Read the summary and the most important questions on Blocky

• 1 True or False

  This is a preview. There are 20 more flashcards available for chapter 1
  Show more cards here

• In Bitcoin, your private key allows you to verify whether a transaction has been signed with the correct public key. (3 PTS)

  • False
    
  • The public key allows you to verify whether a transaction has been signed with the correct private key, or verify the send to address
  • The private key allows you to create a signature

• The largest share of the Bitcoin miner’s income is generated via transaction fees. (3 PTS)

  • False
    
  • Currently mining rewards are the predominant source of miner's revenue
  • As the block reward decreases through halving events, transaction fees may become a larger share of miners' income and since miners typically prioritise transactions with higher fees, fees can become a significant part of their earnings during periods of high network activity

• Blocks on the Ethereum blockchain contain fewer transactions than blocks on the Bitcoin blockchain. Therefore, Bitcoin can process more transactions per second. (3 PTS)

  • False
    
  • Ethereum aims for a target block time around 13-15 seconds, while the target block generation time for Bitcoin is approximately 10 minutes
  • This means that Ethereum processes and confirms transactions much faster than Bitcoin, despite the fact that Bitcoin blocks can accommodate more transactions in terms of raw count

• The monetary policy of Ethereum is more flexible than the monetary policy of Bitcoin. (3 PTS)

  • True
    
  • Bitcoin's monetary policy is characterised by a fixed supply cap of 21 million as opposed to Ethereum which doesn't have a fixed supply
  • The flexibility of Ethereums monetary policy lies in tis ability to adapt and adjust issuance based on network upgrades and changes in transaction fees

• The price for Ethereum Gas depends on the demand for transactions on the Ethereum blockchain. (3 PTS)

  • True 
    
  • Gas is used to determine the transaction fees paid by users to miners for including their transactions in a block
  • The price is not fixed but determined by the Ethereum network's users through a bidding process

• Gas denotes the amount of Ether which needs to be paid for a transaction. (3 PTS)

  • True
    
  • Gas is a unit of measurement for computational work and resources used in the Ethereum network
  • When you send a transaction or execute a smart contract on Ethereum, you pay a certain amount of Gas in Ether to compensate miners for their computational efforts and to prevent network abuse

• Fees for transactions to be recorded on the Ethereum blockchain solely depend on the computational effort to record a transaction on the Ethereum blockchain. (3 PTS)

  • False
  • While computational effort is a significant factor in determining transaction fees (= Gas used * Gas price) on the Ethereum blockchain, the interplay of network demand, user preferences and miner decisions can lead to variations in fees
  • Users can choose to pay higher fees for faster transaction processing (tip) or lower fees if they are willing to wait for conformation

• Deploying a smart contract onto the Ethereum Blockchain does not require Gas. (3 PTS)

  • False
    
  • When you create and deploy a smart contract on the Ethereum blockchain, you are essentially initiating a transaction 
  • This transaction requires computational work, including code execution and storing the contract on the blockchain. The gas used for these operations must be paid in Ether

• Easley, O’Hara, and Basu (2019) show that transaction fees increase whenever the (coinbase) reward for mining a block goes down. (3 PTS)

  • False
    
  • Transaction fees are driven by queuing problems, not by reductions in miner rewards
  • Transaction fees are not welfare-improving and they induce some users to drop out of the market

• Bitcoin provides real anonymity to its users. (3 PTs)

  • False
  • Bitcoin provides pseudonimity
  • All transactions of one address can be linked and addresses can be linked to the user