But how does bitcoin actually work? Cryptocurrency - Part 1 of 2

What is a key characteristic of Bitcoin that differentiates it from traditional currencies?

• It operates without a central authority.

• It requires physical storage.

• It is backed by gold reserves.

• It is issued by a central bank.

How do digital signatures ensure the authenticity of transactions?

• By encrypting the entire transaction.

• By requiring a password for each transaction.

• By using a physical stamp.

• By providing a unique signature for each transaction.

What is the role of a public key in digital signatures?

• To store the transaction history.

• To verify the signature.

• To encrypt the message.

• To generate the private key.

What is a cryptographic hash function used for in the context of cryptocurrencies?

• To generate random numbers.

• To encrypt user passwords.

• To ensure data integrity and security.

• To compress transaction data.

What does 'proof of work' demonstrate in a blockchain?

• The amount of currency in a transaction.

• The speed of the network.

• The identity of the transaction sender.

• The computational effort put into validating a block.

What is the primary purpose of mining in a blockchain network?

• To create new cryptocurrencies.

• To encrypt all network communications.

• To verify and add transactions to the blockchain.

• To store user data securely.

How are miners rewarded for their work in maintaining the blockchain?

• By charging users directly.

• By receiving a fixed salary.

• With block rewards and transaction fees.

• Through transaction fees only.

What is a potential issue with Bitcoin's transaction processing speed?

• It can handle unlimited transactions per second.

• It does not support international transactions.

• It is slower compared to some traditional payment systems.

• It is faster than traditional banking systems.

Why might a user include a transaction fee in a Bitcoin transaction?

• To decrease the transaction time.

• To incentivize miners to process their transaction.

• To increase the transaction amount.

• To ensure the transaction is private.

What happens to the block reward in Bitcoin over time?

• It increases exponentially.

• It remains constant.

• It decreases geometrically.

• It is eliminated after a certain period.