BUS 410 COMPREHENSIVE QUESTIONS AND
ANSWERS SET A+
✔✔How is cryptocurrency created? - ✔✔Though a process called mining
✔✔Mining - ✔✔The process by which transactions are officially entered onto the
blockchain and new bitcoins are launched into circulation
✔✔How does mining work? - ✔✔1) Alice sends instructions to transfer 1 cryptocurrency
to Bob
2) There is a network where anyone using the Bitcoin network can view Alice's message
3) Miners on the network group the transaction into a "block" with a bunch of other
recent transactions
4) Information of the block is transformed into cryptographic code (hashing)
The result is a random 64 hexidecimal number called a hash that is hidden
5) Miners compete to guess the hash
6) Once a miner gets it, the block is added to the blockchain and the transaction is
confirmed and settled between Bob and Alice
✔✔What does a miner get for solving a hash? - ✔✔- Once the miner guesses the code,
he is rewarded a newly created bitcoin as well as a transaction fee
- The miner who solves the puzzle earns the right to add the block on the next chain of
the blockchain
✔✔Staking and how it works - ✔✔Alternative method to verify a transaction
1) People (validators) stake their crypto and take on the validation themselves; they're
rewarded in crypto
2) Staking is much quicker and much more energy efficient
3) If the validators do a poor job validating, they lose their staked bitcoin (slashing)
The more bitcoin you stake, the higher the liklihood to be selected to validate.
, ✔✔Types of Staking - ✔✔Direct protocol
- You participate in the validation process
Smart contracting
- Validators perform on your behalf
✔✔Way to buy BTC - ✔✔brokerage or exchanges
✔✔Crypto wallet - ✔✔Tool that allows you to store and manage digital currencies. Has
a:
Public Key: Allows you to receive BTC
Private Key: Allows you to spend or send BTC
✔✔Types of Crypto Wallets - ✔✔1) Hot wallets - connected to internet
2) Cold wallets - hard drive
✔✔Is Bitcoin Money - ✔✔1) Means of payment
- $: Everyone accepts
- BTC: Not everyone accepts
2) Store of value
- $: Stable
- BTC: Volatile
3) Unit of Account
- both divisible
4) Governance
- $: Government backed
- BTC: Decentralized
5) Transaction verification
- $: controlled authorization process
- BTC: Validators and miners
✔✔Regulatory Uncertainty with Crypto - ✔✔- There is no one who controls crypto so
you can't really have control over it
- People still don't know if the government will ban or promote it
✔✔Bitcoin Cycle 2013 - ✔✔Went from $100 to $1000 because people were becoming
more interested in crypto. The exchange (Mt. Gox) was hacked and people lost
confidence and dropped to $100
✔✔Bitcoin cycle in 2017 - ✔✔- Rise of initial coin offerings
- Strong media attention
- The bust happened because there was human panicking because the government
was increasing their regulations on crypto
ANSWERS SET A+
✔✔How is cryptocurrency created? - ✔✔Though a process called mining
✔✔Mining - ✔✔The process by which transactions are officially entered onto the
blockchain and new bitcoins are launched into circulation
✔✔How does mining work? - ✔✔1) Alice sends instructions to transfer 1 cryptocurrency
to Bob
2) There is a network where anyone using the Bitcoin network can view Alice's message
3) Miners on the network group the transaction into a "block" with a bunch of other
recent transactions
4) Information of the block is transformed into cryptographic code (hashing)
The result is a random 64 hexidecimal number called a hash that is hidden
5) Miners compete to guess the hash
6) Once a miner gets it, the block is added to the blockchain and the transaction is
confirmed and settled between Bob and Alice
✔✔What does a miner get for solving a hash? - ✔✔- Once the miner guesses the code,
he is rewarded a newly created bitcoin as well as a transaction fee
- The miner who solves the puzzle earns the right to add the block on the next chain of
the blockchain
✔✔Staking and how it works - ✔✔Alternative method to verify a transaction
1) People (validators) stake their crypto and take on the validation themselves; they're
rewarded in crypto
2) Staking is much quicker and much more energy efficient
3) If the validators do a poor job validating, they lose their staked bitcoin (slashing)
The more bitcoin you stake, the higher the liklihood to be selected to validate.
, ✔✔Types of Staking - ✔✔Direct protocol
- You participate in the validation process
Smart contracting
- Validators perform on your behalf
✔✔Way to buy BTC - ✔✔brokerage or exchanges
✔✔Crypto wallet - ✔✔Tool that allows you to store and manage digital currencies. Has
a:
Public Key: Allows you to receive BTC
Private Key: Allows you to spend or send BTC
✔✔Types of Crypto Wallets - ✔✔1) Hot wallets - connected to internet
2) Cold wallets - hard drive
✔✔Is Bitcoin Money - ✔✔1) Means of payment
- $: Everyone accepts
- BTC: Not everyone accepts
2) Store of value
- $: Stable
- BTC: Volatile
3) Unit of Account
- both divisible
4) Governance
- $: Government backed
- BTC: Decentralized
5) Transaction verification
- $: controlled authorization process
- BTC: Validators and miners
✔✔Regulatory Uncertainty with Crypto - ✔✔- There is no one who controls crypto so
you can't really have control over it
- People still don't know if the government will ban or promote it
✔✔Bitcoin Cycle 2013 - ✔✔Went from $100 to $1000 because people were becoming
more interested in crypto. The exchange (Mt. Gox) was hacked and people lost
confidence and dropped to $100
✔✔Bitcoin cycle in 2017 - ✔✔- Rise of initial coin offerings
- Strong media attention
- The bust happened because there was human panicking because the government
was increasing their regulations on crypto
