Blockchain and Cryptocurrencies Quiz

What is the primary purpose of blockchain technology?

• To create digital currencies

• To replace traditional banks

• To enhance social media platforms

• To serve as a recording technology

Answer explanation

The primary purpose of blockchain technology is to serve as a recording technology, providing a secure and transparent way to record transactions and data across a distributed network.

Which of the following is a characteristic of decentralized ledgers?

• They have less risk of being taken over

• They require a central authority

• They are locally centralized

• They are easily hacked

Answer explanation

Decentralized ledgers distribute data across multiple nodes, reducing the risk of a single point of failure or takeover. This characteristic enhances security compared to centralized systems, which are more vulnerable.

What does the term 'trustless network' imply?

• Participants must trust each other

• Trust is established through contracts

• No central authority is needed for trust

• Trust is guaranteed by the government

Answer explanation

The term 'trustless network' means that participants do not need to trust each other or a central authority. Instead, trust is built into the system through technology, allowing transactions to occur without reliance on a governing body.

Who introduced the concept of Bitcoin?

• David Chaum

• Satoshi Nakamoto

• Nick Szabo

• Hal Finney

Answer explanation

The concept of Bitcoin was introduced by Satoshi Nakamoto in 2008 through a whitepaper titled 'Bitcoin: A Peer-to-Peer Electronic Cash System'. This pseudonymous individual or group outlined the framework for the cryptocurrency.

What is a smart contract?

• A method of securing blockchain data

• A digital agreement that executes automatically

• A legal document signed by two parties

• A type of cryptocurrency

Answer explanation

A smart contract is a digital agreement that automatically executes when predefined conditions are met, eliminating the need for intermediaries. This distinguishes it from traditional legal documents and cryptocurrencies.

What does NFT stand for?

• Non-Fungible Token

• Network Functionality Test

• Non-Financial Transaction

• New Financial Technology

Answer explanation

NFT stands for Non-Fungible Token, which refers to a unique digital asset verified using blockchain technology, distinguishing it from fungible assets like cryptocurrencies.

What is the main function of miners in blockchain?

• To create new cryptocurrencies

• To regulate transactions

• To store data securely

• To maintain the network by solving puzzles

Answer explanation

Miners maintain the blockchain network by solving complex mathematical puzzles, which validates transactions and secures the network. This process is essential for the functioning and integrity of the blockchain.

What is the difference between ICO and STO?

• STO is more accurate for investment tokens

• STO represents a stake in a company, ICO does not

• ICO is regulated, while STO is not

• ICO is a type of security token, STO is not

Answer explanation

STOs (Security Token Offerings) are designed to represent ownership or investment in a company, making them more accurate for investment tokens. In contrast, ICOs (Initial Coin Offerings) do not necessarily represent such stakes.

Which of the following is NOT a layer of blockchain?

• Networking layer

• Database layer

• Application layer

• Protocol layer

Answer explanation

The database layer is not a recognized layer of blockchain. The main layers include the networking layer, application layer, and protocol layer, which handle communication, user interfaces, and rules for data exchange, respectively.

What is a key issue surrounding blockchain technology?

• High transaction fees

• Energy consumption for mining

• Lack of interest from investors

• Limited applications

Answer explanation

A key issue surrounding blockchain technology is the energy consumption for mining. This process requires significant computational power, leading to high energy use, which raises environmental concerns and sustainability issues.