100,000 Questions and Answers about Cryptocurrencies 37

What is the ERC-20 token standard?

The ERC-20 token standard is a set of rules and guidelines for creating fungible tokens on the Ethereum blockchain. It defines common functions and interfaces for tokens, enabling compatibility and interoperability with various Ethereum wallets, exchanges, and decentralized applications.

Why is the ERC-20 standard important?

The ERC-20 standard is important because it provides a common framework for token creation on Ethereum. This allows developers to easily create and deploy new tokens that are compatible with existing Ethereum infrastructure, reducing development time and cost.

What is the difference between a blockchain and a distributed ledger?

While blockchain and distributed ledger technology are often used interchangeably, there is a subtle difference. A blockchain is a specific type of distributed ledger that uses cryptography to secure and validate transactions in a chain-like structure. Distributed ledgers, on the other hand, can have various structures and consensus mechanisms beyond blockchains.

What is the 51% attack in blockchain?

A 51% attack refers to a scenario where a single entity or group controls more than half of the mining or validation power on a blockchain. This allows them to rewrite the blockchain's history, double-spend coins, or perform other malicious activities. However, most major blockchains have sufficient decentralization to make such attacks highly improbable.

How can a blockchain network prevent a 51% attack?

Blockchain networks can prevent 51% attacks by maintaining a high level of decentralization and ensuring that mining or validation power is distributed among many different entities. Additionally, networks can implement mechanisms like checkpointing or finality gadgets to provide stronger guarantees against such attacks.

What is a block explorer?

A block explorer is a tool that allows users to view and search the contents of a blockchain. It provides information about blocks, transactions, addresses, and other relevant data on the network. Block explorers are useful for tracking the movement of funds, verifying transactions, and analyzing network activity.

What is the difference between on-chain and off-chain scaling solutions?

On-chain scaling solutions aim to improve the performance and throughput of the blockchain itself, such as by increasing block size or implementing sharding. Off-chain scaling solutions, on the other hand, move some transactions and computations off the main blockchain to secondary layers or sidechains, reducing congestion on the main chain.

What is the concept of immutability in blockchain?

Immutability refers to the inability to change or alter data once it has been recorded on a blockchain. Once a block is added to the blockchain, it cannot be modified or deleted, ensuring the integrity and authenticity of the data. This immutability makes blockchains suitable for recording and tracking transactions, assets, and other important information.

What is the double-spending problem in cryptocurrencies?

The double-spending problem refers to the risk that a digital currency can be spent more than once, unlike physical currency. In a decentralized system without a central authority, there is no way to prevent double-spending without a secure ledger like a blockchain. Blockchains solve this problem by maintaining a tamper-proof record of all transactions.

How does a blockchain prevent double-spending?

A blockchain prevents double-spending by maintaining a distributed ledger of all transactions. Each block in the chain contains a timestamp, transaction data, and a cryptographic hash of the previous block. This chain of blocks creates a tamper-proof history of transactions, ensuring that each coin can only be spent once.

What is the difference between public and private blockchains?

Public blockchains are open and accessible to anyone, allowing anyone to participate in mining, validating transactions, and viewing the ledger. They are decentralized and permissionless. Private blockchains, on the other hand, are permissioned networks controlled by a single entity or group of entities. They offer increased privacy and control but sacrifice some of the decentralization benefits of public blockchains.

What is a consortium blockchain?

A consortium blockchain is a hybrid between public and private blockchains. It is a permissioned network that allows a select group of entities to participate in maintaining and validating the ledger. Consortium blockchains are often used by groups of organizations to share data and transactions securely.

What is a hash function in blockchain?

A hash function is a cryptographic algorithm that takes an input (such as a block of data) and produces a fixed-size output called a hash. In blockchain, hash functions are used to ensure the integrity of data by generating unique identifiers for blocks and transactions. Any change to the input data will result in a different hash output, making it easy to detect tampering.

What is a Merkle tree in blockchain?

A Merkle tree is a data structure used in blockchain to efficiently summarize and verify the contents of a block. It consists of a series of hashed pairs, where each pair is the hash of two pieces of data or the hashes of two pairs. The final root hash of the tree represents the entire block and can be used to verify the integrity of the block's contents.

What is cryptographic shredding in blockchain?

Cryptographic shredding refers to the process of securely deleting sensitive data from a blockchain by overwriting it with random or meaningless data. While blockchains are immutable, cryptographic shredding allows for the removal of sensitive information while maintaining the integrity of the ledger. However, this process is irreversible and should be used carefully.

What is a zero-knowledge proof in blockchain?

A zero-knowledge proof is a cryptographic technique that allows one party to prove to another party that a statement is true without revealing any additional information beyond the fact that the statement is true. In blockchain, zero-knowledge proofs can be used to enable privacy-preserving transactions and computations while maintaining the integrity and security of the ledger.

What is a zero-knowledge rollup in Ethereum?

A zero-knowledge rollup is a layer-2 scaling solution for Ethereum that utilizes zero-knowledge proofs to bundle and compress transactions off-chain while maintaining their validity and security on-chain. This allows for higher throughput and lower fees while preserving the security guarantees of the Ethereum main chain.

What is the difference between a coin and a token?

Coins, like Bitcoin, are native assets on their own blockchains and have their own independent economies and consensus mechanisms. Tokens, on the other hand, are created on top of existing blockchains like Ethereum and utilize the underlying blockchain's consensus mechanism and infrastructure. Tokens can represent various assets, utilities, or securities.

What is a wrapped token?

A wrapped token is a representation of a token from one blockchain on another blockchain. For example, Wrapped Bitcoin (WBTC) is a token issued on the Ethereum blockchain that represents Bitcoin held in a custody solution. Wrapped tokens enable interoperability between different blockchains, allowing tokens from one chain to be used on another chain.

What is a bridge in cryptocurrency?

A bridge in cryptocurrency refers to a mechanism or protocol that enables the transfer of assets between different blockchains or networks. Bridges can be used to move tokens from one blockchain to another, enabling interoperability and cross-chain functionality. However, bridges also introduce additional security risks, so users should carefully research and evaluate bridges before using them.