CBP Bitcoin Basics and Cryptography 1 — Questions and Answers
Question 1: What is the primary function of Bitcoin's blockchain?
- To create new bitcoins
- To store transaction data in a secure and decentralized manner (Correct answer)
- To control Bitcoin supply
- To regulate Bitcoin prices
Correct answer: To store transaction data in a secure and decentralized manner
The blockchain is a decentralized ledger that records all Bitcoin transactions in a secure and immutable way.
Question 2: Which cryptographic algorithm is used to secure Bitcoin transactions?
- RSA
- SHA-256 (Correct answer)
- MD5
- Blowfish
Correct answer: SHA-256
Bitcoin transactions are secured using the SHA-256 cryptographic hash function, ensuring data integrity and security.
Question 3: What role do private keys play in Bitcoin transactions?
- To generate new bitcoins
- To sign transactions and prove ownership of Bitcoin (Correct answer)
- To encrypt messages on the network
- To verify other users' transactions
Correct answer: To sign transactions and prove ownership of Bitcoin
Private keys are used to sign transactions, proving ownership and enabling the spending of Bitcoin securely.
Question 4: How does Bitcoin achieve decentralization?
- By relying on a single trusted authority
- By using a peer-to-peer network of nodes (Correct answer)
- By storing all Bitcoin data on a centralized server
- By requiring government regulation
Correct answer: By using a peer-to-peer network of nodes
Bitcoin achieves decentralization by distributing transaction validation and ledger maintenance across a global network of nodes.
Question 5: What happens if a Bitcoin user loses their private key?
- They can recover it through the Bitcoin network
- They permanently lose access to their Bitcoin (Correct answer)
- They can request a new key from the Bitcoin foundation
- Their transactions get reversed
Correct answer: They permanently lose access to their Bitcoin
Losing a private key results in the permanent loss of access to the associated Bitcoin, as there is no recovery mechanism.
Question 6: Why is Bitcoin considered pseudonymous rather than anonymous?
- Because transactions are hidden from all users
- Because transactions are publicly recorded on the blockchain but not directly linked to real identities (Correct answer)
- Because the government assigns Bitcoin addresses
- Because Bitcoin requires identity verification for transactions
Correct answer: Because transactions are publicly recorded on the blockchain but not directly linked to real identities
Bitcoin transactions are recorded on a public ledger, allowing addresses to be tracked, even though real identities are not directly revealed.
CBP Bitcoin Basics and Cryptography 1
What is the primary function of Bitcoin's blockchain?