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Quizzes > Quizzes for Business > Finance

Take the Cryptocurrency Fundamentals Quiz

Boost Understanding of Blockchain and Crypto Basics

Difficulty: Moderate
Questions: 20
Learning OutcomesStudy Material
Colorful paper art displaying a cryptocurrency fundamentals quiz.

Are you ready to test your crypto fundamentals and explore the world of blockchain technology? This Cryptocurrency Fundamentals Quiz is perfect for students and hobbyists eager to master digital asset concepts. You'll gain clear insights into transaction workflows, consensus mechanisms, and network security while receiving instant feedback. Every question can be freely modified in the intuitive editor to suit learning goals. Dive into the challenge with the Cryptocurrency Basics Quiz , compare with the Cryptocurrency Knowledge Quiz, or browse all quizzes.

What is a blockchain?
A distributed ledger of cryptographic blocks
A centralized database controlled by one entity
A programming language for financial applications
A private network for secure messaging
A blockchain is a distributed ledger composed of cryptographically linked blocks containing transaction data. It ensures tamper resistance by chaining blocks via hashes.
What does decentralization refer to in cryptocurrency?
Distribution of control among network participants
Management by a single central authority
Physical distribution of servers in one location
A layer of encryption applied to transactions
Decentralization means no single party controls the network, enhancing security and resilience. It distributes authority across all participants.
Which was the first cryptocurrency?
Ethereum
Litecoin
Ripple
Bitcoin
Bitcoin, introduced by Satoshi Nakamoto in 2009, was the first successful cryptocurrency. It established the model for decentralized digital money.
What is a crypto wallet?
A digital tool to store private keys and manage addresses
An algorithm that encrypts blockchain data
A bank account for holding fiat currency
Hardware used exclusively for mining
A crypto wallet securely stores private keys and allows users to send and receive digital assets. It does not hold coins but manages access credentials.
What is a node in a blockchain network?
A user's wallet application
Special hardware reserved for miners only
A participant that stores and validates the distributed ledger
A device used only for transaction signing
A node refers to any computer that participates in the blockchain network by storing a copy of the ledger and validating transactions or blocks. Nodes maintain consensus.
Which component of a blockchain holds the complete record of transactions?
Ledger
Smart contract
Block header
Hash function
The ledger is the full record of all transactions in a blockchain. It is updated as new blocks are added by network participants.
Which consensus mechanism uses staking tokens rather than solving cryptographic puzzles?
Proof-of-Authority
Proof-of-Stake
Proof-of-Elapsed-Time
Proof-of-Work
Proof-of-Stake selects validators based on the amount of cryptocurrency they lock up as collateral. This contrasts with Proof-of-Work which relies on computational work.
What is a smart contract?
An encryption algorithm used by miners
A function of a crypto wallet
A legal document outside the blockchain
Self-executing code stored on the blockchain
A smart contract is programmable code that automatically enforces the terms of an agreement on the blockchain. It removes intermediaries by executing when conditions are met.
How does decentralization improve transaction security?
By ensuring regulatory compliance
By reducing single points of failure
By increasing centralized oversight
By decreasing network latency
Decentralization ensures that no single actor can compromise the network because validation is spread across many nodes, which enhances security and resilience.
Which feature is unique to Ethereum compared to Bitcoin?
Smart contract functionality
UTXO transaction model
Fixed maximum supply of coins
Proof-of-Work consensus
Ethereum introduced smart contracts, allowing developers to write decentralized applications on its blockchain. Bitcoin focuses primarily on peer-to-peer value transfer.
What data structure organizes transactions for efficient verification?
Hash table
Binary search tree
Merkle tree
Linked list
Merkle trees allow quick and secure verification of transaction integrity by hashing pairs of nodes up to the root. They are fundamental in block design.
A 51% attack on a blockchain occurs when:
One entity controls over half of the network's hashpower
Private keys of majority nodes are compromised
A single validator stakes more than 51% of the tokens
Exchanges hold most of the circulating supply
If an attacker gains control of over 50% of the mining power, they can reorganize the blockchain, enabling double spends. This undermines the trust model.
How does a cryptocurrency transaction propagate through the network?
By emailing it to miners
By sending it to a central server
By broadcasting to peer nodes in a P2P network
By storing it locally until block creation
Transactions are broadcast peer-to-peer so that each node can verify and forward them. This decentralized propagation ensures quick network-wide awareness.
What is the role of a miner in a Proof-of-Work blockchain?
Stake tokens to validate transactions
Solve cryptographic puzzles to add new blocks
Execute smart contracts on demand
Manage user wallets off-chain
Miners expend computational power to solve hashing puzzles, securing the network and adding blocks. Successful miners earn block rewards and transaction fees.
Which term describes unspent outputs in Bitcoin?
UPTX
UTXO
BTOX
TXOU
UTXO stands for Unspent Transaction Output and represents the amount of bitcoin available to be spent. Each new transaction consumes UTXOs as inputs.
What characteristic of Byzantine Fault Tolerance is leveraged in some blockchain consensus protocols?
No need for majority agreement
Resilience against malicious or faulty nodes
Requirement for a central coordinator
Instant finality without communication
Byzantine Fault Tolerance allows a network to reach consensus even if some nodes act maliciously or fail. This improves reliability in distributed systems.
Which model uses accounts with balances instead of individual transaction outputs?
Proof-of-Stake model
State channel model
Account-based model
UTXO model
The account-based model, used by Ethereum, maintains a global state of account balances. Transactions modify these balances directly.
How do Layer-2 solutions improve transaction workflows on a blockchain?
Eliminate the need for any consensus mechanism
Increase the block size on the main chain directly
Centralize validation to a single node for speed
Process transactions off-chain then settle results on the main chain
Layer-2 solutions like state channels or sidechains handle transactions off the main ledger to increase throughput and reduce fees, then anchor final states on-chain.
How does sharding affect blockchain throughput?
It eliminates the need for consensus among shards
It slows processing due to more validator communication
It increases throughput by parallelizing transaction processing across shards
It reduces security by centralizing data in one shard
Sharding divides the network into partitions that process transactions in parallel, improving scalability. Each shard handles its subset of data and consensus.
What is a trade-off of delegated Proof-of-Stake (dPoS) compared to Proof-of-Work?
dPoS sacrifices some decentralization for greater efficiency
dPoS eliminates the need for any consensus
dPoS consumes more energy than Proof-of-Work
dPoS guarantees complete anonymity of validators
Delegated PoS uses a limited set of elected validators, which speeds consensus but can reduce decentralization. It remains more energy efficient than PoW.
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Learning Outcomes

  1. Analyse blockchain architecture and its components
  2. Evaluate decentralisation effects on transaction security
  3. Identify major cryptocurrencies and their unique features
  4. Demonstrate how consensus mechanisms maintain networks
  5. Apply transaction workflows in a crypto environment
  6. Master essential crypto terminologies and concepts

Cheat Sheet

  1. Core Blockchain Architecture - Dive into the heart of blockchain with blocks, chains, nodes, and consensus mechanisms that keep everything running smoothly. Each block bundles transaction data, a timestamp, and a hash linking it to the previous block, forming an unbreakable chain. Learn more
  2. Decentralization & Security - Explore how decentralization removes the single point of failure, making it almost impossible for hackers to tamper with transactions unnoticed. With multiple nodes validating every move, the network becomes a fortress of trust. Read the research
  3. Major Cryptocurrencies - Get acquainted with Bitcoin and Ethereum, the trailblazers of the crypto world. Bitcoin introduced the first decentralized digital currency, while Ethereum supercharged the space with programmable smart contracts. Discover more
  4. Consensus Mechanisms - Compare Proof of Work (PoW) and Proof of Stake (PoS) to see how transactions reach agreement. PoW tasks miners with solving complex puzzles, while PoS lets coin holders lock up tokens to validate blocks, saving energy. Dive deeper
  5. Transaction Workflow - Follow a transaction's journey from initiation to confirmation and beyond. Each step - tracking, verifying, bundling into a block, and final confirmation - cements it into the unchangeable ledger. Explore the process
  6. Key Crypto Terminology - Master the must-know terms: wallets store your private keys, hashes turn data into fixed”size codes, and mining secures the network. With these basics, you'll speak crypto like a pro. Brush up here
  7. Cryptographic Hashes - Discover why hashes are the ultimate tamper detectors in blockchain. Even a tiny input change transforms the hash completely, making unauthorized edits glaringly obvious. See how it works
  8. Role of Network Nodes - Meet the unsung heroes that keep blockchains humming. Nodes store full copies of the ledger, validate incoming transactions, and broadcast updates - fueling decentralization and resilience. Learn about nodes
  9. Smart Contracts - Unleash programmable agreements that self”execute when conditions are met. By cutting out middlemen, smart contracts automate tasks and slash transaction costs. Find out more
  10. Environmental Impact - Weigh the green credentials of PoW versus PoS setups. PoW's heavy computation consumes lots of energy, while PoS offers a leaner, eco-friendlier approach to securing blockchains. Compare consensus
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