Test Yourself: Are You the Ultimate Bitcoin Expert?

Welcome to The Ultimate Bitcoin Expert Quiz.

Current question count: 51

Questions for this quiz have been provided by members of the Bitcoin community. The questions are presented in an ascending difficulty order.

If you wish to add your own question please fill out the form below or add a comment.

Good luck!

What is Bitcoin?

The first decentralized digital currency

A digital voucher for online shopping created by Bitcoin, inc.

A type of money used only by computers

A music album by artist 50 cent

Correct!

Wrong!

Who invented Bitcoin?

Stephen Hawking

Music artist 50 cent

It is a joint project of the NSA and the FBI

Satoshi Nakamoto, an anonymous person(s)

Correct!

Wrong!

What is novel about Bitcoin?

It is used by the black market

It is both digital and decentralized

It allows computers to participate in the economy for the first time

Nothing, it is just another version of electronic money

Correct!

Wrong!

What is decentralization?

A lack of central control and/or authority

A process of digitization by a network of computers

A type of direct democracy

A system with a small central server

Correct!

Wrong!

Why is Bitcoin considered to be an alternative to modern economics?

It allows for illicit trades such as drugs and money laundering

It does not follow the laws of supply and demand

Placing trust in a decentralized network of computers instead of human beings

It requires users to trust the gold standard again, as in times past

Correct!

Wrong!

What is the Blockchain?

It is the name of the mathematical equation which verifies Bitcoin transactions

It is the name of the software which runs the Bitcoin system

It is the ledger of all Bitcoin transactions, and it is accessible only by miners

It is the ledger of all Bitcoin transactions, and it is openly accessible by anyone

Correct!

Wrong!

What is a Bitcoin wallet?

A software program which helps mining for bitcoins

A software program which helps managing personal bitcoins, including holding your private keys

A website that shows Bitcoin transactions and confirmations

A regular wallet, with extra room for bitcoins

Correct!

Wrong!

What is a Bitcoin exchange?

A company that sells people bitcoins

A service that allows people to exchange their coins with other users, to obscure their digital trail

A service that allows people to buy and sell Bitcoins for other currencies (such as US dollars or Euros), among each other

A service that allows people to try out new wallets without needing to open new ones

Correct!

Wrong!

Who buys and sells on exchanges?

Users of the service buy and sell between themselves, and the exchange determines the price

The exchange buys bitcoins from users but doesn’t sell them

The exchange sells bitcoins to users but doesn’t buy them

Users of the service buy and sell between themselves, and the exchange takes a fee. The price is set by supply and demand.

Correct!

Wrong!

How are bitcoins created?

In a process called “mining”, they are minted as a reward for maintaining and securing the system, according to a predetermined algorithm

They are minted by special computers to the highest bidder, which helps fund the continued development of Bitcoin

They were all created at once and have since been handed out

They are minted by Bitcoin, inc.

Correct!

Wrong!

What is the Bitcoin whitepaper?

The beginning of the Blockchain, named after the “blank page” that Bitcoin offers to money

The regulatory framework for Bitcoin defined by the Department of the Treasury

One of the mathematical principles that underlies the Bitcoin system

It is the outline of Bitcoin’s technical design

Correct!

Wrong!

What is unique about the Blockchain technology?

It allows any user to verify the system by querying the miners for cryptographic proof

It allows for a distributed ledger to be authenticated and verified using math

It is the first time that cryptography has allowed computers to make digital signatures

It is the first time that cryptography has allowed computers to verify digital signatures

Correct!

Wrong!

What are Bitcoin miners responsible for?

Regulating the money supply

Running the full nodes to make sure there is enough connectivity

Securing the Blockchain with computational power

Developing the wallets to make sure people can spend their money

Correct!

Wrong!

What is a hosted wallet?

A service which hosts a wallet for you, such that you don’t hold your own private keys, in return for convenience

A regular Bitcoin wallet typically used by guests of international conferences

A wallet with extra security features

A wallet which does not manage Bitcoins, it only presents your transactions

Correct!

Wrong!

Why are hosted wallets less recommended than regular wallets?

Since the service can steal or disappear with your money

Since someone else is holding your private keys, you must trust them with your money

Since the service must be online in order to use them, otherwise you have no access to your money

All of the above

Correct!

Wrong!

How does an exchange work?

The exchange is a messaging platform which allows users to negotiate all their terms by chat or voice

Buyers and sellers “place an order”. Once the exchange determines the price, they trade for that amount

Buyers and sellers state at what price they are willing to trade, by “placing an order”. Once a buyer and a seller order at the same price, they trade

The exchange requires a deposit of money. Once they receive the money, they trade with the user

Correct!

Wrong!

How is the price (a.k.a. the “exchange rate”) of Bitcoin determined?

It depends on all the other currencies

Trades are always private and therefore the exchange rate is guessed by professionals

The owner of an exchange determines the price

The value of one Bitcoin as determined by the last trade on an exchange is usually considered to be the exchange rate

Correct!

Wrong!

What is trade volume?

The amount of new users on an exchange who have made at least one trade

The amount of new users on an exchange

The number of trades being executed

The amount of Bitcoins being exchanged

Correct!

Wrong!

When was the Bitcoin whitepaper published?

2008

2009

2010

2011

Correct!

Wrong!

Is Bitcoin the first attempt at making a decentralized and trustless form of digital money?

Yes, this field was unexplored by scientists until Bitcoin was invented

No, central banks have been developing the field since the economic crisis of 2007

No, Bitcoin is the second version of Litecoin - the first attempt which was published three years prior

No, this field has been studied and developed by cryptographers and computer scientists since the 90’s

Correct!

Wrong!

When was the first block of the Blockchain mined?

May 22, 2010

February 10, 2011

October 30, 2008

January 3, 2009

Correct!

Wrong!

What is Proof of Work?

The physics term for measurement tools like a microscope or ionoscope

It is a difficult equation that has not been solved yet by mathematicians

It is an arbitrary calculation that can be done on any piece of information, such as a block in the Bitcoin Blockchain or an email

A type of accounting software used by Bitcoin companies

Correct!

Wrong!

Why is Proof of Work important in Bitcoin?

The work put into mining blocks makes it expensive to counterfeit information in the Blockchain

Scientists use this unsolved equation to make information security stronger, and Bitcoin uses it for cryptographic security

Precise accounting in Bitcoin is critical for the proper functioning of the Blockchain

Answers A+C

Correct!

Wrong!

How are miners rewarded by the Bitcoin system?

They are non-profit organizations and do not get rewarded

They get newly minted coins as defined by the predetermined algorithm

They get fees associated with transactions

Answers B+C

Correct!

Wrong!

How are fees used in Bitcoin?

Fees are mandatory, they are added by users to ensure their transactions get priority by miners

Fees are not mandatory, however they are added by wallets to fund development

Fees are not mandatory, however they are usually included by users to ensure their transactions get priority by miners

Fees are mandatory, they are added by wallets to fund development

Correct!

Wrong!

How many coins are rewarded to miners by the system?

Initially 50 coins per block, with a “halving” every 210,000 blocks (~4 years)

Initially 25 coins per block, with a “halving” every 210,000 blocks (~4 years)

Initially 50 coins per block, with a “halving” every 105,000 blocks (~2 years)

Initially 25 coins per block, with a “halving” every 105,000 blocks (~2 years)

Correct!

Wrong!

What influence do miners have on the Bitcoin system?

They have no influence whatsoever

They can prioritize, as well as compete for, transactions - and under special circumstances they can also change the transactions themselves

They can prioritize, as well as compete for, transactions - however they cannot make any changes to transactions themselves

They determine how to interpret the Bitcoin protocol

Correct!

Wrong!

What is a Bitcoin block?

A chain of transactions and a link to their cryptographic proof

A collection of Bitcoin addresses which have been hashed by a miner with Proof of Work and have a cryptographic link to a previous block

A chain of transactions and their cryptographic proof

A collection of Bitcoin transactions which have been hashed by a miner with Proof of Work and have a cryptographic link to a previous block

Correct!

Wrong!

What are Bitcoin confirmations?

Each Bitcoin is considered confirmed once the BCG committee (The Bitcoin Confirmation Group) has given the approval and hashed the proof into the Blockchain

Each transaction is considered to have one confirmation for each block which has been validated by miners and includes said transaction in the Blockchain

It is the simple and important confirmation of a full node that it has received the transaction and will propagate it further in the network

A system designed to ensure that miners have accountability by the network

Correct!

Wrong!

What is a full node?

A computer of the network which approves or denies Bitcoin transactions

A computer with special access to network features such as the emergency broadcast system

A computer running software required for opening a Bitcoin wallet

A computer running software needed to independently verify and propagate information in the Bitcoin network

Correct!

Wrong!

What is cold storage?

The storage of the Blockchain on an external hard disk - in order to save space

The storage of the Blockchain on an external hard disk - for security purposes

The storage of private keys offline (disconnected from the internet) for security purposes

The storage of private keys online (connected to the internet) for convenience purposes

Correct!

Wrong!

What is the “difficulty target” in Bitcoin?

An arbitrary value which encompasses how much work is likely to have been invested to create a valid block (using Proof of Work)

An arbitrary value which encompasses how much work is likely to have been invested to create a valid transaction (using Proof of Work)

A challenge that Bitcoin developers have set for themselves - how many full nodes can be connected at once to support as many users as possible

Answers A+B

Correct!

Wrong!

How is the difficulty target determined?

The difficulty target is determined by a random number generator to ensure that miners cannot game the system by getting a head start

The difficulty target is determined every 2016 blocks (roughly two weeks) according to the amount of time it took to create the previous 2016 blocks

The difficulty target is determined by a committee of miners, to ensure that enough computational power is invested into the system

The difficulty target is determined by a committee of elected scientists, to ensure that enough computational power is invested into the system

Correct!

Wrong!

What is an SPV wallet?

A regular wallet with SPV features - the ability to chain multiple Bitcoin transactions without the need for cryptographic signatures

A wallet that uses a more complex verification method to ensure full security and enforcement of the protocol - this is the most secure kind of wallet

A wallet that uses a simpler verification method to remain independent without needing to run a full node - this allows for secure mobile wallets

A wallet which is also called “half-hosted” - the user holds part of his private keys and a service holds the rest

Correct!

Wrong!

What is multisig?

A technology which allows several different keys/wallets to control bitcoins together

A technology which allows several computers to exist as one full node

A protocol rule which defines the delay between freshly minted coins and their spendability

A protocol rule which defines the number of miners needed to verify each transaction

Correct!

Wrong!

How does multisig work?

It does not yet work - it is only a theoretical concept

Several miners must cryptographically sign a “smart contract” which is embedded into the Blockchain for reference

Several computer IP addresses are combined, and all their communications are also relayed between them

Several public keys are combined, and a minimum number of signatures from the corresponding private keys are required to spend any bitcoins sent there

Correct!

Wrong!

What is the “double spend”?

A unique feature of some wallets that allow you to spend Bitcoins “twice” using a special algorithm - this is how “smart contracts” are made

It is a problem with digital assets which can be easily copied and reproduced, making it difficult to verify that a digital asset has not been “spent” twice

Answers A+B

None of the above

Correct!

Wrong!

What is a public-private keypair?

A pair of cryptographic keys which are used in Bitcoin for the mining algorithm

A pair of cryptographic keys which are used in Bitcoin to ascertain ownership

Answers B+D

A pair of cryptographic keys which are used to sign and verify information

Correct!

Wrong!

How are public keys used in Bitcoin?

The public key helps create an address to which Bitcoins may be sent (through hashing).

The public key acts as a hashing nonce to begin the mining process

They are not really used in Bitcoin, only private keys are used

The public key is what verifies the Blockchain, which is also public

Correct!

Wrong!

How are private keys used in Bitcoin?

The private key acts as a hashing nonce to begin the mining process

They are not really used in Bitcoin, only public keys are used

The private key acts as a password with which one may spend Bitcoins

The private key is not used because it is private and known only to Satoshi Nakamoto

Correct!

Wrong!

Which of the following transactions would likely require the least fees?

Fewer dust, more coin days destroyed, lower size in bytes

Fewer dust, fewer coin days destroyed, lower size in bytes

Fewer dust, fewer coin days destroyed, higher size in bytes

More dust, more coin days destroyed, higher size in bytes

Correct!

Wrong!

Technically speaking, the Blockchain technology is ____?

A centralized server to avoid the problems of decentralization such as network propagation and latency

A decentralized bank, which offers financial services to its users

A decentralized timestamping server, used to determine the history of transactions to avoid double spending

Answers A+C

Correct!

Wrong!

How are transactions validated by the network?

Miners include transactions in a block they are mining and embed it with Proof of Work

A transaction is propagated throughout the network and checked by each node before being passed on

All of the above

A transaction is valid if it is signed by the private key which correlates to the public key which “owns” those coins

Correct!

Wrong!

What are inputs of a Bitcoin transaction?

The block number which the transaction is included in

The origin of the spent coins along with the cryptographic proof required for spending

The destination of the spent coins, the address to which they are “inputted”

None of the above

Correct!

Wrong!

What are outputs of a Bitcoin transaction?

The destination of the spent coins (i.e. the cryptographic requirements for spending further), along with a corresponding amount

The block number which the transaction is included in

The origin of the spent coins, the address from which they are “outputted”

None of the above

Correct!

Wrong!

What kind of cryptographic signatures does the Bitcoin protocol use?

RSA

ECDSA

Schnorr

ElGamal

Correct!

Wrong!

What is a hash?

Answers B+D

A function that takes information and returns a value of fixed size

A function that takes a value and extracts hidden information

A function that will give you a “one-way” loss of information, used for verification

Correct!

Wrong!

What is a merkle tree?

A tree of values which are obfuscated against quantum computing

Answers A+C

A tree of hashes which are used to discover full nodes on the network

A tree of values which are labeled with hashes for efficient storage and verification of large data structures

Correct!

Wrong!

How does a mining pool’s hashrate predict mining revenue?

Pool hashrate divided by total hashrate multiplied by block reward

Total hashrate divided by pool hashrate multiplied by block reward

Pool hashrate divided by total hashrate divided by block reward

Total hashrate divided by pool hashrate divided by block reward

Correct!

Wrong!

How does fee-less pool mining affect mining revenue, compared to solo mining?

Increases total revenue, lowers variance

No effect on total revenue, raises variance

No effect on total revenue, lowers variance

Decreases total revenue, lowers variance

Correct!

Wrong!

How would lower block times (<10 minutes) affect the Blockchain?

Lower orphan rate, larger mempool size

No effect on orphan rate, smaller mempool size

Higher orphan rate, smaller mempool size

No effect on orphan rate, larger mempool size

Correct!

Wrong!

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