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Blockchain Interview Questions

Blockchain Interview Questions

A list of top frequently asked Blockchain Interview Questions and answers are given below.

1) What is Blockchain?

A Blockchain is a constantly growing ledger(file) that keeps a permanent record of all the transactions that have taken place, in a secure, chronological, and immutable way. It can be used for the secure transfer of money, property, contracts, etc. without requiring a third-party intermediary like bank or government.

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2) What is the difference between Bitcoin blockchain and Ethereum blockchain?

Points Bitcoin Blockchain Ethereum Blockchain
Founder Satoshi Nakamoto Vitalik Buterin
Release Date 9 Jan 2008 30 July 2015
Release Method Genesis Block Mined Presale
Usage Digital Currency Smart Contracts
Cryptocurrency Used Bitcoin Ether
Algorithm SHA-256 Ethash
Blocks Time 10 minutes 12-14 seconds
Scalable Not yet Yes

3) What are the different types of Blockchains?

Blockchain Interview Questions

There are mainly three types of Blockchains introduced to the world.

1. Public Blockchain

A Public blockchain is a kind of blockchain which is "for the people, by the people, and of the people." There is no one is in-charge, and anyone can read, write, and audit the blockchain. It is open source, therefore anyone can review anything on a public blockchain. They are considered to be "Permissionless blockchain."

2. Private Blockchain

A Private blockchain is a private property of an individual or an organization. It is controlled by a single organization that determines who can read it, submit the transaction to it, and who can participate in the consensus process. They are considered to be "permissioned blockchain."

3. Consortium Blockchain or Federated Blockchain

In this blockchain, the consensus process is controlled by a pre-selected group, i.e., group of companies or representative individuals. These pre-selected group is coming together and making decisions for the best benefit of the whole network. Such groups are also called consortiums or a federation that's why the name consortium or federated blockchain.

4) Where is a blockchain stored?

The blockchain can be either stored as a flat file or as a database.

5) What are the types of records that are present in the blockchain database?

There are two types of records in a blockchain database.

  1. Transactional Records
  2. Block Records

Both the records can easily be accessed and can integrate with each other without following any complex algorithm.

6) List the key features of blockchain?

There key properties of a blockchain are:

  1. Decentralized Systems
  2. Distributed ledger
  3. Safer & Secure Ecosystem
  4. Fast
  5. Low Transaction Fees
  6. Fault-Tolerant
  7. Minting

7) How does Blockchain differ from relational databases?

Points Blockchain Relational Database
Unit of data Block Table
Failure None Can happen
Centralized Control No Yes
Modification in data Not Possible Possible
Single Point of Failure Does not exist Exists

8) Name some popular platforms for developing blockchain applications.

Some of the popular platforms for developing blockchain is given below:

  1. Ethereum
  2. Hyperledger Sawtooth
  3. Quorum
  4. Ripple
  5. R3 Corda
  6. Qtum
  7. IOTA
  8. EOS

9) What do you mean by blocks in the blockchain technology?

A Blockchain consists of a list of records(some or all of the recent transaction). Such records are stored in blocks. Each time a block gets completed, a new block is generated. The block linked with other blocks constitutes a chain of blocks called Blockchain. Each block when goes into the Blockchain will be stored as a permanent database. It cannot be deleted from the blockchain.

Blockchain Interview Questions

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10) Every block of Blockchain consist of what elements?

Every block must include these three things:

  1. A hash pointer to the previous block
  2. Timestamp
  3. List of transactions

11) How does a block is recognized in the Blockchain approach?

Every block in the blockchain consists of a hash value that acts as a link to the block which is prior to it, transaction data and in fact a stamp of time.

Blockchain Interview Questions

12) How can blocks be identified?

Blocks can be identified by their block height and block header hash.

13) Can you modify the data in a block?

No, it's not possible to modify the data in a block. In case any modification is required, you would have to erase the information from all other associated blocks too.

14) Can you remove a complete block from a network?

Yes, it is possible to remove a complete block from a network. There are times when only a specific portion of this online ledger is to be considered. There are default options and filters that can help us do this without making a lot of efforts.

15) What type of records can be kept in the Blockchain? Is there any restriction on the same?

No, it is not possible to give restriction for keeping records in the Blockchain approach. We can put any type of data on a blockchain such as Bank records, health records, images, Facebook messages, etc.

Some common types of records that can be kept in the blockchain are:

  1. Records of medical transactions
  2. Transaction processing
  3. Identity management
  4. Events related to organizations,
  5. Management activities
  6. Documentation

16) Which cryptographic algorithm is used in Blockchain?

Blockchain uses SHA-256 Hashing algorithm. SHA-256 Hashing algorithm was developed by the National Security Agency (NSA) in the USA.

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17) In what order are the blocks linked in the blockchain?

In the blockchain, each and every block are always linked in a backward order, i.e., each block gets linked to its previous block.

18) What are the benefits of Blockchain that you know?

The important benefits for Blockchain are given below:

Blockchain Interview Questions

Settlement in real time: In the financial industry, blockchain can allowing the quicker settlement of trades. It does not take a lengthy process for verification, settlement, and clearance because a single version of agreed-upon data is available between all stack holders.

Cost saving: Blockchain allows peer-to-peer transactions to be completed without the need for a third party such as a bank which reduced overhead costs for exchanging assets.

Security and Resilience: Blockchain uses very advanced cryptography to make sure that the information is locked inside the blockchain that protects against hacking attacks and fraud. It uses Distributed Ledger Technology where each party holds a copy of the original chain, so the system remains operative, even the large number of other nodes fall.

Immutability: Blockchain register transactions in a chronological order which certifies the unalterability of all operations. It means when any new block has been added to the chain of ledgers, it cannot be removed or modified.

User Pseudonymity: Pseudonymity is the state in which a user has a consistent identifier that is not their real name. The real identities are only available to administrators. It allows users to communicate with others in a generally anonymous way. It helps to maintain user privacy and enables free transactions without any security worries. In Blockchain, your pseudonym is the address to which you receive Bitcoin. Every transaction which involves that address is stored forever in the blockchain. If your address is linked to your identity, every transaction will be linked to you. It was recommended that Bitcoin users every time use a new address for each transaction to avoid the transactions being linked to a common owner.

19) What are the Merkle trees? How important are Merkle trees in Blockchains?

Merkle tree is a fundamental part of blockchain technology. Merkle trees are a mathematical data structure trees in which every leaf node is labeled with the hash of a data block, and the non-leaf node is labeled with the cryptographic hash of the labels of its child nodes. The leaf nodes are the lowest nodes in the tree. Merkle trees serve as a summary of all the transactions in a block. It is also known as Hash Tree.

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The Merkle tree in blockchain plays an important role when someone needs to verify the existence of a specific transaction in a block, then there is no need to download the entire block to verify the transaction in a block. He can only download the chain of block headers. Downloading a collection of a branch of this tree which contains this transaction is enough. We check the hashes which are relevant to my transactions. If these hashes check out good, then we know that this particular transaction exists in this block.

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20) What is Double Spending? Is it possible to double spend in a Blockchain system?

Double spending means spending the same money multiple times. In physical currency, the double spending problem can never arise. But in digital cash-like bitcoin, the double spending problem can arise. Hence, in Bitcoin transactions, there is a possibility of being copied and rebroadcasted. This makes it possible that the same bitcoin could be spent twice by its owner. One of the primary aims of Blockchain technology is to eliminate this approach up to the possible extent.

Blockchain prevents the double spending problem by implementing a confirmation mechanism from multiple parties before the actual transaction is written to the ledger.

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21) What is a ledger? Name the common type of ledgers that can be considered by users in Blockchain?

A ledger is a file that is constantly growing. It keeps a permanent record of all the transactions that have taken place between two parties on the blockchain network.

There are three common types of ledger that can be considered by users in the blockchain:

  1. Centralized Network
  2. Decentralized Network
  3. Distributed Network

22) Why is Blockchain a trusted approach?

Blockchain is a trusted approach due to the following reasons:

  1. It is easily compatible with other business applications due to its open-source nature.
  2. It is safe, hacking proof and encrypted.
  3. There is no central authority to control it.
  4. All participants agreed to how a transaction is written into the blockchain.
  5. The transaction is immutable means once the transaction is written it cannot be changed.

23) What is mean by DAO?

The DAO stands for Decentralized Autonomous Organization. It is an organization that is both autonomous and decentralized. It is represented by rules encoded as a computer program that is transparent, controlled by shareholders, and not influenced by the central government.

A DAO can be seen as the most complex form of a smart contract. A smart contract is a computer program that autonomously exists on the Internet, but at the same time, it needs people to perform a task that it can't do by itself.

A DAO's financial transaction record and program rules are maintained on a blockchain. Since DAO runs on a blockchain, and it's running on a distributed network, you can have multiple combinations of different parties exchanging value and reaching agreements. It means that, to a Decentralized Autonomous Organization, it doesn't matter if you are a human being or you're a robot. You can actually have devices communicating with devices, or devices communicating with people, or people communicating with people. To a Decentralized Autonomous Organization, it makes no difference because as long as it's programmed into the collection of smart contracts, the whole thing can run automatically and immutable.

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24) What do you mean by Coinbase transaction?

A coinbase transaction is the first transaction in a block. It is a unique type of bitcoin transaction that can be created by a miner. The miners use it to collect the block reward for their work and any other transaction fees collected by the miner are also sent in this transaction.

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25) What is the difference between blockchain and Database?

The important differences between the blockchain and database are:

SN Blockchain Database
1. Blockchain is Decentralized. Here, no one is an administrator means everyone is an in-charge. Database is centralized. It has administrators who control all the data.
2. Everyone has rights to read and write. Only authorized people can read and write.
3. Peer-to-peer architecture. Client-server architecture.
4. Here, only Append operation is allowed. CRUD(Create, Read, Update, Delete) mechanism is possible.
5. Historical data of digital records. No records of ownership.
6. Blockchains are fully confidential. Databases are not fully confidential.
7. Blockchain is slow because it depends on the hash rate. Database is fast because less people administer it.
8. Blockchain is permissionless. Database is permissioned.

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26) What is Cryptocurrency?

Cryptocurrency is a digital asset(currencies) which can be used to exchange value between parties. It uses strong cryptography to secure and verify the financial transactions as well as control the creation of new units of that currency. As we know, it is a digital currency, so it doesn't exist physically. Some popular cryptocurrencies are: Bitcoin, Litecoin, Z-Cash, Monero, Dash, etc.

Unlike the government currencies such as Dollar, Ruppies, Yen or the Yuan, all of these currencies are printed by a government. So, there is a centralized institution exists which create these currencies. But with a cryptocurrency like bitcoin, they are created by the same mathematical formulas that make the cryptocurrency work. Due to this, cryptocurrencies used decentralized control which works through distributed ledger technology that serves as a public financial transaction database.

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27) What are the limitations of blockchain?

The major limitations of Blockchain are:

Lack of Technical Talent

Today, there are a lot of developers can do a lot of different things, but in the blockchain, there are not many developers that have specialized expertise in blockchain technology. Hence, the lack of developers is a hindrance to developing anything on the blockchain.

Network Size

Blockchains require a large network of users. Therefore it is not much resistant to the wrong action as well as it responds to attacks and grows stronger. The blockchain is a robust network with a widely distributed grid of nodes, which makes it more difficult to reap the full benefit.

Security Flaw

Bitcoin and other blockchains are associated with one considerable security flaw known as a "51% attack." This security flaw refers to a situation when a group of "miners" takes control of more than half of the blockchain network's computing power. If the miners somehow acquire sufficient computational power, then there is no centralized authority to prevent them from influencing the entire Bitcoin network. It means the "attackers" can prevent new transactions from being verified, they can also be able to reverse the transactions that were finalized during that same period of time. Due to this, they could spend coins twice.

For this reason, Bitcoin mining pools are closely monitored by the community who ensure that no one gains such network influence.

Speed and cost of transactions

The first few years of the existence of blockchain, transactions cost are "nearly free." But as the network grows, it will NOT be the most cost-effective option of transferring money due to rising transaction costs in the network. From the end of 2016, it processes only seven transactions per second, and each transaction costs around 0.20$.

Consensus Mechanism

In the blockchain, we know that a block can be created in every 10 minutes. It is because every transaction made must ensure that every block in the blockchain network must reach a common consensus. Depending on the network size and the number of blocks or nodes involved in a blockchain, the back-and-forth communications involved to attain a consensus can consume a considerable amount of time and resources.

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28) What is a 51% attack?

The 51% attack on a blockchain network refers to a miner or a group of miners who are trying to control more than 50% of a network's mining power, computing power or hash rate. In this attack, the attacker can block new transactions from taking place or being confirmed. They are also able to reverse transactions that have already confirmed while they were in control of the network, leading to a double-spending problem.

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29) What is encryption? What is its role in Blockchain?

We know that the security of data is always matters. Encryption is a process of converting information or data into a code to prevent from unauthorized access. It helps organizations to keep their data secure(i.e., prevent from unauthorized access). In this technique, the data is encoded or changed into an unreadable format 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 technology, this approach is very useful because it makes the overall security and authenticity of blocks and help to keep them secure.

30) What is the difference between Proof-of-work and Proof-of-stake?

The main differences between the Proof of Work and Proof of Stake are given below.

Proof of Work

Proof of Work(PoW) algorithm is used to confirm the transaction and creates a new block to the chain. In this algorithm, minors compete against each other to complete the transaction on the network. The process of competing against each other is called mining. It defines an expensive computer calculation. In this, a reward is given to the first minor who solves each blocks problem.

Proof of Stake

In the case of PoS algorithm, a set of nodes decide to stake their own cryptocurrencies for the transaction validation. They are called 'stakers.' In proof of stake, the creator of a new block is chosen in a deterministic way, depending on its wealth, also defined as stake. There is no block reward is given, so miners take the transaction fees only. Proof-of-Stake can be several thousand times more cost-effective as compared to proof of work.

31) How does the security of a block works?

A blockchain is a chain of blocks that contain records of transactions. It is the most secure part of a blockchain. The record of a blockchain is protected through a cryptographic hash algorithm. Each block is connected with all other blocks before and after it through a distinctive hash pointer which adds more security to the block. If the value within a block is modified, the hash value will also change. This is a security identifier and provides a reasonable level of security to the whole blockchain.

Ambitious hackers also need to know the hash key of the previous block to make changes to the block information. For those ambitious hackers, blockchains are decentralized and distributed across peer-to-peer networks that are continuously updated and keep syncing. Since these records are not contained in a central location, so blockchains don't have a single point of failure and cannot be changed from a single computer.

32) What is the difference between public and private key?

A private key is used to encrypt or lock a message or a transaction that is sent on the blockchain network. The sender can send a message using the public key of the receiver. On the other hand, the receiver can decrypt the message or the transaction using his private key. By using the private and public key, the communication or transaction is kept safe and tamper-proof.