100,000 Questions and Answers about Cryptocurrencies 75

：

What is a decentralized application (DApp)?

A decentralized application (DApp) is an application that runs on a blockchain network and utilizes smart contracts. It is not controlled by a central authority and is designed to be censorship-resistant and tamper-proof.

How do DApps differ from traditional apps?

DApps differ from traditional apps primarily in their decentralized nature and reliance on blockchain technology. Traditional apps are typically centralized and controlled by a single entity, while DApps are distributed across a network of computers and governed by smart contracts. This allows DApps to offer greater transparency, security, and censorship resistance compared to traditional apps.

What is a decentralized finance (DeFi) platform?

A decentralized finance (DeFi) platform is a blockchain-based ecosystem that provides financial services without the need for traditional financial institutions. DeFi platforms enable users to lend, borrow, trade, and earn interest on their cryptocurrencies in a decentralized and permissionless manner.

How does DeFi work?

DeFi works by utilizing smart contracts and decentralized applications (DApps) running on blockchain networks. These smart contracts automate the execution of financial transactions and enable users to interact with the DeFi ecosystem in a secure and transparent manner. DeFi platforms often offer lending, borrowing, trading, and yield farming services, among others.

What is non-fungible token (NFT)?

A non-fungible token (NFT) is a unique digital asset that represents ownership of a specific item, such as digital art, music, videos, or even real-world assets. NFTs are stored on a blockchain and are non-interchangeable, meaning each NFT is unique and cannot be replaced with another identical item.

How do NFTs work?

NFTs work by utilizing blockchain technology to create a digital certificate of ownership for a specific item. This certificate is stored on the blockchain and can be verified by anyone with access to the blockchain. The owner of an NFT has exclusive rights to the item represented by the NFT and can transfer ownership by transferring the NFT to another wallet address.

What is gas in Ethereum?

Gas in Ethereum refers to the fee required to perform transactions or execute smart contracts on the Ethereum blockchain. It is paid by the user in Ether (ETH), the native cryptocurrency of the Ethereum network.

How does gas work in Ethereum?

In Ethereum, every transaction or smart contract execution requires a certain amount of computational resources. Gas serves as the unit of measurement for these resources and is paid by the user to compensate the miners or validators for their work in processing the transaction or executing the smart contract. The amount of gas required for a transaction depends on its complexity and the current network congestion.

What is a stablecoin?

A stablecoin is a type of cryptocurrency that aims to maintain a stable value relative to a real-world asset, such as the US dollar or gold. Stablecoins are designed to reduce the volatility inherent in most cryptocurrencies and enable their use as a medium of exchange or store of value.

How do stablecoins maintain their stability?

Stablecoins maintain their stability in various ways, depending on their design. Some stablecoins are backed by a reserve of fiat currency or other assets, while others utilize algorithms to adjust the supply of tokens in response to market conditions. The goal is to keep the price of the stablecoin pegged to its target value, usually 1:1 with the underlying asset.

What is a blockchain oracle?

A blockchain oracle is a service that provides real-world data to smart contracts running on a blockchain network. Oracles enable smart contracts to interact with off-chain data and events, allowing them to perform actions based on information from the outside world.

How do blockchain oracles work?

Blockchain oracles work by retrieving data from external sources, such as APIs, databases, or sensors, and delivering it to smart contracts in a trusted and secure manner. This data can include prices, weather conditions, event outcomes, and other real-world information. Oracles use various techniques to ensure the accuracy and authenticity of the data they provide, such as data aggregation, encryption, and consensus mechanisms.

What is blockchain sharding?

Blockchain sharding is a technique used to improve the scalability of blockchain networks by dividing the network into smaller, more manageable pieces called shards. Each shard operates independently and processes a subset of the overall network's transactions.

How does blockchain sharding work?

Blockchain sharding works by partitioning the network into multiple shards, with each shard maintaining its own ledger and processing a fraction of the overall network's transactions. Transactions are routed to the appropriate shard based on their content or sender/receiver addresses. This allows the network to scale horizontally by adding more shards as the transaction volume increases. Cross-shard communication protocols enable shards to interact and exchange information as needed.

What is cross-chain interoperability?

Cross-chain interoperability refers to the ability of different blockchain networks to communicate and interact with each other, enabling the transfer of value and data across multiple blockchains. This allows blockchains to work together and leverage each other's strengths while maintaining their independence and security.

How does cross-chain interoperability work?

Cross-chain interoperability works by utilizing various techniques and protocols to facilitate communication between different blockchain networks. These include sidechains, bridges, atomic swaps, and cross-chain communication protocols. These solutions enable the transfer of assets, execution of smart contracts, and sharing of data across multiple blockchains, promoting interoperability between different ecosystems.

What is a zero-knowledge proof?

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.

How do zero-knowledge proofs work?

Zero-knowledge proofs work by having the prover generate a cryptographic proof that demonstrates the truth of a statement without revealing any sensitive information. The verifier can validate the proof without knowing the specific details used to generate it. This allows for privacy-preserving verification of statements while minimizing the disclosure of sensitive information.

What is the Lightning Network?

The Lightning Network is a second-layer scaling solution for the Bitcoin blockchain that enables fast, low-fee, and scalable micropayments. It operates as a network of payment channels that allows users to send and receive Bitcoin without having to record every transaction on the main Bitcoin blockchain.

How does the Lightning Network work?

The Lightning Network works by establishing payment channels between users. These channels are funded with Bitcoin and allow users to send and receive payments over the channel without broadcasting each transaction to the main Bitcoin blockchain. When a user wants to send a payment to someone who is not directly connected to them, the payment is routed through a series of channels until it reaches the intended recipient. The Lightning Network utilizes cryptographic techniques to ensure the security and integrity of the payments processed through the network.