100,000 Questions and Answers about Cryptocurrencies 87

What is a blockchain oracle?

A blockchain oracle is a service that provides real-world data to smart contracts on a blockchain. Smart contracts often need access to external data, such as stock prices or weather information, which is not natively available on the blockchain. Oracles serve as a bridge between the blockchain and the outside world, fetching and verifying this data.

How do blockchain oracles work?

Blockchain oracles work by fetching real-world data from trusted sources and then verifying its authenticity and integrity before passing it on to smart contracts. The oracle may use various methods to retrieve data, including web scraping, APIs, or trusted third-party services. Once the data is obtained, the oracle signs it cryptographically to prove its authenticity and then provides it to smart contracts on the blockchain.

What is the Lightning Network?

The Lightning Network is a second-layer scaling solution for Bitcoin that enables faster and cheaper transactions. It consists of a network of payment channels between participants, allowing for off-chain transactions that are settled on the Bitcoin blockchain only periodically.

How does the Lightning Network work?

The Lightning Network works by allowing participants to open payment channels with each other. These channels are funded with Bitcoin, enabling participants to make off-chain transactions using the funds in the channel. Transactions are recorded locally between the participants and only settled on the Bitcoin blockchain when the channel is closed. This off-chain approach significantly reduces transaction fees and latency compared to on-chain transactions.

What is a sidechain?

A sidechain is a separate blockchain that is pegged to the main blockchain, allowing for the transfer of assets between the two chains. Sidechains enable experimentation with new features and technologies while maintaining the security and stability of the main chain.

How do sidechains work?

Sidechains work by allowing users to lock assets on the main chain into a smart contract. In exchange, an equivalent amount of assets is issued on the sidechain. Users can then transact with these assets on the sidechain, taking advantage of its unique features and capabilities. When users want to move the assets back to the main chain, they can unlock them on the sidechain and have them released from the smart contract on the main chain.

What is sharding in blockchain?

Sharding is a technique used in blockchain technology to improve scalability by dividing the network into smaller, independent partitions called shards. Each shard operates independently and processes transactions in parallel, significantly increasing the overall throughput of the network.

How does sharding work?

Sharding works by splitting the blockchain ledger and network into multiple shards. Each shard maintains its own ledger and processes transactions independently. Transactions are routed to the appropriate shard based on certain criteria, such as the sender or receiver's address. The shards operate in parallel, enabling the network to handle a higher volume of transactions simultaneously.

What is gas in Ethereum?

Gas in Ethereum refers to the fee required to perform operations on the Ethereum blockchain. It is a unit of measurement that represents the computational effort required to execute a transaction or smart contract.

How does gas work in Ethereum?

Gas works in Ethereum by requiring senders of transactions to specify a gas limit and a gas price. The gas limit represents the maximum amount of gas that the sender is willing to pay for the transaction, while the gas price is the amount of Ether (ETH) per unit of gas. The total gas fee for the transaction is calculated by multiplying the gas limit by the gas price. Miners include transactions in blocks based on the gas fee offered, with higher fees resulting in faster inclusion. The gas used by the transaction is deducted from the sender's account, rewarding miners for their computational effort.

What is the ERC-20 token standard?

ERC-20 is a technical standard used for smart contracts on the Ethereum blockchain for implementing tokens with certain common functionalities. ERC-20 tokens are fungible and can be transferred and traded like any other asset on Ethereum.

What are the key features of ERC-20 tokens?

The key features of ERC-20 tokens include the ability to transfer tokens between addresses, approve other addresses to spend tokens on behalf of the token holder, and access basic information about the token such as its name, symbol, and total supply. These features enable ERC-20 tokens to be used in a wide range of decentralized applications and services on the Ethereum network.

What is the difference between public and private blockchains?

Public blockchains are open and accessible to anyone, allowing anyone to participate in the network and view the ledger. Private blockchains, on the other hand, are restricted to a specific group of participants and may have limited access to the ledger.

Which use cases are suitable for private blockchains?

Private blockchains are suitable for use cases where a trusted group of participants needs to securely share data and transactions without making them publicly available. Examples include supply chain management, enterprise collaboration, and regulated industries where data privacy and compliance are critical.

What is a hybrid blockchain?

A hybrid blockchain combines features of both public and private blockchains. It allows for open participation and access to certain parts of the network while restricting access to other parts. Hybrid blockchains aim to balance the benefits of decentralization and scalability with the need for privacy and control.

How are hybrid blockchains used?

Hybrid blockchains are used in scenarios where there is a need for both public and private aspects within a single blockchain solution. For example, a supply chain management system may use a hybrid blockchain to allow open tracking of products from source to destination while maintaining private information about specific participants or transactions.

What is blockchain interoperability?

Blockchain interoperability refers to the ability of different blockchain networks to communicate and interact with each other. It enables the transfer of value and data across multiple blockchains, opening up new possibilities for cross-chain applications and services.

How is blockchain interoperability achieved?

Blockchain interoperability can be achieved through various techniques such as cross-chain bridges, sidechains, and atomic swaps. These solutions allow for the transfer of assets and data between different blockchains while maintaining the security and integrity of each network.

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 indeed true.

How do zero-knowledge proofs work in blockchain?

Zero-knowledge proofs are used in blockchain technology to enable privacy-preserving transactions and computations. They allow users to prove that they possess certain information or satisfy certain conditions without revealing the underlying data or details. This enables secure and anonymous transactions while maintaining the integrity and verifiability of the blockchain ledger.