CCE Cryptocurrency Core Concepts 3 — Questions and Answers
Question 1: What distinguishes a permissioned blockchain from a permissionless one?
- Permissioned chains use proof of work exclusively
- Permissioned chains restrict participation to approved entities (Correct answer)
- Permissioned chains have no native cryptocurrency
- Permissioned chains cannot support smart contracts
Correct answer: Permissioned chains restrict participation to approved entities
Permissioned blockchains require identity verification and approval before nodes can join, unlike open public networks.
Question 2: What is a '51% attack' and why is it dangerous?
- When 51% of users sell their holdings simultaneously
- When a single entity controls over half of mining power and can rewrite recent blocks (Correct answer)
- When 51% of nodes go offline and halt the network
- When transaction fees exceed 51% of block rewards
Correct 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.
Question 3: What is 'finality' in blockchain transactions?
- The fee paid to finalize a transaction
- The point at which a transaction is considered irreversible (Correct answer)
- The final block before a halving event
- The last transaction in a block
Correct answer: The point at which a transaction is considered irreversible
Finality refers to the guarantee that a confirmed transaction cannot be altered or reversed.
Question 4: Which of the following best describes a 'mempool'?
- A pool of mining hardware resources shared among miners
- A holding area for unconfirmed transactions awaiting block inclusion (Correct answer)
- A reserve of staked coins held by validators
- A database of all historical blockchain transactions
Correct 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.
Question 5: What problem does the Lightning Network primarily solve for Bitcoin?
- Smart contract incompatibility
- High on-chain transaction fees and low throughput (Correct answer)
- Wallet security vulnerabilities
- Block size disputes between miners
Correct 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.
Question 6: What is 'gas' in the context of the Ethereum network?
- The native token earned by Ethereum validators
- A unit measuring computational effort required to execute operations (Correct answer)
- The fee paid to Ethereum's development foundation
- A cryptographic nonce used in block mining
Correct 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.
Question 7: What is token burning in cryptocurrency ecosystems?
- Converting tokens into fiat currency at market rate
- Permanently removing tokens from circulation by sending them to an unspendable address (Correct answer)
- Exchanging tokens across different blockchain networks
- Staking tokens to earn yield rewards
Correct 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.
CCE Cryptocurrency Core Concepts 3
What distinguishes a permissioned blockchain from a permissionless one?