Consensus Mechanisms and Mining Flashcards
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Read the first 7 Consensus Mechanisms and Mining flashcards as text
What is the 'Nakamoto Coefficient' in the context of blockchain decentralization?
Answer: The minimum number of entities that would need to collude to compromise a blockchain's consensus mechanism
Named after Bitcoin's creator, the Nakamoto Coefficient quantifies decentralization — a higher number means more parties must collude to attack the network.
What is 'Verifiable Random Function' (VRF) used for in Proof of Stake systems like Algorand?
Answer: It allows validators to privately and verifiably determine whether they are selected for a committee without revealing their selection until they act
VRF lets each validator secretly determine if they're chosen for block production or voting committees — they only reveal proof when they publish, preventing targeted DDoS.
In Bitcoin mining, what is an ASIC and why did its emergence change mining?
Answer: Application-Specific Integrated Circuit — hardware purpose-built for SHA-256 hashing that made CPU and GPU mining uneconomical
ASICs perform SHA-256 hashing orders of magnitude faster and more efficiently than CPUs or GPUs, driving mining toward industrial-scale specialized facilities.
What is 'liquid staking' and what problem does it solve?
Answer: Users stake tokens and receive a liquid derivative token representing their stake, solving the illiquidity of locked staking funds
Liquid staking (e.g., Lido's stETH, Rocket Pool's rETH) lets users stake while retaining liquidity — the derivative token can be used in DeFi while the underlying ETH earns staking rewards.
What is 'stratum protocol' in the context of cryptocurrency mining?
Answer: A communication protocol between mining software and pool servers that efficiently distributes work to miners
Stratum replaced the older getwork protocol; it uses a persistent TCP connection for efficient two-way communication between miners and pool servers, reducing bandwidth and latency.
What is 'Proof of History' (PoH) used by Solana?
Answer: A verifiable delay function that creates a cryptographic timestamp record, allowing nodes to agree on the ordering of events without communicating
Solana's PoH is a VDF (verifiable delay function) that generates a historical record proving events occurred at specific times, enabling validators to agree on event ordering without coordination overhead.
What distinguishes 'work' in Proof of Work from 'stake' in Proof of Stake as Sybil resistance mechanisms?
Answer: PoW requires spending real-world energy to create identities, while PoS requires locking up economic value — both make creating many fake identities expensive
Both mechanisms make Sybil attacks costly — PoW through irreversible energy expenditure and PoS through capital at risk — preventing any single actor from cheaply creating many voting identities.