Cryptocurrency Core Concepts Flashcards

In Bitcoin's UTXO model, if a transaction has inputs totaling 1.5 BTC and outputs totaling 1.4 BTC with no explicit change output, what happens to the 0.1 BTC difference?

Answer: It is implicitly claimed by the miner as a transaction fee

In Bitcoin's UTXO model, the difference between total inputs and total outputs is not explicitly assigned — it becomes the miner's fee. Miners collect this implicit fee as an incentive to include the transaction in a block. There is no protocol mechanism to auto-refund or hold the difference; if you forget a change output, the miner takes the entire surplus.

Which cryptographic property is MOST critical for a cryptocurrency's digital signature scheme to prevent an attacker who observes multiple signed transactions from forging new signatures without the private key?

Answer: Existential unforgeability under chosen-message attack (EUF-CMA)

EUF-CMA (Existential Unforgeability under Chosen-Message Attack) is the precise security model for digital signatures that guarantees an adversary cannot forge a valid signature on any new message, even after observing polynomially many valid signatures on chosen messages. Collision resistance applies to hash functions, perfect forward secrecy applies to key exchange, and semantic security applies to encryption — none of these directly model signature unforgeability.

A miner on a Proof-of-Work chain secretly mines 6 blocks ahead of the public chain tip and then releases them all at once. This attack is most precisely described as:

Answer: A finality reversion exploiting the longest-chain rule

Releasing a secretly pre-mined chain longer than the public chain causes honest nodes to abandon their current chain and adopt the attacker's chain via the longest-chain (heaviest-chain) rule, reverting previously confirmed transactions. Selfish mining is a related but distinct strategy of strategic partial withholding to gain excess revenue. Sybil and eclipse attacks target network topology, not chain reorganization.

In Ethereum's account-based model, what prevents an attacker from replaying a valid signed transaction (e.g., a payment) on the same network indefinitely?

Answer: Each account maintains a monotonically increasing nonce that must match exactly for a transaction to be valid

Ethereum uses a per-account nonce — an integer that starts at 0 and increments by exactly 1 with each sent transaction. A transaction is only valid if its nonce equals the sender's current nonce; once included in a block, the nonce advances, making the old signed transaction invalid if resubmitted. Balance checks and gas prices serve other purposes but do not prevent replay of a transaction that was valid at a prior state.

A Lightning Network payment channel between Alice and Bob has a capacity of 1 BTC. Alice has a local balance of 0.3 BTC and Bob has 0.7 BTC. Alice wants to route a 0.4 BTC payment to Carol through Bob. Why does this specific routing attempt fail at this hop?

Answer: Alice's local balance of 0.3 BTC is insufficient to forward 0.4 BTC toward Bob

In a Lightning channel, a node can only forward value equal to its current local (outbound) balance toward the next hop. Alice's outbound balance on the Alice–Bob channel is only 0.3 BTC, so she cannot push 0.4 BTC to Bob for forwarding — the routing fails at this hop regardless of Bob's onward liquidity. Inbound liquidity is Bob's concern for receiving, not Alice's concern for sending; channel capacity limits the total, not per-hop minimums.

Schnorr signatures offer a concrete advantage over ECDSA for multi-party signing (multisig) in cryptocurrencies primarily because:

Answer: Schnorr signatures are linearly homomorphic, allowing multiple signers' partial signatures to be aggregated into a single compact signature indistinguishable from a single-signer one

Schnorr signatures satisfy a linearity property: partial signatures from multiple independent signers can be mathematically combined (aggregated) into a single signature that verifies against the aggregate public key. This enables schemes like MuSig where an n-of-n multisig produces a single 64-byte signature and a single aggregated public key, appearing on-chain identically to a single-signer transaction — improving both privacy and efficiency. ECDSA lacks this linearity, requiring each signer's contribution to be handled separately.