Blockchain Interview Questions and Answers

Blockchain is a hot technology. It is a one of the leading software platforms for digital assets. Blockchain is a public ledger and decentralized that uses an open, distributed record to keep track of all transactions. It provides a transparent and secure means for tracking the ownership and transfer of assets.

When new various transactions are made, blocks of transactions are added to the sequential Blockchain. Constantly developing as ‘finished’ blocks (the maximum recent transactions) are recorded and delivered to it in chronological order, it permits marketplace participants to preserve tune of virtual foreign money transactions without crucial recordkeeping. Each node (a computer linked to the community) gets a replica of the Blockchain, which is downloaded automatically.

Block chains can save many different styles of information: the details of cryptocurrency transactions, the contents of a land check in, insurance data, health records, modifications of possession, etc. They can also serve as a platform for different applications.

“A Blockchain is a tool for creating digital ledgers and then sharing those ledgers among a group of computers. Your probable maximum acquainted with Blockchain in the context of Bitcoin, and which can serve as a high instance of how the Blockchain may be used.”

“The Blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.”-Don & Alex Tapscott, authors Blockchain Revolution (2016).

After the development of bitcoin, various Blockchain platforms started coming up. Ethereum came right after the evolution of Bitcoins, and is one of the popular public platforms for building Blockchain based applications. Then there is a Hyperledger community for building enterprise-based solutions. Also, Qtum, IOTA, EOS are some of the widely used platforms for building Blockchain.

There are public (open to all users), private (with restricted access), and hybrid (the combination of private and public.

Private Blockchain:

Private Blockchain is a chain of blocks that can be created by a limited circle of persons who have confirmed rights for it. The rights may belong to one or more persons (or one or several organizations). Creation of new blocks in such a system is controlled by one or several nodes.

Public Blockchain:

Public blockchain can be compared with the intranet, in which all the members are verified and use is limited to one organization. It is open for all, and no one controls it.

Hybrid Blockchain:

Hybrid blockchain is a combination of two previous types. It may be implemented and used for a more secure interaction between users, for combating hacker attacks, and for protection from intrusion into privacy and external attacks.

Another Blockchain type:

Consortium Blockchain:

A semi-private blockchain type — the consortium blockchain — is run by a predetermined group, not a single entity. This means that the nodes for the consensus process can be selected in advance. The consortium blockchain guarantees privacy for transactions just as well as the private blockchain. The most suitable use case for this blockchain type is a consortium of financial institutions that sign blocks, validating transactions to operate the nodes.

Blocks are the storage unit of the Blockchain. They are fundamental to the network, and the transactions data is stored within them. They can be seen as books with each page equivalent to a transaction. Blocks are immutable. This means if a data is recorded, it cannot be changed or deleted. Also, blocks are organized linearly in a Blockchain.

A block is mined by a miner which acts as a way to verify the transaction. This means that until a transaction is not mined, it will not be shown on the Blockchain and the transaction will be deemed incomplete.

Cryptography is a set of methods to ensure the confidentiality of information and preservation of its authenticity. It is the science of data encryption. The main task of cryptography is to protect data from changes and unauthorized access during storage and to transfer from a sender to a recipient.

In order for the Blockchain system to work, it must be updated all the time – adding records about new transactions on the network. It is during the process of adding new information to the system that it becomes the most vulnerable to attacks. Thanks to a strict hierarchy in the block of chains, the authenticity of all records and their protection against unauthorized changes are guaranteed.

Using a hash function ensures that the existing transaction chain remains unchanged. A new block refers to the hash of the previous one.

A Cryptocurrency (Crypto Currency) is a digital currency or virtual currency. The crypto-part of its name comes from the fact that it uses cryptography to secure, verify different transactions and to control the creation of new coins. It is designed to work as a medium of exchange. The first decentralized cryptocurrency to be created was Bitcoin(BTS) back in 2009. The technical system on which all cryptocurrencies are based on was created by Satoshi Nakamoto. There are multiple different cryptocurrencies that are widely used. For example: Bitcoin, Litecoin, Ripple, Ethereum, NEM and more.While hundreds of various cryptocurrency specs exist, maximum are derived from considered one of two protocols are Proof of work or Proof of stake.All cryptocurrencies are maintained by using a community of cryptocurrency miners who’re individuals of the majority that have set up their computers or ASIC machines to take part inside the validation and processing of transactions.

Cryptocurrency is not regulated or controlled by means of any financial institution (or bank), authorities or centralized monetary government. Cryptocurrencies use decentralized manage in place of centralized electronic cash and imperative banking structures. The decentralized manage of every cryptocurrency works through a blockchain, that is a public transaction database, functioning as a disbursed ledger.

Bitcoin(BTS) is a digital currency. it’s a new currency system that was created in 2009. You can make transactions by check and money or wiring.  Now, you’ll additionally use Bitcoin (or BTC), wherever you refer the purchaser to your signature, which is a long line of security code encrypted with 16 distinct symbols. The emptor decodes the code along with his smartphone to get a cryptocurrency. Bitcoin is a decentralized peer to peer payment network that’s high-powered by its users with no central authority or middlemen. It can be used to buy or sell completely different things from people and companies that settle for bitcoin as payment, however, it differs in many key ways that from traditional currencies

The Blockchain has four key elements. They are as follows

Shared Ledger: Shared ledger is the logical component of a Blockchain. It is decentralized in nature.

Node Application: A node application is a software/solution that lets a computer connect with the Blockchain. For example, Bitcoin uses a Bitcoin wallet application to identify each node on the network.

Virtual Machine: The virtual machine handles all the tasks that a Blockchain undertakes. It is part of the node application and provides an environment where instructions can run.

Consensus Algorithm: The Consensus algorithm is used to set the Blockchain rules by which every node can come to a conclusion. There is different consensus algorithm used in the Blockchain.

RSA stands for Rivest Shamir Adleman.RSA Algorithm is one of the most popular and secure public-key encryption methods. The algorithm capitalizes on the fact that there is no efficient way to factor very large (100-200 digit) numbers.

Using an encryption key (e,n), the algorithm is as follows:

• Represent the message as an integer between 0 and (n-1). Large messages can be broken up into a number of blocks. Each block would then be represented by an integer in the same range.
• Encrypt the message by raising it to the eth power modulo n. The result is a ciphertext message C.
• To decrypt ciphertext message C, raise it to another power d modulo n
• The encryption key (e,n) is made public. The decryption key (d,n) is kept private by the user.

Cryptographic methods cannot be proven secure. Instead, the only test is to see if someone can figure out how to decipher a message without having direct knowledge of the decryption key. The RSA method’s security rests on the fact that it is extremely difficult to factor very large numbers. If 100 digit numbers are used for p and q, the resulting n will be approximately 200 digits. The fastest known factoring algorithm would take far too long for an attacker to ever break the code. Other methods for determining d without factoring n are equally as difficult.

Any cryptographic technique which can resist a concerted attack is regarded as secure. At this point in time, the RSA algorithm is considered secure.

RSA security relies on the computational difficulty of factoring large integers. As computing power increases and more efficient factoring algorithms are discovered, the ability to factor larger and larger numbers also increases.

Honey Encryption technique was developed by Ari Juels, former chief scientist of the RSA, and Thomas Ristenpart from the University of Wisconsin.  Honey Encryption is best-suited in the situations where the encrypted data is obtained from the passwords. If an attacker tries to carry out brute force attack then using the Honey Encryption security tool makes it complicated for an attacker to know if he has correctly guessed a password or encryption key. Honey encryption addresses the challenge of encrypting messages using keys that are vulnerable to guessing attacks, such as the passwords selected by ordinary users. HE creates a cipher text that, when decrypted with an incorrect key or password, yields a valid-looking but bogus message. So, attackers can’t tell when decryption has been successful. Counter intuitively, HE enables the encryption of a message using a weak password such that even a strong attacker–one with unlimited computing power–can’t decrypt the message with certainty. You can use HE to encrypt the list of passwords in a password manager, credentials used in SSH (Secure Shell), and so on.

It’s a condition when one digital token is spent multiple times because the token generally consists of a digital file that can easily be cloned. It simply leads to inflation and organizations must bear a huge loss. One of the primary aims of Blockchain technology is to eliminate this approach up to the possible extent.

Blockchain prevents double spending by confirming a transaction by multiple parties before the actual transaction is written to the ledger. It’s no exaggeration to say that the entirety of bitcoin’s system of Blockchain, mining, proof of work, difficulty etc, exist to produce this history of transactions that is computationally impractical to modify.

Blind signature is a form of digital signature in which the content of a message is disguised (blinded) before it is signed. The resulting blind signature can be publicly verified against the original, unblinded message in the manner of a regular digital signature. Blind signatures are typically employed in privacy-related protocols where the signer and message author are different parties. Examples include cryptographic election systems and digital cash schemes.

Off Chain Transactions are the movements of value that are placed outside the blockchain. While a simple transaction or an on-chain transaction modifies blockchains apart from depending on the blockchain to determine the validity. The off-chain transactions rely on other methods to validate transactions and even record them.

In Cryptography, a transposition cipher is methods of encryption by which the positions held by units of plaintext (which are commonly characters or groups of characters) are shifted according to a regular system, so that the ciphertext constitutes a permutation of the plaintext.

On-chain transactions are considered valid when the Blockchain is modified to reflect the transaction on the public ledger. This entails the validation and authentication of a transaction by a set number of participants. The various details of the transaction are then recorded on a block and dispersed to the entire Blockchain network, which makes it irreversible. However, they may take longer than off-chain transactions because of all the different steps that have to occur for a transaction to be successfully completed. Added to that is the potentially high cost of a transaction, which can prove off-putting for some members of the community.

An off-chain transaction is the movement of value outside of the block chain. While an on-chain transaction – usually referred to as simply ‘a transaction’ – modifies the Blockchain and depends on the Blockchain to determine its validity an off-chain transaction relies on other methods to record and validate the transaction. Like on-chain transactions all parties must agree to accept the particular method by which the transaction occurs, the question then being, how can those parties be convinced that the movement of value has actually happened, will not be reversed, and can be exchanged in the future for something of value?With an on-chain transaction those questions are answered by the parties faith in the Bitcoin system as a whole. For instance a transaction (after some number of confirmations) can only be reversed if a majority of hashing power agrees to reverse the transaction. The parties to the transaction are trusting that the majority of hashing power in existence is controlled by “honest” parties who will not attempt to reverse the transaction..

A side-chain is a secondary or another Blockchain layer designed to facilitate lower-cost and/or higher-speed transactions between two or more parties. One case in which they’re often deployed is between parties who make many transactions amongst each other. Committing all of those transactions to the public Blockchain would may undesirable for cost or other reasons, so the side-chain’s job in this example would be to aggregate the activity into the least transactional activity necessary to reflect the final state of the side-chain’s ledger.

This is an important part of the blockchain interview questions. Consensus is a mathematical algorithm used to guarantee that all nodes agree about the true and real state of the blockchain network, and to avoid any risk of digital currency double-spending. To provide protection, there are a number of consensus algorithms:

Proof of Work: Users Have To Perform A Hash Algorithm Several Times Or Calculate A Mathematical Puzzle According To A Certain Algorithm To Confirm Electronic Transactions. In The Bitcoin Network, Bitcoins Are Put Into Circulation By Paying Compensation To Miners Who Successfully Created New Blocks.

Proof of Burn: Based On The Principle Of “Burning” Or “Destroying” The Coins Owned By The Miners Who Give Them Mining Rights.

Proof of Stake: The User Must Have Some Amount Of Cryptocurrency If He Or She Wants To Claim The Confirmation Of Additional Blocks In The Middle, And Get Paid For It.

Proof of Possession (Proof Of Hold): The More Money The User Has, The More Rights He Or She Has To Carry Out The Audit.

Proof of Use: The More The User Is Exchanging Currency, The More Rights He Or She Has To Carry Out An Audit.

Proof of Importance: Users Who Have The Highest Confirmation Of Rates In The Cryptocurrency Will Be Rewarded.

Delegated Proof of Stake (DPoS): Consensus Uses A Reputation System Recruited Through Voting To Select A Limited Group Of People Who Are Trusted. Only Such People Have The Right To Record Blocks And Do It In A Random Order. All Owners Of Tokens Can Vote, And Votes Are Weighed By The Number Of Coins That The Voter Owns.

There is no restriction of keeping records in the Blockchain approach. It must be noted that the record keeping is not just limited to these applications only.

The common types of records that can be kept on them are:

• Records of medical transactions
• Identity management
• Transaction processing
• Events related to organizations,
• Management activities
• Documentation

Screctsharing is a well-known fact that security matters a lot in digital transactions. Secret sharing is an approach meant for same. In Blockchain technology it is an approach that divides secret or personal information into different units and sent them to the users on the network. The original information can only be combined when a participant to whom a share of the secret is allocated agree to combine them together with others. There are several security-related benefits it can offer in Blockchain technology.

Blockchain technology is like the internet in that it has a built-in robustness. By storing blocks of information that are identical across its network, the Blockchain cannot:

• Be controlled by any single entity.
• Has no single point of failure.

Bitcoin was invented in 2008. Since that time, the Bitcoin Blockchain has operated without significant disruption. (To date, any of problems associated with Bitcoin have been due to hacking or mismanagement. In other words, these problems come from bad intention and human error, not flaws in the underlying concepts.)

The internet itself has proven to be durable for almost 30 years. It’s a track record that bodes well for Blockchain technology as it continues to be developed

51% Attack refers to a situation where a group of miners who hold more than 50% of the Network Hash Rate could manipulate with the New transactions (Stopping the transactions to proceed or gaining conformations) or able to reverse the transactions that were recently confirmed and kind of doing Double spend. It is Highly unlikely to be able to do that today but it is possible.

The Merkle Tree (hash-tree) is a special data structure that contains summary information about a larger amount of data and is used to verify the integrity of data. Here is what a Merkle

A security policy defines what exactly needs to be secured on a system. It bounds a network user under some core protocols that they all must agree and follow to enhance the overall security. When it comes to information or financial records of an organization, multiple security policies are implemented than just one.

The Blockchain network lives in a state of consensus, one that automatically checks in with itself every ten minutes. A kind of self-auditing ecosystem of a digital value, the network reconciles every transaction that happens in ten-minute intervals. Each group of these transactions is referred to as a “block”. Two important properties result from this:

Transparency data is embedded within the network as a whole, by definition it is public. It cannot be corrupted altering any unit of information on the blockchain would mean using a huge amount of computing power to override the entire network.

Data security always matters. Encryption is basically an approach that helps organizations to keep their data secure. In this technique, the data is encoded or changed up to some extent before it is sent out of a network by the sender. The only receiver can understand how to decode the same. In Blockchain, this approach is useful because it simply adds more to the overall security and authenticity of blocks and help to keep them secure.

Bitcoin interview questions should also include interview questions concerning its functioning.

The process of its formation and functioning is divided into four stages:

• Two participants agree on the terms of a transaction (transfer of money, assets, financial documents, etc.)
• The registry is “scanned” by members of the network. By analyzing its chronology, members of the network make sure that the seller does have the assets that he or she sells.
• If the seller’s data is valid, the transaction is confirmed and added to the last block of the chain.
• The registry is distributed among all network members. Its prevalence ensures its security. To falsify the transaction, it would be necessary to change the logs of all members (nodes) of the network.

Some of the popular consensus algorithms are:

• PBFT (Practical Byzantine Fault Tolerance)
• Proof-of-work
• Proof-of-stake
• Delegated proof-of-stake
• Proof-of-elapsed time

Now, the possible reasons why we need consensus mechanism more than “proof-of-work” are”

Different business needs

Different use cases

Also:

• Cryptography/Strength of Algorithm
• Regulation requirements
• Implementation
• Performance
• Tokenization
• Security
• Privacy

There are lots of threats to information in the present scenario. Due to increase in online transactions over the internet, many hackers have become active and are adopting new approaches to hack information and servers that contain financial information. The major threat is software attack, identity theft, information extortion, as well as sabotage. In addition to this, Trojan horses, worms, and viruses are other trouble creators.

The first and in fact the prime difference is Blockchain is a digital ledger that can be decentralized very easily. The chances of error in this approach are far less than that in an ordinary ledger. An ordinary ledger is what that is prepared with hands or by human efforts while the Blockchain performs all its tasks automatically. You just need to configure it in a proper manner and by following all the guidelines.

Decentralized applications (dApps) are applications that run on a P2P network of computers rather than a single computer. dApps, have existed since the advent of P2P networks. They are a type of software program designed to exist on the Internet in a way that is not controlled by any single entity.Decentralized applications don’t necessarily need to run on top of a blockchain network. BitTorrent, Popcorn Time, BitMessage, Tor, are all traditional dApps that run on a P2P network, but not on a Blockchain (which is a specific kind of P2P network).

As opposed to simple smart contracts, in the classic sense of Bitcoin, that sends money from A to B, dApps have an unlimited number of participants on all sides of the market.(

Assuming that you have implemented P2P communication, mechanisms for creating digital identities (private and public keys), and provided ways for users to sign documents using their private keys, you are ready to start sending information to your peers.

Since we do not have a central authority that will validate how much money you have, the system will have to ask you about it every time, and then check if you lied or not. So, your transaction record might contain the following information:

• I have 100 Topcoins
• I want to send 10 coins to my pharmacist for the medication (you would include your pharmacists public key here)
• I want to give one coin as transaction fee to the system (we will come back to this later)
• I want to keep the remaining 89 coins

The only thing left to do is digitally sign the transaction record with your private key and transmit the transaction record to your peers in the network. At that point, everyone will receive the information that someone (your virtual identity) is sending money to someone else (your pharmacist’s virtual identity).

Your job is done. However, your medication will not be paid for until the whole network agrees that you really did have 100 coins, and therefore could execute this transaction. Only after your transaction is validated will your pharmacist get the funds and send you the medication.

A blind signature is an essential part of cryptography where the information is blinded or encrypted. The information is signed and hence become encrypted. The approach is verified and ensures that privacy protocols are maintained in the network.

You can easily get your bitcoin address from your public key and the network on which this address should be used.

Console.WriteLine(publicKey.GetAddress(Network.Main));

Console.WriteLine(publicKey.GetAddress(Network.TestNet));

Kerberos is a protocol for single sign-on and authenticating users against a central authentication and key distribution server. Kerberos works by giving authenticated users “tickets”, granting them access to various services on the network. When clients then contact servers, the servers can verify the tickets. Kerberos is a primary method for securing and supporting authentication on a LAN, and for establishing shared secrets (thus, it needs to be used with other algorithms for the actual protection of communication). Note that to use Kerberos, both the client and server have to include code to use it, and since not everyone has a Kerberos setup, this has to be optional – complicating the use of Kerberos in some programs. However, Kerberos is widely used.

IPSec stands for Internet Protocol Security. IPSec provides encryption and/or authentication at the IP packet level. However, IPSec is often used in a way that only guarantees authenticity of two communicating hosts, not of the users. As a practical matter, IPSec usually requires low-level support from the operating system (which not all implement) and an additional keyring server that must be configured. Since IPSec can be used as a “tunnel” to secure packets belonging to multiple users and multiple hosts, it is especially useful for building a Virtual Private Network (VPN) and connecting a remote machine. As of this time, it is much less often used to secure communication from individual clients to servers. The new version of the Internet Protocol, IPv6, comes with IPSec “built in,” but IPSec also works with the more common IPv4 protocol. Note that if you use IPSec, don’t use the encryption mode without the authentication, because the authentication also acts as integrity protection.

A symmetric key algorithm is also known as a secret key algorithm, uses the concept of a key and lock to encrypt plaintext and decrypt ciphertext data. The same “key” is used to both encrypt and decrypt the file. They are sub-classified by stream ciphers and block ciphers. A stream cipher is where plaintext digits are combined with a pseudo-random cipher digit stream. Block ciphers take the number of bits and encrypt them as a single unit (known as rounds), padding the plaintext so that it’s a multiple of a block size.

Asymmetric cryptography is also known as public key cryptography and is based on the principle of having a pair of mathematically-related keys for encryption and decryption: a public key and a private key. The public key pair can be shared with anyone, while the private key must be kept secret. Anyone with the public key can encrypt a message but only the holder of a private key can decrypt it. Security depends on the secrecy of the private keys.

• AES
• ARIA
• Twofish
• Blowfish
• Threefish
• RSA
• DES
• Triple DES
• CAST
• Camellia
• CMAC
• GOST 28147
• IDEA
• Mars
• Rabbit
• SEED
• serpent
• Rijndael
• MIStyi
• RC2
• RC5
• RC6
• W7

A quantum computer uses “qubits” that can exist in any superposition rather than bits (0 or 1) in a conventional device. Consequently, certain calculations can be performed simultaneously and far faster than ever before, solving problems that would require unattainable amounts of conventional computing power today. With operations that are thousands of times faster, quantum computers offer new possibilities, for instance, for searching large databases, for chemical or physical simulations, and in material design, etc. However, this operating power may also allow the decoding of currently used encryption algorithms that are practically impossible to decode with technologies available today.

Post-quantum cryptography (sometimes referred to as quantum-proof, quantum-safe or quantum-resistant) refers to cryptographic algorithms (usually public-key algorithms) that are thought to be secure against an attack by a quantum computer.-Wikipedia

In recent years, there has been a substantial amount of research on quantum computers – machines that exploit quantum mechanical phenomena to solve mathematical problems that are difficult or intractable for conventional computers. If large-scale quantum computers are ever built, they will be able to break many of the public-key cryptosystems currently in use. This would seriously compromise the confidentiality and integrity of digital communications on the Internet and elsewhere.  The goal of post-quantum cryptography (also called quantum-resistant cryptography) is to develop cryptographic systems that are secure against both quantum and classical computers, and can interoperate with existing communications protocols and networks.

It is basically a process of finding the threats and all the vulnerabilities to the financial records of an organization. The best thing that can be done against this approach is to take the right counter measures against them immediately. Another approach is to pay attention to a back-up plan. Based on the value of information, more approaches such as buying new risk management software can simply be considered. The prime risk to information is from black-hat hackers.

Hashing means taking an input string of any length and giving out an output of a fixed length. In the context of cryptocurrencies like Bitcoin, the transactions are taken as an input and run through a hashing algorithm (Bitcoin uses SHA-256) which gives an output of a fixed length.

It means that the distribution from which the value is chosen is hugely distributed so much so that us choosing a random value has negligible probability. Basically, if you were told to chose a number between 1 and 5, that’s a low min-entropy distribution. However, if you were to choose a number between 1 and a gazillion, that is a high min-entropy distribution.

Hash rate basically means how fast these hashing operations are taking place while mining. A high hash rate means more people and software machines are taking part in the mining process and as a result, the system is running smoothly. If the hash rate is too fast the difficulty level is increased. If the hash rate becomes too slow then the difficulty level is decreased.

Secure Hash Algorithms, also known as SHA, are a family of cryptographic functions designed to keep data secured. It works by transforming the data using a hash function: an algorithm that consists of bitwise operations, modular additions, and compression functions. The hash function then produces a fixed-size string that looks nothing like the original. These algorithms are designed to be one-way functions, meaning that once they’re transformed into their respective hash values, it’s virtually impossible to transform them back into the original data. A few algorithms of interest are SHA-1, SHA-2, and SHA-3, each of which was successively designed with increasingly stronger encryption in response to hacker attacks. SHA-0, for instance, is now obsolete due to the widely exposed vulnerabilities.

 Two kinds of records normally hold by Blockchain without loss of information. One is block records and another one is transactional records. Both those records are very much popular and maintaining a well or good relationship between each other. Both are very much well accessible without any big implementation. And also the best thing is if people need to integrate with between each other means block data and transactional data then that part also be very much easy without written any big algorithm.

There are many differences between distributed database and traditional database, they are,Operations in Distributed Database (Blockchain) and Traditional Database

Blockchain Distributed Database:

• In Blockchain, we can store data but there is no chance for edit and delete.
• There is a full replication of block on every peer of the Blockchain
• In Blockchain, most of the peers agree on the outcome of transactions.

Traditional Database:

• In the traditional database, we can perform CRUD operations.
• Replication in Blockchain Vs Traditional Database
• Here we can have master-slave multi-master.
• Here in the traditional database, distributed transactions can happen.

Blockchain has a lot of features. The main features are as below.

• Security: Blockchain provides unparalleled security
• Immutability: Data once are written cannot be changed or altered.
• Fast: Blockchain offers quick transactions
• Decentralized: Any centralized authority or entity do not control it
• Fault tolerant: Blockchain networks are fault tolerant.
• Low transaction fees: No need for the third party makes it cheaper and more effective
• Minting: Provides coin minting by various methods.