1.4 Blockchain Essentials

Question 1

What is Blockchain Technology?

Answer 1

A system often described as a distributed ledger whose job is to keep track of individual transactions.

Blockchain technology underpins cryptocurrencies and various other applications.

Question 2

Define ‘blockchain’.

Answer 2

A distributed ledger that maintains a secure and tamper-proof record of transactions.

Each block in the chain contains a list of transactions and is linked to the previous block.

Question 3

Explain the primary function of blockchain.

Answer 3

To keep track of individual transactions.

It ensures transparency and security in the transaction process.

Question 4

Describe what a ‘distributed ledger’ is in the context of blockchain.

Answer 4

A type of ledger that is available for anyone to see, where all participants maintain a copy, and changes are distributed to everyone.

This eliminates the need for a central authority.

Question 5

Who can view the distributed ledger?

Answer 5

Everyone participating in the blockchain.

This promotes transparency and trust among participants.

Question 6

Who maintains the distributed ledger?

Answer 6

All participants in the blockchain network.

This decentralized maintenance prevents any single point of failure.

Question 7

What happens when changes are made to the distributed ledger?

Answer 7

Those changes are distributed to everyone who maintains a copy of the ledger.

This ensures all participants have the most up-to-date version.

Question 8

Identify the unique aspects of how the ledger is maintained and shared among participants.

Answer 8

• Decentralization
• Transparency
• Immutable records

These characteristics differentiate blockchain from centralized systems.

Question 9

Outline the steps a transaction goes through from initiation to being recorded in a block.

Answer 9

• Transaction initiated
• Information sent to participants
• Transactions validated
• Transactions grouped into a block
• Block added to the blockchain

Each step ensures accuracy and integrity.

Question 10

Where is transaction information sent initially?

Answer 10

To all participants in the blockchain network.

This allows for immediate validation and visibility.

Question 11

What happens to individual transactions before they become part of a block?

Answer 11

They are validated and grouped together.

This process ensures only legitimate transactions are included.

Question 12

What is a ‘hash’ in the context of a blockchain block?

Answer 12

A unique alphanumeric code added to a block of transactions.

It acts as a cryptographic fingerprint for the block.

Question 13

What is the primary purpose of a hash?

Answer 13

To provide integrity for all the transactions within a block.

It ensures that any alteration to the block is detectable.

Question 14

How does the hash ensure the integrity of transactions?

Answer 14

By linking the block to its contents, making any changes detectable.

If a transaction is altered, the hash becomes invalid.

Question 15

What happens if a block has an invalid hash?

Answer 15

The block is rejected by other devices maintaining the ledger.

This prevents tampered data from being added to the blockchain.

Question 16

List various practical applications of blockchain technology.

Answer 16

• Payment processing
• Digital identification
• Supply chain monitoring
• Digital voting

These applications benefit from the security and transparency of a distributed ledger.

Question 17

What is the first step required before a transaction can be added to a blockchain?

Answer 17

A transaction must occur, such as transferring Bitcoin or a house title.

This initiates the process of recording on the blockchain.

Question 18

Instead of sending transaction results to a single entity, where is transaction information sent in a blockchain system?

Answer 18

To everyone participating in the blockchain.

This allows for immediate verification by all users.

Question 19

What crucial element is added to a block of transactions to provide integrity?

Answer 19

A hash.

This ensures that the contents of the block remain unchanged.

Question 20

Explain how a hash helps to maintain the integrity of transactions within a block.

Answer 20

It acts as a cryptographic fingerprint that links the block to its contents.

Any modification to transactions would result in a different hash.

Question 21

What action do other devices take if they receive a block with an invalid hash?

Answer 21

They throw out the block.

This confirms that the block has been modified and prevents tampering.