disk storage space.

The entirety of the Bitcoin network, including the nodes that build the blocks and the wallets that store the coins.

23. T/F: Which statements are true?(one correct selection necessary to proceed)

Bitcoin transactions are built by attaching unspent digital coins called Unspent Transaction Outputs or UTXOs to a transaction as inputs.

Bitcoin transactions are built by attaching unspent digital coins called Unspent Transaction Inputs or UTXIs to a transaction as outputs.

The coins are spent into the transaction and redistributed as new unspent transaction inputs, consuming the outputs in the process.

The coins are spent into the transaction and redistributed as new unspent transaction outputs, consuming the inputs in the process.

24. Bitcoin is a solution to the __________ i) without the need for centralized decision making. Bitcoin instead uses __________ ii). This rule states that the first seen transaction that spends ___________ iii) is the transaction which is accepted by the node.

i) Byzantine Generals Problem, ii) Replace By Fee, iii) the highest fee

i) double spending problem, ii) the First Seen Rule, iii) a particular UTXO

i) currency inflation crisis, ii) fee market rule, iii) the highest fee

i) double spending problem, ii) consensus, iii) the most bitcoins

25. What would happen if two conflicting transactions are simultaneously sent to the network?

Nodes will choose the one that pays the highest transaction fee, if the fee is the same then both transactions will be denied.

There is a 50/50 chance that either one will confirm. Whichever is confirmed first will be the valid transaction.

It is impossible to send two conflicting transactions simultaneously.

The one which reaches the network nodes with the most combined hashpower is the transaction which is written into a block.

26. The only way to be certain that each transaction a ________ i) has received is the only transaction attempting to _________ ii) is to be aware of _________ iii) in as close to real time as possible.

i) node, ii) spend particular UTXOs, iii) all of the transactions taking place on the network

i) user, ii) double spend, iii) all wallets

i) node, ii) spend inputs simultaneously, iii) all blocks in the chain

i) block, ii) spend a particular unspent output, iii) all of the network transactions

27. If a node tries to create a block using a transaction that other nodes on the network recognise as a ___________ i), there is a very strong chance that they will have _____________ ii).This creates an incentive for nodes ___________ iii), thereby reducing the chance of using ____________ iv).

i) fanout transaction, ii) attempted to defraud the network, iii) to make sure that all transactions are honest, iv) a dishonest transaction in a valid block

i) simultaneous spending of particular UTXOs to separate outputs, ii) facilitated fraud, iii) to be active in assisting law enforcement, iv) double spends by criminals to defraud users.

i) double spend, ii) wasted the cost of creating the block and performing proof-of-work, iii) to ensure that all other nodes are aware of the transactions they are working on incorporating into a block, iv) a double spent input

i) invalid transaction, ii) to redo the proof-of-work correctly, iii) to be sure that they are properly validating transactions, iv) an invalid transaction in a block

28. What is necessary for consensus to be achieved in Bitcoin?

For all nodes to agree to a single history of the order in which transactions are recorded.

For all users to run a full node and validate their own transactions.

For all nodes to be equal even if they don’t participate in building blocks.

For all nodes to vote for the same protocol changes.

29. T/F: Which statements are true?(one correct selection necessary to proceed)

In a centralized system, the monitoring of which inputs are used in a transaction is managed simply on a first seen basis while in Bitcoin, the system has no such means for centralised decision making and therefore cannot rely on nodes maintaining the first seen rule.

The public announcement of all transactions is critical to the sound operation of the system and provides the fastest means for participants in the competitive block building process to come to consensus on the order of events when a valid block is announced to the network.

Without public announcement, every time a potential block is found the discovering node must subsequently supply any missing transactions to the rest of the network which consumes time and resources, impacting its ability to operate as effectively and efficiently as possible.

The first seen rule and its application to both transaction and block announcements is a core element of the incentives that drive the construction of the infrastructure that underpins the Bitcoin network.

30. The way a timestamp server works is by taking the hash of a block header that contains a timestamp and proves inclusion of _________ i) and _________ ii). The hash proves that the data __________ iii). In Bitcoin when a node finds a valid block, each transaction is published as __________ iv), and through the hash of the transaction message can be ___________ v) the block was found.

i) all items occurring simultaneously, ii) compiling them into a timestamp, iii) that was created simultaneously will exist under a single timestamp, iv) a timestamp, v) trusted to have occurred when

i) each item, ii)combining them into a block, iii) within a block has an accurate timestamp for each item, iv) a part of the ledger, v) identified by the time that

i) a block of items, ii) widely publishing the hash, iii) must have existed before the hash was produced, iv) part of that block, v) provenly shown to have existed at the time

i) a particular item, ii) recording when it occurred, iii) existed at a particular time, iv) a hash, v) can be shown when

31. What does the network consider a transaction to be and how is this connected to the timestamping of blocks?

The network considers a transaction to be the exchange of bitcoins between two or more peers. Each transaction is first time-stamped and then entered into a block.

The network considers each transaction to be a separate item or event, and uses the hashed transaction message as an input into the block’s own hash. As nodes find valid blocks, each transaction is published as part of a block, and through the hash of the transaction message can be provaby shown to have existed at the time the block was found.

The network considers transactions to be the source of all revenue to the Bitcoin blockchain and the fees that transactions provide support the building and timestamping of blocks which permanently store the transaction in the ledger.

The network considers small transactions with insignificant fees to be “spam” and excludes them from being time stamped in blocks.

32. T/F: Which statements are true? (one correct selection necessary to proceed)

Once a node has finished processing a block that block is then broadcasted across the entire Bitcoin network and either accepted or rejected by the rest of the nodes in the competition.

By broadcasting a block, a node is publicly publishing the events contained within that block, akin to the publishing of a notice on a publicly available bulletin board or website.

By publishing a valid block that is accepted by the network a node is effectively creating a timestamp.

Once a transaction is accepted into a block it is provided with its own unique timestamp reflecting when the node first saw the transaction.

33. T/F: Which statements are true? (one correct selection necessary to proceed)

Bitcoin’s proof-of-work chain forms a separate and distinct DAG from the transaction ledger commonly referred to as the Time chain or Block chain.

The contents of Bitcoin’s proof-of-work chain are an immutable record of what took place on the ledger and the order in which it took place.

Any transaction that contradicts an event such as a double spend, that has been recorded in a block which forms part of the chain is considered invalid and can never become a part of the longest chain of proof of work.

Double spend attempts are included in the longest chain of proof-of-work even though they are non-actionable and serve as a record of attempted fraud.

34. T/F: Which statements are true? (one correct selection necessary to proceed)

The implementation of Bitcoin’s distributed timestamp uses hash based proof-of-work to give nodes the ability to demonstrate their willingness to invest in network infrastructure via the hashing competition.

Bitcoin was originally an implementation of a peer-to-peer distributed timestamp server created by Adam Back called Hashcash.

Hashcash was originally conceived as an anti-spam measure for email inboxes, and was intended as a means to set a price on sending an email to disincentivize the creation of an incredibly large number of spam emails that are sent every day across the globe to users inboxes.

Bitcoin’s proof-of-work serves as protection from users creating low fee/low value spam transactions.

35. What does Proof-of-Work signal to other nodes in the Bitcoin network?

Proof-of-work signals that the node holds a large stake of Bitcoins.

Proof-of-work is used to identify a node to the other nodes in a network as a means of projecting authority.

Proof-of-work is used as a signal from one node to another that they are a capable and dedicated player on the network whose block solutions deserve consideration for insertion into the chain.

None of the above.

36. The hash machines take the _________ i) and begin testing different message hashes by _________ ii) and _________ iii). A block is solved when a ________ iv) that when combined with the _________ v) creates a message that hashes to a value which is less than the difficulty target which is stored in the block header as a 4 byte floating point number.

i) block header, ii) incrementing the nonce value, iii) re-hashing the message as many times as possible per second, iv) hash machine finds a nonce value, v) block header

i) nonce, ii) combining the block header, iii) rehashing the block header as many times as possible per minute, iv) nonce is found, v) message hash

i) block header, ii) rehashing the block header as many time as possible, iii) finding a nonce value, iv) transaction message

i) transaction hash, ii) combining the nonce, iii) block header, iv) transaction hash, v) block header

37. How do additional blocks add to the security of transactions?

Each additional block obscures past blocks making them difficult for an attacker to find and alter.

Each additional block adds more encryption layers making it harder to hack.

Each additional block deletes the previous block except for the block hash making it impossible to alter.

Each additional block added to the chain means that any changes to earlier blocks requires the Proof-of-Work to be redone for all subsequent blocks.

38. How practical is it for an attacker to change or remove a transaction and how does that make Bitcoin secure?

An attacker must hack into the node infrastructure of each of the nodes within the Bitcoin network and simultaneously alter or remove the transactions entirely from the node data archive. This is extremely difficult to achieve and requires the usage of quantum computers along with additional advanced network penetration techniques.

An attacker must build a new proof of work chain and outpace the constantly lengthening chain-tip for their blocks to be considered as valid, making it computationally impractical to erase information that has been captured in a block. In this way, information contained in blocks that have an established quantity of proof of work on-top of them are considered immutable.

Bitcoin is secure because each transaction is under constant surveillance by all network nodes which are alerted to any attempts to alter or remove the transaction and will subsequently fork the network to protect the integrity of the transaction record.

While it is easy to form a duplicate proof-of-work chain and alter specific transactions on Bitcoin, it is complicated to convince the network that this altered chain is the correct one and involves complicated deception techniques in order to force nodes to build blocks on the imposter chain.

39. What is the significance of “one-CPU-one-vote”?

Without a CPU to cycle through nonce and block headers, a node cannot participate in the block building process. Since proof-of-work requires the accumulation of infrastructure and the expenditure of energy there is a need for nodes participating in building blocks to have the CPU power continuously available to continuously solve proof-of-work.

“One-CPU-one-vote” means that everybody who has a computer should have a say in how the Bitcoin network operates.

By providing each CPU with a vote, Bitcoin requires users to run their own node.

“One-CPU-one-vote” means that even if your node is not capable of satisfactorily building blocks you still have a say in what types of blocks are acceptable.

40. What must be maintained in order for dishonest nodes to extend their chain faster than honest nodes and what will be the subsequent result?

For dishonest nodes to maintain their lead and control the longest chain they must ensure that no blocks are found.

Dishonest nodes need to maintain a spam attack by sending millions of low value transactions to clog up the memepool and slow the block discovery process.

For dishonest nodes to maintain their lead and retain the longest chain they must continuously perform proof-of-work at a rate equal or greater than that of the honest chain for an indefinite period. This strategy is extremely costly to pursue as attackers risk losing both the cost of the proof-of-work and the value of the coins earned.

Dishonest nodes need to maintain faster internet connections in order to find blocks faster than other nodes.

41. What would an attacker need to do to modify a previously mined block? What is one of the factors that prevent this from happening?

To modify a past block, an attacker must redo that block’s proof-of-work and win all new blocks being discovered simultaneously.

To modify a past block, an attacker would need to obtain the private key used in the transaction they wish to alter. This is made difficult due to the private nature of transactions and the subsequent unalterable ability to modify blocks.

To modify a past block, an attacker would need to redo the proof-of-work for that block. This is made difficult due to the public nature of mining and the subsequent unalterable evidence of criminality.

To modify a past block, an attacker would need to redo the proof-of-work of the altered block and all subsequent blocks at a rate faster than honest nodes in order to catch up with and surpass the work of the honest chain. This is made difficult due to the public nature of mining and the subsequent unalterable evidence of criminality.

42. In order to allow for ________ i) who invest in more ________ ii) to help discover more valid blocks through the proof of work process, the network uses __________ iii) to maintain a steady rate of block discovery no matter how many __________ iv) to the proof-of-work process.

node operators, ii) processing capacity, iii) an algorithm that adjusts the network difficulty, iv) CPU cycles are applied

i) users, ii) bitcoins, iii) a provably fair lottery, iv) nodes are contributing

i) nodes, ii) hash power, iii) a throughput handicap, iv) transactions are entered in

i) operators, ii) CPU’s, iii) a difficulty adjustment algorithm iv) nodes are contributing

43. What should all nodes be sufficiently capable of doing?

Ensuring that the Bitcoin code remains unchanged.

Validating it’s users transactions.

Collecting, validating and storing all global transactions in real time.

Spending and receiving transactions instantly.

44. Why do nodes always try to build on the longest chain?

Nodes always try to build on the longest chain because that follows the rules put forth in the Bitcoin whitepaper.

Nodes always attempt to build upon the longest valid chain of proof of work, as any new block discovered that is not built upon the longest valid chain-tip will not be built upon by competing miners.

Nodes always try to build on the longest chain because it has a greater block reward.

Nodes always try to build on the longest chain because it takes less hashpower and therefore is cheaper.

45. How does the cost of proof-of-work incentivize nodes to build on the valid chain-tip?

Since proof-of-work costs money, node operators are incentivised to ensure that their nodes are building on the most valid chain-tip, minimising the risk of money being wasted on a block that has either already been built upon, or surpassed by a competing valid chain-tip.

Since the cost of proof-of-work is expensive, nodes seek to build on the chain with the least difficulty

The growing cost of proof-of-work means that only those with enough hash power can afford to solve blocks thereby creating a valid chain.

The cost of proof-of-work doesn’t incentivize nodes to build on the valid chain-tip but rather the users decide which chain-tip is valid using a democratic vote.

46. What does the Coin Distribution subsidize?

It subsidizes the transaction fees.

The build-out of network infrastructure and incentivizes nodes to participate in processing transactions despite low usage.

Developer funding to build and modify the protocol.

The funding of faucets.

47. What occurs as nodes extend the chain of proof of work and are awarded coins?

Awarded coins are distributed to the listening nodes who contributed their validated transactions to the winner’s block template.

New coins are created every time a block is found. Nodes agree how many coins they win between themselves.

The coins are distributed by the winning node to other nodes on it’s team

As the initial issuance is distributed the quantity of coins in reserve is depleted and over time the reward amount is reduced.

48. How is the reduction in block subsidy an important part of Bitcoin’s incentive system?

The reduction in the rate at which new Bitcoins enter the economy is an important aspect of the system of incentives that keeps nodes honest by minimizing the opportunity to conduct selfish mining.

The reduction in the rate at which new Bitcoins enter the economy is an important aspect of the system of incentives that encourage network scaling as it incentivises miners to build a network that can accomodate large numbers of transactions with a view to using the fees paid as a means to replace the subsidy income.

The reduction in the rate at which new Bitcoins enter the economy is an important aspect of Bitcoin’s incentives that make it into a digital store of value.

The reduction in the rate at which new Bitcoins enter the economy is an important aspect of the system of incentives that prevent node operators from becoming too wealthy and powerful.

49. How are nodes subject to the dishonesty of other nodes?

As a node creates a dishonest block, all other nodes will be immediately aware due to the nature of a small world network. These nodes will immediately refuse the dishonest block as the risk the cost of investment in it’s proof of work.

Nodes can easily be fooled by dishonest nodes with a significant amount of hashpower. This is why users must be vigilant and run their own node.

When a node creates a dishonest block it can easily deceive others nodes by swamping the network with “spam” transactions and force other nodes to follow it’s chain

For a node to create a block with dishonest activity in it, such as a double spent transaction output or extra coinbase rewards, the rest of the network would have to collectively support their dishonest behaviour, investing proof of work and building upon the dishonest actions taken.

50. To conduct a __________ i) on the network, the attacking node must accumulate enough hashpower to __________ ii) nodes on the network, and must then pay to maintain that hashpower ___________ iii), while it tries to convince the remaining nodes on the network to support its illegal actions.

i) double spend attack, ii) overrule more than half of the other, iii) for an indefinite period of time

i) 51% attack, ii) deceive other, iii) for 24 hours

i) double spend attack, ii) control the other, iii) constantly

i) double spend attack, ii) force off other, iii) in order to continue the network

51. What does it mean for a transaction record to be immutable?

It means that everyone must retain a record of that transaction forever.

It means that if a transaction record is changed it can be easily proven that it is not authentic.

It means that the preservation of the transaction record is required of all nodes in order to build blocks.

It means that a transaction record is held privately and secured from alteration.

52. What allows for nodes to be able to remove individual transactions that have been placed in a block without impacting the integrity of the block hash?

A Merkle Signature enables a node to remove individual transactions from their record of a block, and to retain only the signatures of those transactions.

A Merkle Branch enables a node to remove their record of a transaction, and to retain only hashes of the branch the transaction was in.

A Merkle Block enables a node to remove entire blocks from their record of the chain of blocks, and to retain only hashes of the block.

A Merkle Tree enables a node to remove spent transactions from their record of a block, and to retain only hashes of the transaction, or even hashes of the branch the transaction was in.

53. Once a transaction has been added to a valid block which the network __________ i), the transaction is considered ________ ii). This means that anyone with a copy of the transaction can prove that _________ iii) and therefore it is no longer necessary for ________ iv). Nodes are free to remove these transactions from their copy of the block chain as they unnecessarily _________ v). It then becomes the responsibility of the users to retain their own copies of these transactions which can be __________ vi).

i) has then built additional blocks upon, ii) immutable, iii) the transaction was created before proof-of-work solution was found, iv) building new blocks, v) consume hard disk storage space, vi) stored in archive services or private storage

i) has not yet validated, ii) immutable, iii) it existed after the block was created, iv) preserving, v) clutter the ledger, vi) stored within their wallets

i) has hashed, ii) valid, iii) it is immutable, iv) retaining, v) consume hashpower, vi) stored on the ledger

i) deems immutable, ii) removable, iii) it existed within a particular block, iv) building additional blocks, v) consumes block space, vi) reused into new UTXOs

54. A Merkle tree starts with a list of transactions. Each transaction is _________ i) of the tree. As long as the node has copies of all of the transactions, they can validate the whole structure. Transactions are hashed to form their transaction IDs, and are then hashed in pairs to create the hashes at the _______ ii) , effectively halving the number of data items at the next level in the tree. Parent branches are hashed with their adjacent ________ iii) creating another level half the size and so on and so forth until the two deepest branches are combined to form the _________ iv). This hash is used in the block header and subjected to proof-of-work, and this value is what must remain provenly linked to the Merkle tree the node is storing.

i) is hashed to form the top level, ii) lowest level of the tree, iii) child branch, iv) root hash

i) hashed to form the lowest level, ii) parent elements, iii) parent element, iv) root hash

i) subjected to proof-of-work and entered on the lowest level, ii) child branch, iii) parent branch, iv) top level of the tree

i) hashed to form the top level, ii) child branch, iii) Merkle tree hash, iv) blockheader

55. The record of a block’s existence is ________ i). From this a node can see which block it builds upon, approximately what time it was discovered and can _________ ii) done by the node that discovered it. The contents of the merkle tree, which are all of the transactions that the block includes, ________ iii) and are not needed to prove the _______ iv) which had its transactions validated by the network a long time ago.

i) the block hash, ii) validate the work, iii) is included in the block hash, iv) block

i) the Merkle tree, ii) validate that there were now double spends, iii) are a part of the block header, iv) the Merkle root

i) the Merkle root, ii) authenticate the proof-of-work, iii) are not a part of the Merkle root, iv) authenticity of the block header

i) the block header, ii) validate the proof-of-work, iii) are not a part of the header, iv) existence of a block

56. Since blocks are generated every 10 minutes and a Block Header is approximately 80 bytes what will be the storage requirements for the full record of the Bitcoin’s proof of work.

1.4 MB per year

4.2 MB per year

42 MB per year

2.4 GB per year

57. Which functions must a node perform in order for it to be considered a Full Network Node?

Must be able to receive all types of transactions, collect the transactions into a block, find the correct proof-of-work of that block and then broadcast that block to all nodes.

Don’t need to build blocks, rather at a minimum store individual copies of the block chain to protect the ledger’s accuracy and allow users to verify transactions issued on the network.

Need to be able to receive and collect transactions, perform proof-of-work on blocks and then broadcast them while retaining a complete record of all transactions on the ledger.

Need to be able to retain the complete transaction ledger and build blocks, nothing more.

58. How can a peer store an abbreviated form of the Bitcoin ledger that is best suited to their own needs?

The user downloads a lightweight node client and sends the transactions it wants to preserve to it.

The user starts with a Merkle tree and deletes any parent and child transactions they wish while retaining those which they want.

The user starts with a copy of the block header list which is easily verified through Proof-of-Work, then selectively adds the transactions which they directly are interested in using merkle proofs to verify their authenticity.

None of the above.

59. The strategy and illusion of making invalid transactions appear valid can only be maintained for as long as the attacking node can __________ i). As soon as the honest chain of blocks overtakes the dishonest chain, user systems will _________ ii) to the now longer valid chain, rendering the attacker’s transactions ____________ iii). A dishonest attack of this form is enormously costly, and must be conducted in a way that is ____________ iv), making it extremely risky for the operators of dishonest nodes to participate in such attacks on the network’s validity.

i) afford to maintain a majority of the network hash, ii) reject the invalid chain and jump across, iii) void and destroying the investment in the proof of work used to build the chain, iv) fully visible to the public

i) perform denial of service attacks to prevent new blocks from being accepted, ii) revert, iii) frozen, iv) secretive

i) have it’s blocks accepted, ii) reject the dishonest blocks and jump, iii) null, iv) private

i) reap block rewards, ii) ban the attacking node from the network and revert, iii) frozen, iv) fully public and expensive

60. What is advisable to businesses that are making or receiving very large numbers of transactions?

They should operate using Simplified Payment Verification to minimize their cost and effort in accepting bitcoins as payment.

They should consider operating their own node to participate in the network by validating transactions and building blocks.

They should operate a lightweight node client to retain a full copy of the blockchain.

None of the above.

61. What is the main benefit or benefits of operating a node for businesses that are making or receiving very large numbers of transactions?

Doing so secures the business from any potential theft of bitcoins from their wallets.

Doing so allows a business to follow the longest valid chain closely, providing full visibility of any attempted attack on the network including any double spends that might be directed at them.

Doing so allows a business to pay less in transaction fees and hide their transaction activity from competitors.

All of the above.

62. How is Bitcoin able to merge and split outputs in order to form a single transaction?

As a bitcoin transaction takes place, one or more unspent transaction outputs are gathered into the transaction and spent into a new combination of outputs scripts.

As a bitcoin transaction occurs multiple inputs are used to bind the outputs into a single transaction

Once a bitcoin transaction is created all outputs are pieced together into a single transaction that returns any change caused by overspending.

Nodes merge and split outputs at the behest of users.

63. How does Bitcoin simplify transactions consisting of many small inputs?

By hashing each transaction together to form the transaction ID.

By creating many small transactions all linked via the merkle root within the blockheader.

By using Simplified Payment Verification.

By aggregating small coins into a single payment, transactions support the capability to use multiple coins as inputs.

64. What happens when a coin or combination of coins matching the exact value of the desired payment cannot be found in the user’s wallet?

The wallet sends coins to miners requesting exact change for a small fee.

The wallet breaks down coins into smaller amounts called a ‘satoshi’ allowing for the payment's exact value to be spent.

The wallet collects the overflow ‘change’ by creating a second output for the transaction containing the user’s wallet address. This extra coin is spent into a script and is immediately received back into the wallet’s balance as spendable funds.

Each bitcoin is made up of many smaller coins called a ‘satoshi” that can always be aggregated to form the exact value of a desired payment.

65. Because most outputs in Bitcoin are locked with a __________ i) , it isn’t possible to remove all information about the __________ ii) from the transaction. By virtue of the fact that information provided to the payer is embedded in the transaction, the transaction itself ___________ iii), so care must be taken by the receiver to retain their own _________ iv).

i) script requiring a knowledge proof, ii) identity of the receiving party, iii) cannot be anonymous, iv) privacy over the information in the script

i) an input, ii) value of the bitcoins, iii) remains anonymous, iv) accounting ledger

i) digital signature, ii) identity of the paying party, iii) becomes a receipt, iv) anonymity when transacting

i) private key, ii) sender, iii) is public, iv) anonymity

66. How can a Bitcoin user still remain private?

Users cannot be private when using Bitcoin.

Users can remain private by separating digital signature data from the transaction. This excludes identifying information from the ledger and can be stored separately by the user.

Users can remain private by not publishing their details onto the ledger as part of the transaction. Both parties to a transaction can make separate records to ensure that any requirement to re-visit the transaction can be executed with accurate and full knowledge of the nature of the transaction.

Users that wish to remain private must use anonymizing systems such as coin mixers and off chain payment channels.

67. When both parties to a Bitcoin transaction use _________ i), it becomes almost impossible for third parties who are outside the sphere of trust pertaining to the transaction to follow the details. This can be further augmented by _________ ii) to further mask the details. In this way it becomes easy for _________ iii) to guard their privacy and maintain a secure online presence.

i) obscurification measures, ii) hiding digital signatures, iii)users

i) anonymizing techniques, ii) using a coin mixer, iii) users involved in illegal activity

i) digital signatures, ii) multi-output transactions, iii) for users wishing to remain anonymous

i) strong privacy measures, ii) breaking the payment into multiple outputs or multiple transactions, iii) legitimate users of Bitcoin

68. In situations where a user is receiving all of their funds into a re-used locking script, it becomes much easier to see what funds that user has received. How can this risk be mitigated?

The user can choose to use a new private key every time new funds are being received in order to separate the digital coins on the ledger.

The user can choose to alternate locking scripts for each transaction in order to obscure the digital signatures.

The user can encrypt the locking script to hide the key signing process.

None of the above.

69. Most wallets are capable of generating a new private key every time new funds are being received in order to separate the digital coins on the ledger using what technique?

Using RSA Symmetric Key Cryptography which allows the wallet to generate an effectively unlimited number of keypairs from a predetermined seed.

Using Hierarchically Deterministic Keychains which allows the wallet to generate an effectively unlimited number of keypairs from a predetermined seed.

Asymmetric Key Encryption Algorithm which allows the wallet to generate an effectively unlimited number of keypairs from a predetermined seed.

None of the above.

70. Using Hierarchically Deterministic Keychains allows the user to ‘recover’ their wallet/s through __________ in the event the wallet is lost or destroyed.

a peer based shared seed

a node based password recovery service

the re-creation of the original seed

a user generated wallet address

71. How can wallets avoid linking inputs to a single owner?

By spending a larger output than the payment itself, however this is not always possible.

By spending a larger output than the payment itself, this is always possible and recommended although it may result in a higher transaction fee than normal.

By using Simplified Payment Verification so there is no traceable way to discern who is associated with which particular inputs.

By removing the digital signatures to minimize transaction size.

72. Mitigation strategies to prevent a user's _________ i) being ________ ii) include the use of _________ iii) for instances in which many inputs are being used. Each input can be spent in _________ iv), thereby avoiding the possibility of linking the user to a group of coins.

i) financial activities, ii) exposed, iii) separate transactions, iv)completely separate transactions

i) public address, ii) found, iii) coin mixing, iv) a way that the transactions are mixed with other transactions

i) transactions, ii) revealed, iii) time staggering, iv) a way that prevents them from being confirmed in a way that they seem to be different transactions

i) Identity, ii) doxxed, iii) using separate digital signatures, iv) a way that a new key is generated for each input

73. What is a 51% attack?

A 51% attack is when a dishonest node creates an alternate chain which may contain transactions that misallocate funds or reject valid actions using a majority of network hashpower.

A 51% attack is when an attacker creates additional bitcoins by forcing the network to accept network altering changes using a majority of hashpower.

A 51% attack is when a dishonest node redirects it’s previously spent bitcoins back into their own wallets by using precisely 51% of the network's hashpower.

A 51% attack is when a network is forced to perform dishonest actions by a node that redirects honest hashpower to the dishonest chain.

74. If a 51% attack is successful, ______________ i), such as creating new bitcoins or taking money that never belonged to the attacker. Nodes are ____________ ii) as payment, and honest nodes will ____________ iii).

i) a dishonest node cannot alter the network rules, ii) looking to maintain price stability in the market because they receive bitcoins, iii) not risk losing their business due to being an accessory to fraud.

i) it allows for a dishonest node to alter the network rules, ii) disincentivize to do this because they receive bitcoins, iii) not hurt their source of revenue

i) it does not open the system to arbitrary changes, ii) not going to accept an invalid transaction, iii) never accept a block containing them

i) It doesn't allow arbitrary changes to the network rules, ii) not concerned with earning dollars, iii) not being bribed into doing the bidding of external actors

75. What is a dishonest node with the majority of the hashpower able to attempt to alter in a 51% attack?

Such a node can attempt to alter network rules by successfully extending it’s chaintip.

Such a node can attempt to alter any of the transactions within the blocks it successfully validates.

Such a node can attempt to fraudulently take back payments that it had recently spent.

Such a node can attempt to reroute user payments to a wallet under its control.

76. The attack can be characterised by viewing the honest and dishonest chaintips as a pair of _________ i), with each vying for leadership. The gap between the two chaintips can be characterised by ____________ ii) and is increased by ___________ iii) is found, while being decreased by ____________ iv) found.

i) chains, ii) the number of transactions that the honest chain-tip leads with, iii) how many transactions are on the honest chain, iv) the number of transactions an attacker has found

i) competing processes, ii) the number of blocks that the honest chain-tip leads with, iii) 1 every time an honest block, iv) 1 every time a dishonest block is

i) Bitcoin forks, ii) how many blocks are found by nodes on either fork , iii) 5 every time a new block is found, iv) 0 if no block is

i) competing chaintips, ii) how many blocks separate the honest and dishonest chaintips, iii) 1 every time a dishonest node’s block, iv) 1 every time an honest node’s bock is

77. The probability that an attacker ever reaches breakeven, or surpasses the honest chain is very strongly related to the ___________ i). In a situation where the attacker can ___________ ii), there is a _________ iii) chance they will eventually have the leading chaintip, however if their __________ iv), the chance of them ever catching up goes down with the square of the gap between the two chaintips, leading them to an ever increasing deficit against the rest of the network.

i) honest nodes awareness of double spend attempts on the network, ii) conceal their double spend attempts, iii) high, iv) double spends are detected

i) amount of invalid transactions it can process into blocks, ii) build larger blocks then the honest nodes, iii) small, iv) blocks are smaller than the honest nodes

i) percentage of hashpower the dishonest node controls, ii) hash blocks faster than the honest nodes, iii) 50% chance, iv) is an honest node that has a faster processing ability

i) dishonest node’s ability to perform proof-of-work, ii) perform proof-of-work equal to or greater than the rest of the network, iii) 100%, iv) capability is less than the network

78. When a user creates a transaction that aggregates multiple inputs to pay one larger output, can the coins that are used in that transaction be traced back to a single owner?

Yes, but only if the inputs have all been signed with the same digital signature.

Yes, it clearly shows on the ledger that the inputs belonged to the spending party.

No, once multiple inputs have been aggregated into a single output there is no way to discern whom they belonged to.

No, the record on the ledger is not enough to identify a user, however it is possible to link spent inputs to a spending party.

79. By which rate does the block subsidy reduce and when will it reach zero?

The block subsidy reduces by half every 210,000 blocks (approximately every 4 years) approaching zero after 32 halvening events around the year 2140.

The block subsidy reduces by half every 20,000 blocks (approximately 4 years) approaching zero after 20 halvening events around the year 2022.

The block subsidy reduces by a quarter every 2,000,000 blocks (approximately every 4 years) approaching zero after 200 halvening events around the year 2200.

The block subsidy reduces by a quarter every 210,000 blocks (approximately 4 years) approaching zero after 32 halvening events around the year 2140.

80. If a user spends coins that they have received from third parties, or which were spent back to themselves as change, it becomes ____________ i) chain of ownership back via the ledger. This _________ ii) a user's __________ iii) to __________ iv) who have an understanding of how to analyse the public ledger.

i) impossible to trace any part of the, ii) prevents, iii) digital signature from becoming known, iv) thieves

i) possible to trace some part of the, ii) risks exposing, iii) financial activities, iv) malicious parties

i) easy to trace the, ii) this is because the transaction includes, iii) identity, iv) users

i) difficult to trace the, ii) is because, iii) address becomes encrypted and is only visible, iv) those

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