Cryptocurrency Core Concepts Flashcards

What distinguishes a permissioned blockchain from a permissionless one?

Answer: Permissioned chains restrict participation to approved entities

Permissioned blockchains require identity verification and approval before nodes can join, unlike open public networks.

What is a '51% attack' and why is it dangerous?

Answer: When a single entity controls over half of mining power and can rewrite recent blocks

A 51% attack occurs when one entity controls the majority of hash rate, enabling double-spend attacks by reorganizing recent transaction history.

What is 'finality' in blockchain transactions?

Answer: The point at which a transaction is considered irreversible

Finality refers to the guarantee that a confirmed transaction cannot be altered or reversed.

Which of the following best describes a 'mempool'?

Answer: A holding area for unconfirmed transactions awaiting block inclusion

The mempool (memory pool) is a node's local queue of broadcast but unconfirmed transactions pending selection by miners or validators.

What problem does the Lightning Network primarily solve for Bitcoin?

Answer: High on-chain transaction fees and low throughput

The Lightning Network is a Layer 2 protocol enabling fast, low-fee off-chain payments that only settle on-chain when channels close.

What is 'gas' in the context of the Ethereum network?

Answer: A unit measuring computational effort required to execute operations

Gas measures the computational work needed to execute transactions or smart contracts, with users paying ETH per unit of gas consumed.

What is token burning in cryptocurrency ecosystems?

Answer: Permanently removing tokens from circulation by sending them to an unspendable address

Token burning permanently destroys coins by transferring them to a provably unspendable address, reducing total supply.