Freshers / Beginner level questions & answers
Ques 1. What is Bitcoin?
Bitcoin is a decentralized digital currency, without a central bank or single administrator, that can be sent from user to user on the peer-to-peer bitcoin network without the need for intermediaries.
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Ques 2. How does a Bitcoin transaction work?
A Bitcoin transaction involves the transfer of ownership of bitcoins from one address to another. It is verified by network nodes through cryptography and recorded in the blockchain.
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Ques 3. What is a Bitcoin wallet?
A Bitcoin wallet is a digital wallet that allows users to store and manage their bitcoins. It can be hardware-based, software-based, or exist as a paper wallet.
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Ques 4. Explain the term 'private key' in the context of Bitcoin wallets.
A private key is a secret cryptographic key that allows the owner to access and control their bitcoins. It should be kept secure and never shared.
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Ques 5. Explain the role of confirmations in Bitcoin transactions.
Confirmations refer to the number of blocks added to the blockchain after a transaction has been included in a block. More confirmations increase the security and irreversibility of the transaction.
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Ques 6. What is the role of a mempool in the Bitcoin network?
The mempool is a short-term memory pool of unconfirmed transactions in the Bitcoin network. Miners select transactions from the mempool to include in the next block.
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Ques 7. What is the role of a Bitcoin exchange?
A Bitcoin exchange is a platform that facilitates the buying, selling, and trading of bitcoins and other cryptocurrencies. It acts as an intermediary between buyers and sellers.
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Ques 8. Explain the concept of a 'paper wallet' in the context of Bitcoin.
A paper wallet is a physical document containing a public address for receiving bitcoins and a private key for spending or transferring bitcoins stored in that address. It is considered a form of cold storage.
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Ques 9. What is the role of the 'difficulty adjustment' in the Bitcoin network?
The difficulty adjustment is a mechanism that regulates the rate at which new blocks are added to the blockchain. It ensures that the average time between blocks remains around 10 minutes.
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Ques 10. What is the role of a 'watch-only' Bitcoin wallet?
A watch-only wallet is a wallet that can only view and monitor the balance and transactions of a specific Bitcoin address. It does not have the ability to spend bitcoins.
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Ques 11. What is the significance of the 'white paper' in the history of Bitcoin?
The white paper, titled 'Bitcoin: A Peer-to-Peer Electronic Cash System,' was published by Satoshi Nakamoto and introduced the concept of Bitcoin and its underlying technology. It is considered the foundation of the cryptocurrency.
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Ques 12. What is the role of a 'block explorer' in the Bitcoin ecosystem?
A block explorer is a web tool or interface that allows users to view information about the blocks, transactions, and addresses on the Bitcoin blockchain. It provides transparency and visibility into the network.
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Ques 13. Explain the term 'Satoshi' in the context of Bitcoin.
A Satoshi is the smallest unit of bitcoin, named after Bitcoin's pseudonymous creator, Satoshi Nakamoto. One bitcoin is equivalent to 100 million Satoshis.
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Intermediate / 1 to 5 years experienced level questions & answers
Ques 14. Explain the concept of blockchain in the context of Bitcoin.
Blockchain is a distributed ledger that records all transactions across a network of computers. In the case of Bitcoin, it is used to secure and verify transactions, creating a transparent and tamper-resistant history of all transactions.
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Ques 15. What is mining in the context of Bitcoin?
Mining is the process by which new bitcoins are created and added to the circulating supply. It involves solving complex mathematical problems using computational power, and miners are rewarded with bitcoins for their efforts.
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Ques 16. Explain the term 'block reward' in the context of Bitcoin mining.
The block reward is the reward given to a miner for successfully adding a new block to the blockchain. It consists of newly created bitcoins and transaction fees.
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Ques 17. What is the role of nodes in the Bitcoin network?
Nodes are computers that participate in the Bitcoin network. They validate and relay transactions, maintain a copy of the blockchain, and help secure the network by following the consensus rules.
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Ques 18. What is the purpose of the Lightning Network in Bitcoin?
The Lightning Network is a layer-2 scaling solution for Bitcoin that enables faster and cheaper transactions by conducting most transactions off-chain and settling the final result on the Bitcoin blockchain.
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Ques 19. What is the significance of the 21 million supply limit in Bitcoin?
Bitcoin has a maximum supply of 21 million coins, which is hardcoded into its protocol. This scarcity is designed to mimic the scarcity of precious metals like gold and is intended to control inflation.
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Ques 20. Explain the term 'Segregated Witness' (SegWit) in the context of Bitcoin.
Segregated Witness is a protocol upgrade that separates transaction signatures from the transaction data, increasing the block size limit and addressing certain scalability issues in the Bitcoin network.
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Ques 21. What is a double-spending problem, and how does Bitcoin solve it?
Double-spending is the risk of a digital currency being spent more than once. Bitcoin solves this problem by using a decentralized network and a consensus mechanism based on proof-of-work to validate and confirm transactions.
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Ques 22. What is the role of a full node in the Bitcoin network?
A full node is a computer that maintains a complete copy of the Bitcoin blockchain and validates transactions independently. It enhances the security and decentralization of the network.
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Ques 23. Explain the term 'halving' in the context of Bitcoin.
Halving is an event that occurs approximately every four years, reducing the reward that miners receive for adding a new block to the blockchain by half. It is programmed to control the issuance of new bitcoins.
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Ques 24. What is the role of the 'genesis block' in the Bitcoin blockchain?
The genesis block is the first block in the Bitcoin blockchain, mined by Bitcoin's creator, Satoshi Nakamoto. It serves as the foundation for the entire blockchain.
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Ques 25. Explain the term 'multisignature' (multisig) in the context of Bitcoin wallets.
Multisignature is a security feature that requires multiple private keys to authorize a bitcoin transaction. It adds an extra layer of security by distributing control among multiple parties.
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Ques 26. Explain the concept of 'BIP' in the context of Bitcoin improvement proposals.
A BIP, or Bitcoin Improvement Proposal, is a design document that provides information to the Bitcoin community or describes a new feature for Bitcoin or its processes. It is the standard way of introducing new ideas.
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Ques 27. Explain the term 'fungibility' in the context of Bitcoin.
Fungibility refers to the property of interchangeable units. In the context of Bitcoin, it means that each bitcoin is indistinguishable from every other bitcoin, ensuring that they are all of equal value.
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Ques 28. Explain the term 'soft fork' in the context of Bitcoin.
A soft fork is a backward-compatible upgrade to the Bitcoin protocol that tightens the rules for valid blocks. It does not require all participants to upgrade their software but encourages miners to adopt the new rules.
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Experienced / Expert level questions & answers
Ques 29. Explain the concept of a 'hard fork' in the context of Bitcoin.
A hard fork occurs when there is a significant divergence in the blockchain, leading to the creation of two separate and incompatible chains. It often results in the creation of a new cryptocurrency.
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Ques 30. Explain the concept of a '51% attack' in the context of Bitcoin.
A 51% attack occurs when an entity gains control of more than 50% of the total computational power of the Bitcoin network. This could potentially allow the attacker to manipulate transactions or double-spend bitcoins.
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