QUESTION BANK BLDT -TT1

1.What is Blockchain (Technical definition of Blockchain)

Blockchain is a method of recording information that makes it impossible or difficult for the
system to be changed, hacked, or manipulated. A blockchain is a distributed ledger that
duplicates and distributes transactions across the network of computers participating in the
blockchain.

2.What are the Elements of a blockchain Features of Blockchain

1. Distributed ledger technology

All network participants have access to the distributed ledger and its immutable record of
transactions. With this shared ledger, transactions are recorded only once, eliminating the
duplication of effort that’s typical of traditional business networks.

2. Immutable records
No participant can change or tamper with a transaction after it’s been recorded to the shared
ledger. If a transaction record includes an error, a new transaction must be added to reverse the
error, and both transactions are then visible.

3. Smart contracts
To speed transactions, a set of rules — called a smart contract — is stored on the blockchain and
executed automatically. A smart contract can define conditions for corporate bond transfers,
include terms for travel insurance to be paid and much more.

Features of blockchain
1. **Decentralization**: Blockchain operates on a decentralized network of nodes, which means
there is no central authority controlling the data. This increases transparency and reduces the risk
of manipulation or fraud.

2. **Immutability**: Once data is recorded on the blockchain, it cannot be altered or deleted

without consensus from the majority of the network. This immutability ensures data integrity and
trustworthiness.

3. **Transparency**: Every transaction on the blockchain is visible to all participants in the

network. This transparency fosters trust among users and eliminates the need for intermediaries.
4. **Security**: Blockchain uses cryptographic techniques to secure transactions and data. Each
block is linked to the previous one using cryptographic hashes, making it extremely difficult for
anyone to alter the data without being detected.

5. **Traceability**: The chronological order of transactions is maintained on the blockchain,

allowing users to trace the history of assets or transactions back to their origin.

3.Explain the different type of Blockchain,

1. Public Blockchain
These blockchains are completely open to following the idea of decentralization. They don’t have
any restrictions, anyone having a computer and internet can participate in the network.

• As the name is public this blockchain is open to the public, which means it is not owned
by anyone.
• Anyone having internet and a computer with good hardware can participate in this public
blockchain.

2. Private Blockchain
These blockchains are not as decentralized as the public blockchain only selected nodes can
participate in the process, making it more secure than the others.

• These are not as open as a public blockchain.

• They are open to some authorized users only.
• These blockchains are operated in a closed network.

3. Hybrid Blockchain
It is the mixed content of the private and public blockchain, where some part is controlled by some
organization and other makes are made visible as a public blockchain.

• It is a combination of both public and private blockchain.

• Permission-based and permissionless systems are used.

4. Consortium Blockchain
It is a creative approach that solves the needs of the organization. This blockchain validates the
transaction and also initiates or receives transactions.

• Also known as Federated Blockchain.

• This is an innovative method to solve the organization’s needs.
• Some part is public and some part is private.
 • In this type, more than one organization manages the blockchain.

4.What is DLT

Distributed Ledger Technology (DLT) is centered around an encoded and distributed database
where records regarding transactions are stored. A distributed ledger is a database that is spread
across various computers, nodes, institutions, or countries accessible by multiple people around
the globe.

5.Give the difference of . DLT V/S Blockchain

6.What is Consensus Mechanism give its Type

A consensus mechanism is what keeps decentralized networks secure. Nodes must agree on the
current state before updating the blockchain. This automated process prevents errors and secures
the network against threats such as double-spending or Sybil attacks, where malicious actors
manipulate the network with fake nodes.
Some common types include:

1. Proof of Work (PoW): Participants compete to solve complex mathematical puzzles, and
the one who finds the solution first gets to add a new block to the blockchain. Bitcoin’s
blockchain uses PoW.

2. Proof of Stake (PoS): Validators are chosen to create new blocks based on the amount of
cryptocurrency they hold and are willing to “stake” as collateral. Ethereum is
transitioning to PoS with its Ethereum 2.0 upgrade.

3. Delegated Proof of Stake (DPoS): Token holders vote for delegates who are responsible
for validating transactions and adding blocks to the blockchain. EOS and TRON are
examples of blockchains that use DPoS.

4. Practical Byzantine Fault Tolerance (PBFT): Participants in the network reach consensus
through a series of rounds of message exchanges. PBFT is used in systems like
Hyperledger Fabric.

5. Delegated Byzantine Fault Tolerance (dBFT): Similar to PBFT, but with a delegated
voting system. NEO is an example of a blockchain that uses dBFT.

7.Explain the structure of a Block

https://www.shiksha.com/online-courses/articles/structure-of-a-block-in-blockchain/

8.Define block header and , Merkle Tree

Block header: The portion of a block that contains information about the block itself (block
metadata), typically including a timestamp, a hash representation of the block data, the hash of
the previous block’s header, and a cryptographic nonce (if needed).
Merkle tree: A hash tree, also known as a Merkle tree, is a tree in which each leaf node is labeled
with the cryptographic hash of a data block, and each non-leaf node is labeled with the
cryptographic hash of its child nodes’ labels

9.What is Bitcoin

Bitcoin is a decentralized digital asset. It is a new type of asset that joins the ranks of traditional
assets such as cash, gold, and real estate. Bitcoin spans many traditional assets, such as cash and
gold. For example, you can use it like money or as a store of value. Another key to what makes
Bitcoin different is its decentralized and “trustless" model. This means that trusted third parties
(middlemen such as banks) aren’t necessary with Bitcoin. These third parties act as go-betweens,
and are often called intermediaries.

10.Explain in short Bitcoin Transactions

Sure, here's a more detailed explanation of Bitcoin transactions:

1. **Inputs:** Each Bitcoin transaction starts with inputs, which are references to previous
transactions where the sender received Bitcoin. These inputs prove that the sender has the
authority to spend the Bitcoin being transferred.

2. **Outputs:** Outputs specify where the Bitcoin is being sent and how much is being sent to
each recipient. Each output contains the recipient's address and the amount of Bitcoin being sent
to them. Transactions can have multiple outputs, allowing users to send Bitcoin to multiple
recipients in a single transaction.

3. **Transaction ID:** Every transaction is assigned a unique identifier called a transaction ID.
This ID is used to track the transaction on the blockchain and can be used to look up details
about the transaction, such as the amount sent and the addresses involved.

4. **Transaction Fees:** Bitcoin transactions may include a transaction fee, which is an

incentive for miners to include the transaction in a block and add it to the blockchain. The sender
can choose the transaction fee amount, which typically determines how quickly the transaction
will be processed by miners.

5. **Confirmation:** After a transaction is broadcasted to the Bitcoin network, it awaits

confirmation by miners. Miners include transactions in blocks and add them to the blockchain
through a process called mining. Once a transaction is included in a block and added to the
blockchain, it is considered confirmed. The number of confirmations a transaction has received
indicates how many blocks have been added to the blockchain since the transaction was
included, providing increasing levels of security and finality.

11.Give short note on UTXO.

In bitcoin, the transaction lives until it has been executed till the time another transaction is done
out of that UTXO. UTXO stands for Unspent Transaction Output.

• It is
the amount of digital currency someone has left remaining after executing a
transaction.
• When a transaction is completed, the unspent output is deposited back into the database
as input which can be used later for another transaction.

UTXOs are created through the consumption of existing UTXOs. Every Bitcoin transaction is
composed of inputs and outputs. Inputs consume an existing UTXO, while outputs create a new
UTXO.

UTXO Model: The UTXO model does not incorporate wallets at the protocol level. It is based
on individual transactions that are grouped in blocks. The UTXO model is a design common to
many cryptocurrencies, most notably Bitcoin.

• Cryptocurrencies that use the UTXO model do not use accounts or balances. Instead,
UTXOs are transferred between users much like physical cash.
• Each transaction in the UTXO model can transition the system to a new state, but
transitioning to a new state with each transaction is infeasible.
• The network participants must stay in sync with the current state.

12.Discuss the different challenges addressed by blockchain in the Energy sector.

Scalability: The energy sector requires handling a high volume of transactions, especially in
decentralized grids. Current blockchain solutions need to evolve to manage this scale efficiently.

Regulatory Hurdles: The energy sector is heavily regulated. Blockchain applications must
navigate a complex web of regulations and standards, which can vary significantly from one
region to another.

Integration with Legacy Systems: Many energy companies operate on outdated infrastructure.
Integrating blockchain with these legacy systems poses significant technical challenges.
Energy Consumption of Blockchain: Blockchain networks, especially those using proof-of-work
consensus mechanisms, are criticized for their high energy consumption. This is at odds with the
energy sector’s move towards sustainability.
Transparency and Accountability : Increasing transparency within the Bitcoin mining industry,
particularly regarding energy consumption and sources, can enable stakeholders to make more
informed decisions and hold miners accountable for their environmental impact. Initiatives like
the Crypto Climate Accord aim to promote transparency and encourage industry-wide
commitments to sustainability.

13.Differentiate between Bitcoin blockchain and Ethereum Blockchain

14.Explain bitcoin mining with the help of a neat diagram

Bitcoin mining is a computation-intensive process that uses complicated computer code to

generate a secure cryptographic system. The bitcoin miner is the person who solves
mathematical puzzles(also called proof of work) to validate the transaction. Anyone with
mining hardware and computing power can take part in this. Numerous miners take part
simultaneously to solve the complex mathematical puzzle, the one who solves it first, wins
6.25 bitcoin as a part of the reward. Miner verifies the transactions(after solving the puzzle)
and then adds the block to the blockchain when confirmed.
The nodes of the blockchain network are based on the concept that no one in the network can
be trusted. Proof of work is accepted by nodes to validate any transaction. Proof of work
involves doing hefty calculations to find a 32-bit hash value called nonce to solve the
mathematical puzzle. The miners create new blocks by abiding by the fact that the transaction
volume must be less than 21 million. 21 million is the total number of bitcoins that can be
generated. The verified transaction gets a unique identification code and is linked with the
previous verified transaction.
Let’s understand this with the help of an example-
• Suppose Alice wants to transfer 10 BTC to Bob.
• Now the transaction data of A is shared with the miners from the memory pool. A memory
pool is a place where an unconfirmed or unverified transaction waits for its confirmation.
• Miners start competing with themselves to solve the mathematical riddle in order to
validate and verify the transaction using proof of work.
• The miner who solves the problem first shares his result with other nodes(miners).
• Once maximum nodes agree with the solution, the transaction block is verified and is then
added to the blockchain.
• At the same time, the miner who solved the puzzle gets a reward of 6.25 bitcoins.
• Now, after the addition of the transaction block, the 10 BTC associated with the transaction
data is transferred to Bob from Alice.
Requirements to Mine Bitcoin

In past, users of the system used to mine bitcoins using their home computers but as the
technology has improved, this is no longer the case. The general time a bitcoin network takes
to verify a new transaction is 10min. Within that time, there are more than one million miners
competing with each other to find the hash value. When there is more computing power
working together to mine for bitcoins, the difficulty level of mining increases. Therefore, in
order to mine bitcoins, the user must possess-
• Specialized mining hardware is called “application-specific integrated circuits,” or ASICs.
• A Bitcoin mining software to join the Blockchain network.
• Powerful GPU (graphics processing unit).

15.Explain the extended Bitcoin Network

The extended Bitcoin network refers to the broader ecosystem and infrastructure surrounding the
Bitcoin blockchain itself. While the core of Bitcoin is the decentralized ledger where transactions
are recorded and validated through a process called mining, the extended network encompasses
various layers and components that support its functionality, adoption, and usability.

1. **Bitcoin Protocol**: This is the underlying set of rules and processes that govern how the
Bitcoin network operates. It includes consensus mechanisms, transaction validation rules, and the
issuance of new bitcoins through mining.

2. **Blockchain**: The Bitcoin blockchain is a distributed ledger that records all transactions
ever made on the network. It consists of a series of blocks, each containing a list of transactions,
cryptographically linked to the previous block, forming an immutable chain.

3. **Mining Infrastructure**: Bitcoin mining is the process by which transactions are verified
and added to the blockchain. Miners use powerful computers to solve complex mathematical
puzzles, and in return, they are rewarded with newly minted bitcoins. The mining infrastructure
includes mining pools, specialized hardware (such as ASICs), and mining farms.

4. **Nodes**: Nodes are individual computers participating in the Bitcoin network. They store a
copy of the entire blockchain and communicate with other nodes to propagate transactions and
blocks across the network. Nodes can be full nodes, which store the entire blockchain, or
lightweight nodes, which rely on full nodes for verification.

5. **Wallets**: Bitcoin wallets are software applications or physical devices used to store, send,
and receive bitcoins. They generate and store private keys, which are necessary to access and
control bitcoins associated with a particular wallet address.
6. **Exchanges**: Bitcoin exchanges are online platforms where users can buy, sell, and trade
bitcoins for fiat currencies or other cryptocurrencies. They play a crucial role in facilitating
liquidity and price discovery within the Bitcoin market.

7. **Payment Processors**: Payment processors enable merchants to accept bitcoin payments

for goods and services. They provide tools and services for businesses to integrate bitcoin
payments into their existing checkout systems, often converting bitcoins into fiat currency to
mitigate price volatility.

8. **Developers and Community**: The Bitcoin ecosystem is supported by a vibrant community

of developers, enthusiasts, and contributors who continuously work on improving the protocol,
developing new applications, and fostering adoption. This includes open-source projects, forums,
conferences, and educational resources dedicated to Bitcoin.

9. **Regulatory Landscape**: The extended Bitcoin network also interacts with various
regulatory frameworks and legal considerations governing its use and operation in different
jurisdictions. Regulations related to taxation, anti-money laundering (AML), and know-your-
customer (KYC) requirements impact how businesses and individuals engage with Bitcoin.

10. **Layer 2 Solutions**: Layer 2 solutions are protocols built on top of the Bitcoin blockchain
to enhance its scalability and functionality. Examples include the Lightning Network, which
enables faster and cheaper off-chain transactions, and sidechains, which allow for
experimentation with new features and functionalities without modifying the main Bitcoin
protocol.

16.Explain , Concept of Wallet and Wallet Technologies in Bitcoin HD

17. Compare different types of blockchain

20 Explain basics of Bitcoin Forensics:

Bitcoin forensics is the process of analyzing and investigating transactions, addresses, and other
data related to the Bitcoin blockchain to uncover information for legal, regulatory, or
investigative purposes. It involves applying various analytical techniques to trace the flow of
bitcoins, identify illicit activities, and attribute transactions to specific individuals or entities.
Here are the basics of Bitcoin forensics:

1. **Transaction Analysis**: Bitcoin transactions are recorded on the blockchain, a public

ledger. Forensic analysts examine transaction data to understand the movement of bitcoins
between addresses. They can trace transactions backward and forward to identify patterns and
connections between different addresses.

2. **Address Clustering**: Bitcoin addresses are pseudonymous, meaning they do not directly
reveal the identity of their owners. However, forensic techniques can be used to cluster addresses
together based on common ownership. This clustering helps analysts understand the flow of
funds and link multiple addresses to a single entity.

3. **Chain Analysis**: Chain analysis involves tracking the entire transaction history of bitcoins
to identify suspicious or illicit activity. Analysts use specialized tools and software to visualize
transaction flows, detect mixing services, and flag transactions associated with known illicit
entities, such as darknet markets or money laundering operations.

4. **Wallet Analysis**: Bitcoin wallets store private keys, which are necessary to access and
control bitcoins. Forensic investigators analyze wallet data to identify ownership and transaction
history. They may examine wallet files, software applications, or online services used to manage
bitcoins.

5. **Pattern Recognition**: Bitcoin transactions can exhibit certain patterns or behaviors that
indicate potential fraud, money laundering, or other illicit activities. Forensic analysts look for
anomalies in transaction amounts, frequency, timing, and clustering to identify suspicious
behavior.

6. **Exchange Analysis**: Bitcoin exchanges facilitate the conversion of bitcoins to fiat

currency and vice versa. Forensic investigators analyze exchange data, such as transaction
records, account information, and KYC/AML compliance measures, to trace the movement of
funds and identify individuals or entities involved in illicit activities.

7. **Regulatory Compliance**: Bitcoin forensics often involves ensuring compliance with

regulatory requirements, such as anti-money laundering (AML) and know-your-customer (KYC)
regulations. Investigators work to identify and report suspicious transactions to regulatory
authorities and law enforcement agencies.

8. **Legal and Court Proceedings**: Bitcoin forensics may be used as evidence in legal
proceedings, such as criminal investigations, civil litigation, or regulatory enforcement actions.
Forensic analysts may be called upon to testify as expert witnesses and present their findings in
court.