C4 Cryptocurrency Basics — Questions and Answers
Question 1: What is the primary function of a blockchain in cryptocurrency?
- To generate fiat currency
- To serve as a marketing tool
- To record and verify transactions (Correct answer)
- To calculate mining rewards
Correct answer: To record and verify transactions
Blockchain acts as a decentralized digital ledger that records all transactions across a distributed network securely and transparently.
Question 2: Which of the following best describes Bitcoin?
- A government-issued stablecoin
- A centralized online payment service
- A decentralized cryptocurrency (Correct answer)
- A traditional banking system
Correct answer: A decentralized cryptocurrency
Bitcoin is a decentralized digital currency that allows peer-to-peer transactions without the need for a central authority.
Question 3: What does a private key in cryptocurrency enable the user to do?
- Track market trends
- Mine new blocks
- Access and control funds (Correct answer)
- Verify network updates
Correct answer: Access and control funds
A private key grants the holder control over their cryptocurrency assets, allowing them to sign transactions and access their funds.
Question 4: Which consensus mechanism does Bitcoin use?
- Proof of Stake
- Delegated Proof of Stake
- Proof of Authority
- Proof of Work (Correct answer)
Correct answer: Proof of Work
Bitcoin relies on Proof of Work (PoW), where miners solve complex puzzles to validate transactions and add new blocks to the blockchain.
Question 5: What is a cryptocurrency wallet primarily used for?
- To mine cryptocurrencies
- To regulate crypto prices
- To store and manage digital assets (Correct answer)
- To trade NFTs
Correct answer: To store and manage digital assets
Cryptocurrency wallets store private and public keys and allow users to send, receive, and manage their digital assets.
Question 6: What does the term 'decentralized' mean in cryptocurrency?
- Operated by one central bank
- Controlled by a company
- Regulated by government
- Distributed across multiple participants (Correct answer)
Correct answer: Distributed across multiple participants
Decentralization means no single entity controls the network; instead, control is distributed among all participants.
C4 Cryptocurrency Basics
What is the primary function of a blockchain in cryptocurrency?