CBCP Cryptocurrency and Digital Assets 2 — Questions and Answers
Question 1: Which consensus mechanism does Ethereum currently use after 'The Merge' in 2022?
- Proof of Work
- Proof of Stake (Correct answer)
- Delegated Proof of Stake
- Proof of Authority
Correct answer: Proof of Stake
Ethereum transitioned from Proof of Work to Proof of Stake via 'The Merge' in September 2022, reducing energy consumption by ~99.95%.
Question 2: What is a 'hard fork' in the context of cryptocurrency?
- A software update that is backward compatible
- A protocol change that is not backward compatible, creating a permanent divergence (Correct answer)
- A temporary split in the blockchain that resolves automatically
- A scheduled maintenance window for the network
Correct answer: A protocol change that is not backward compatible, creating a permanent divergence
A hard fork is a permanent, backward-incompatible protocol change that splits the blockchain into two separate chains if not all nodes upgrade.
Question 3: What is the primary purpose of a cryptocurrency 'mempool'?
- Long-term storage of confirmed transactions
- A temporary holding area for unconfirmed transactions awaiting inclusion in a block (Correct answer)
- A database of wallet addresses and balances
- A pool of mining rewards not yet distributed
Correct answer: A temporary holding area for unconfirmed transactions awaiting inclusion in a block
The mempool (memory pool) is a node's staging area for valid but unconfirmed transactions, ordered by fee priority for miners/validators.
Question 4: Which of the following best describes a 'stablecoin'?
- A cryptocurrency with a fixed maximum supply
- A digital asset pegged to a stable reference asset such as fiat currency or commodities (Correct answer)
- A cryptocurrency that uses a fixed block reward
- A digital token that cannot be transferred between wallets
Correct answer: A digital asset pegged to a stable reference asset such as fiat currency or commodities
Stablecoins maintain a stable value by pegging to reference assets like USD, gold, or through algorithmic mechanisms.
Question 5: What is 'slippage' in the context of cryptocurrency trading?
- The difference between the expected transaction fee and the actual fee paid
- The difference between the expected trade price and the actual executed price (Correct answer)
- The loss of funds due to a failed smart contract
- The delay between transaction broadcast and block confirmation
Correct answer: The difference between the expected trade price and the actual executed price
Slippage is the gap between expected and actual execution prices, typically caused by low liquidity or large order sizes relative to the market.
Question 6: What distinguishes a 'utility token' from a 'security token'?
- Utility tokens are always built on Ethereum while security tokens use other blockchains
- Utility tokens grant access to a product or service while security tokens represent investment contracts in an enterprise (Correct answer)
- Utility tokens have unlimited supply while security tokens have capped supply
- Utility tokens are regulated by the SEC while security tokens are unregulated
Correct answer: Utility tokens grant access to a product or service while security tokens represent investment contracts in an enterprise
Utility tokens provide platform access or functionality, while security tokens represent ownership or profit-sharing rights and are subject to securities regulation.
Question 7: What is the function of a 'block explorer' in cryptocurrency?
- A wallet application for managing multiple cryptocurrencies
- A tool that allows users to view and search all transactions and blocks on a blockchain (Correct answer)
- Software that automatically discovers new coins to mine
- An exchange interface for converting between cryptocurrencies
Correct answer: A tool that allows users to view and search all transactions and blocks on a blockchain
A block explorer is a web-based tool providing a transparent, searchable interface to all on-chain data including transactions, addresses, and block details.
CBCP Cryptocurrency and Digital Assets 2
Which consensus mechanism does Ethereum currently use after 'The Merge' in 2022?