Q.1 How is a Blockchain transaction different from a traditional transaction? Explain with an example.
Traditional Transaction:
- Centralized: Relies on a trusted intermediary (e.g., bank, payment processor) to facilitate and validate the transaction.
- Reversible: Transactions can be reversed or modified by the intermediary.
- Slower: Processing times can vary and often involve delays due to intermediary verification and settlement processes.
- Fees: Transaction fees are typically charged by the intermediary.
- Example: Transferring money from your bank account to another person’s bank account.
Blockchain Transaction:
- Decentralized: No single entity controls the transaction; validation is performed by a network of computers (nodes).
- Irreversible: Once a transaction is confirmed and added to the blockchain, it cannot be altered.
- Faster: Transactions are typically processed more quickly due to the decentralized nature of the network.
- Transparent: All transaction details are recorded on the public ledger (blockchain) and are accessible to anyone.
- Example: Sending cryptocurrency (like Bitcoin) from your digital wallet to another person’s digital wallet.
Q.2 What are the objectives of consensus protocols?
Consensus protocols are the heart of blockchain technology. Here are their key objectives:
- Agreement: Ensure that all nodes in the network agree on the valid state of the blockchain.
- Fault Tolerance: Allow the network to function correctly even if some nodes fail or act maliciously.
- Validity: Guarantee that only valid transactions are added to the blockchain.
- Finality: Provide a high degree of confidence that confirmed transactions are irreversible.
Q.3 What are the limitations and challenges of Blockchain?
While blockchain offers numerous advantages, it also faces limitations:
- Scalability: Handling a large number of transactions per second can be challenging, leading to network congestion.
- Regulation: The lack of clear regulatory frameworks in many jurisdictions can hinder widespread adoption.
- Energy Consumption: Some consensus mechanisms (like Proof-of-Work) require significant energy consumption.
- Complexity: Understanding and implementing blockchain technology can be complex for both developers and users.
- Security Risks: Although the blockchain itself is secure, vulnerabilities can exist in applications built on top of it.
Q.4 Explain the structure of a Merkle tree.
A Merkle tree is a fundamental data structure used in blockchains to efficiently verify the integrity of large sets of data.
- Structure: It is a binary tree where each non-leaf node is the hash of its two child nodes.
- Leaf Nodes: Contain the hashes of individual transactions.
- Non-Leaf Nodes: Contain the hashes of their child nodes.
- Merkle Root: The top node of the tree, which represents the hash of all transactions in the block.
- Benefits:
- Efficient Verification: Allows for quick verification of whether a specific transaction is included in a block.
- Data Integrity: Ensures that the data in a block has not been tampered with.
Q.5 Differentiate between Altcoin, token, and Bitcoin.
- Bitcoin (BTC): The first and most well-known cryptocurrency. It operates on its own independent blockchain.
- Altcoin: Any cryptocurrency other than Bitcoin. Altcoins often aim to improve upon Bitcoin’s limitations or offer new features. Examples include Ethereum, Litecoin, and Ripple.
- Token: A digital asset that typically represents a specific utility or function within a blockchain ecosystem. Tokens often run on top of existing blockchains (like Ethereum).
Q.6 What is forking? Explain different types of forking.
A fork occurs when a blockchain splits into two separate chains due to changes in the protocol or disagreements among the network participants.
- Types of Forks:
- Soft Fork: A backward-compatible change to the protocol. Nodes running the older version can still participate in the network.
- Hard Fork: A non-backward-compatible change. Nodes running the older version must upgrade to the new protocol to continue participating.
Q.7 What is UTXO? Explain how it prevents double-spending.
UTXO (Unspent Transaction Output) is a way of tracking ownership of Bitcoin in the Bitcoin blockchain.
- How it Works:
- When a Bitcoin transaction occurs, the inputs (previous UTXOs) are fully consumed.
- The transaction creates new outputs (UTXOs) that represent the new ownership of the Bitcoin.
- Each UTXO can only be spent once.
- Preventing Double-Spending: By tracking the history of each Bitcoin through UTXOs, the system prevents someone from spending the same Bitcoin twice.
Q.8 What are the benefits of Smart contracts?
Smart contracts are self-executing contracts with the terms of the agreement directly written into code.
- Benefits:
- Automation: Automate the execution of agreements, eliminating the need for intermediaries.
- Transparency: Contract terms are visible and auditable by all parties.
- Security: Reduce the risk of fraud and manipulation.
- Efficiency: Streamline processes and reduce transaction costs.
Q.9 Write S/N on DApp and DAO.
- DApp (Decentralized Application):
- Runs on a decentralized network (like a blockchain).
- Backend code operates on a peer-to-peer network.
- Often uses tokens for in-app functionality.
- Examples: CryptoKitties, decentralized exchanges.
- DAO (Decentralized Autonomous Organization):
- Operates autonomously based on rules encoded in smart contracts.
- Community-governed, typically through token-based voting.
- Examples: MakerDAO, Uniswap.
Q.10 Explain the structure of a Smart contract.
A smart contract typically consists of the following components:
- Variables: Store data related to the contract’s state.
- Functions: Define the actions that can be performed by the contract.
- Events: Trigger notifications when certain conditions are met.
- Modifiers: Alter the behavior of functions (e.g., access control).
- Constructor: Initializes the contract’s state when it is deployed.
Q.11 How to calculate mining difficulty?
Mining difficulty is a measure of how hard it is to find a valid block in a Proof-of-Work blockchain.
- Adjustment Mechanism: Difficulty is adjusted periodically (e.g., every 2016 blocks in Bitcoin) to maintain a consistent block time.
- Factors:
- Hash Rate: The total computational power of the network.
- Target Block Time: The desired time between blocks.
- Calculation: The difficulty is calculated by comparing the current hash rate to the target block time and adjusting accordingly.
Q.12 Explain the Byzantine Generals Problem.
The Byzantine Generals Problem is a thought experiment that illustrates the challenge of achieving consensus in a distributed system where some participants may be unreliable or malicious.
- Scenario: Several generals need to agree on a coordinated attack plan.
- Problem: Some generals may be traitors who try to disrupt communication and prevent a consensus.
- Relevance to Blockchain: Consensus protocols in blockchains address the Byzantine Generals Problem by ensuring that the network can reach agreement even in the presence of faulty or malicious nodes.
Q.13 Describe Blockchain Technology. How does Blockchain work?
- Description: Blockchain is a secure, distributed ledger that records transactions in a chronological and tamper-proof manner. It is a chain of blocks, each containing a set of transactions, linked together cryptographically.
- How it Works:
- Transaction Request: A user initiates a transaction.
- Verification: The transaction is broadcast to the network of nodes.
- Block Creation: Nodes validate the transaction and group it with other transactions into a block.
- Consensus: Nodes reach consensus on the validity of the block using a consensus protocol.
- Block Addition: The new block is added to the blockchain.
- Confirmation: The transaction is confirmed and recorded on the ledger.
Q.14 What are the main components of a Solidity Smart Contract?
Solidity is a popular programming language for writing smart contracts on the Ethereum blockchain. Here are its main components:
- Pragma Directive: Specifies the compiler version.
- Contract Declaration: Defines the contract’s name and scope.
- State Variables: Store data related to the contract.
- Functions: Define the contract’s logic and actions.
- Modifiers: Alter the behavior of functions.
- Events: Trigger notifications.
- Structs: Define custom data types.
- Enums: Define a set of named constants.
If you have any further questions or need more details on any of these topics, feel free to ask!
