Blockchain & Web3 MCQ

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A blockchain is a decentralized, distributed ledger where data is stored in cryptographically linked blocks, replicated across many participants for transparency and tamper resistance.

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Each block contains the hash of the prior block, forming a chain — if any earlier block changes, its hash changes too, breaking the chain and revealing tampering.

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Decentralization removes the need for a central authority, distributing trust and control across many nodes that independently validate transactions.

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Hash functions like SHA-256 produce a fixed-length digest from any input; even a tiny change in input produces a completely different hash, useful for verifying integrity.

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In Proof of Work, miners expend computational effort to find a valid block hash, securing the network and being rewarded with newly minted coins and fees.

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A crypto wallet manages cryptographic keys; the funds themselves exist on the blockchain, while the wallet provides the keys needed to prove ownership and authorize transactions.

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Public-key cryptography lets users share a public address derived from their public key, while the private key proves ownership and must never be exposed.

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Smart contracts are programs stored on a blockchain that execute automatically and deterministically based on their code and inputs, without intermediaries.

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Ethereum introduced a general-purpose virtual machine (EVM) allowing developers to deploy smart contracts and build decentralized applications on top of the blockchain.

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dApps use smart contracts on a blockchain for core logic and data, often paired with a traditional frontend, reducing reliance on a single centralized backend.

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Tokens are built using standards (like ERC-20 or ERC-721) on existing blockchains, representing things like currencies, voting rights, or unique digital items.

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NFT stands for Non-Fungible Token, a unique digital asset on a blockchain that, unlike fungible tokens (e.g., currency), cannot be exchanged 1:1 with another identical unit.

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Fungible assets are interchangeable — one unit equals another unit of the same value (e.g., one ETH equals any other ETH), unlike unique NFTs.

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Block explorers (like Etherscan for Ethereum) provide a searchable interface into blockchain data, allowing anyone to verify transactions and balances publicly.

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Gas measures the computational cost of operations on Ethereum; users pay gas fees (in ETH) to compensate validators for executing transactions and smart contracts.

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Testnets mimic mainnet behavior using worthless test tokens, letting developers test smart contracts and apps safely before deploying to the real mainnet.

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A seed phrase encodes the master private key data in human-readable words, allowing a wallet to be backed up and restored on any compatible device.

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The private key (or seed phrase that derives it) grants complete control over a wallet's assets — anyone with access can sign transactions and irreversibly drain funds.

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Consensus mechanisms (like Proof of Work or Proof of Stake) ensure all honest nodes agree on which transactions and blocks are valid, without a central authority.

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In PoS, validators lock up tokens as a stake; they are selected to propose/validate blocks proportional to their stake, and can lose their stake for malicious behavior.

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Bitcoin focuses on being "digital gold" / a payment network with a simple scripting language, while Ethereum's Turing-complete EVM enables general-purpose smart contracts.

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Because each block is cryptographically linked to the previous one and replicated across many nodes, altering a past transaction would require redoing all subsequent blocks across the network.

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Nodes maintain the network by storing blockchain data, relaying transactions, and in many networks, validating new blocks according to the consensus rules.

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Exchanges (centralized like Coinbase, or decentralized like Uniswap) facilitate trading between cryptocurrencies and other assets such as fiat currency.

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CEXs act as custodians and intermediaries for trades, while DEXs use smart contracts (often with liquidity pools) letting users trade directly from their own wallets.

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Web3 broadly refers to a decentralized internet paradigm using blockchain, tokens, and smart contracts, contrasted with the centralized platforms of "Web2".

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Stablecoins like USDC or USDT aim to minimize price volatility, typically by being backed by reserves of fiat currency or other collateral, useful for trading and payments.

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A hard fork introduces incompatible changes; nodes that don't upgrade follow the old rules, potentially splitting the network into two separate chains (e.g., Bitcoin/Bitcoin Cash).

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Validators in PoS networks lock up stake as collateral and are selected to propose and attest to new blocks, earning rewards for honest behavior and risking penalties for misbehavior.

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Deploying a smart contract sends a special transaction that stores its bytecode on the blockchain at a new contract address, after which users can call its functions.

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DeFi refers to financial applications (lending, trading, savings) built on blockchains using smart contracts instead of traditional intermediaries like banks.

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Liquidity pools let users deposit token pairs into a smart contract, enabling automated trading (e.g., via AMMs) while providers earn a share of trading fees.

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Minting is the process of "creating" a token on-chain by writing its initial record (often via a smart contract function), establishing its existence and ownership.

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DAOs use smart contracts to encode governance rules, allowing token holders to propose and vote on decisions, theoretically removing the need for centralized leadership.

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On-chain data is recorded in blocks and inherits blockchain guarantees, while off-chain data (e.g., large files) lives elsewhere, often referenced via a hash for verification.

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Block rewards (new coin issuance plus transaction fees) compensate miners/validators for the resources and stake they commit to securing and maintaining the network.

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A confirmed transaction is part of an accepted block; the more subsequent blocks added on top, the more "confirmations" it has, increasing certainty it won't be reversed.

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Cold wallets (e.g., hardware wallets, paper wallets) keep private keys offline, reducing exposure to online hacking compared to "hot wallets" connected to the internet.

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Fees incentivize validators to include transactions and discourage network spam, with fees often fluctuating based on network demand and transaction complexity.

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The genesis block is the foundational, hardcoded first block of a blockchain, with no predecessor, from which the entire chain history extends.

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Without a central authority, digital tokens could theoretically be copied and spent multiple times; consensus mechanisms ensure all nodes agree on one canonical, ordered ledger preventing this.

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The EVM is a deterministic, sandboxed execution environment; every node runs the same bytecode and arrives at the same state, ensuring consensus on contract execution results.

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ERC-20 specifies standard functions (transfer, balanceOf, approve, etc.) that fungible tokens must implement, allowing them to work seamlessly with existing Ethereum infrastructure.

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ERC-721 introduces unique token IDs within a contract, making each token distinguishable — the foundation for NFTs representing art, collectibles, or other unique items.

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With majority control of hashing power (PoW) or stake (PoS), an attacker could potentially reorganize recent blocks or censor transactions, though rewriting deep history remains very costly.

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A Merkle tree hashes pairs of transactions repeatedly up to a single Merkle root, enabling efficient and secure verification of transaction inclusion without downloading the whole block.

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Because smart contracts often manage real funds and are difficult or impossible to modify after deployment, audits aim to catch bugs and vulnerabilities before they can be exploited.

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Reentrancy occurs when a contract makes an external call before updating its own state, allowing the called contract to recursively call back in and exploit the stale state (e.g., the DAO hack).

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Layer 2 solutions (e.g., rollups, sidechains) handle transactions off the main chain to improve throughput and reduce fees, while inheriting security from the underlying Layer 1.

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Optimistic rollups post transaction data and assume correctness, relying on fraud proofs during a dispute period; zk-rollups generate succinct zero-knowledge proofs that validity is correct upfront.

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Bridges enable interoperability between chains, often by locking assets on one chain and minting representative wrapped assets on another, though they introduce additional trust/security considerations.

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Since users pay gas proportional to computational complexity, efficient code (e.g., minimizing storage writes, using appropriate data types) directly reduces transaction costs.

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Smart contracts cannot natively access data outside the blockchain; oracles (like Chainlink) fetch and deliver external data (prices, weather, events) on-chain in a verifiable way.

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AMMs like Uniswap use mathematical formulas (e.g., constant product x*y=k) and liquidity pools to determine prices and execute trades automatically, without matching buyers and sellers directly.

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When pooled asset prices diverge from the deposit ratio, the value of a liquidity provider's withdrawn assets may be less than if they had simply held the assets, hence "impermanent" (realized on withdrawal).

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Multisig wallets (e.g., requiring 2-of-3 signatures) reduce single points of failure, commonly used by organizations or for added personal security against a single compromised key.

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Permissionless networks like Bitcoin and Ethereum allow open participation, contrasted with "permissioned" blockchains (common in enterprise) that restrict who can join or validate.

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Permissioned blockchains (e.g., Hyperledger Fabric) are often used by consortiums of known organizations, trading some decentralization for performance and privacy compared to public permissionless chains.

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Slashing economically disincentivizes harmful behavior (e.g., signing conflicting blocks) by destroying part of a validator's stake, reinforcing network security.

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The Merge (2022) replaced Ethereum's energy-intensive Proof of Work mining with Proof of Stake validation, reducing energy use by over 99% while preserving existing contract state.

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Sidechains operate with their own validators and rules, connected to a main chain via a bridge, allowing experimentation or higher throughput at the cost of relying on the sidechain's own security.

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Since deployed bytecode cannot be changed directly, proxy patterns separate storage (in the proxy) from logic (in an implementation contract), allowing the implementation address to be updated.

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Because pending transactions are visible in the mempool before confirmation, bots can detect profitable opportunities (like large swaps) and front-run them by paying higher fees to be processed first.

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The mempool ("memory pool") holds transactions that have been broadcast but not yet confirmed, from which miners/validators select transactions (often prioritizing higher fees) to include in the next block.

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Governance tokens (e.g., in DAOs) allow holders to vote on proposals, decentralizing decision-making over a protocol's parameters, treasury, or upgrades.

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Yield farmers deposit assets into lending protocols or liquidity pools to earn interest and/or governance tokens, often moving funds between protocols to chase the highest returns, with associated risks.

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Tokenomics covers how a token is created, distributed, used, and incentivized — factors that significantly influence a project's long-term sustainability and value.

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Vesting schedules lock tokens for a period and release them gradually (often with a "cliff"), discouraging early dumping and aligning stakeholders with the project's long-term success.

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Because no single party controls a sufficiently decentralized network, valid transactions are very difficult for any one entity to block, a key value proposition of public blockchains.

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BFT consensus protocols (e.g., Tendermint) tolerate a certain fraction of faulty/malicious nodes (often up to 1/3) while still reaching agreement among the honest majority.

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Wrapped tokens let assets native to one chain (like Bitcoin) be used on another (like Ethereum), with the original asset held in custody/locked, and the wrapped version minted 1:1.

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Persistent on-chain state allows contracts to maintain balances, ownership records, or configuration across transactions, with every node maintaining a consistent copy as part of consensus.

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Interoperability solutions (bridges, cross-chain messaging protocols) allow value and data to move between otherwise isolated blockchain ecosystems.

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Testnet faucets provide developers with free test tokens (which have no real value) so they can pay gas fees and test smart contracts without spending real cryptocurrency.

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Flash loans exploit the atomicity of blockchain transactions: if the borrowed funds (plus fees) aren't returned by the end of the transaction, the entire transaction is reverted as if it never happened.

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Staking-as-a-service lets token holders earn staking rewards without running their own validator node, delegating to a provider who handles uptime and infrastructure for a fee.

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Whitelisting limits sensitive operations to approved addresses, often used in regulated token offerings or to restrict early access during a presale.

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Rug pulls occur when project insiders remove liquidity or sell large token holdings suddenly, crashing the token's value and leaving other holders with losses.

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Because smart contracts are open and standardized (e.g., ERC-20), protocols can interact with each other programmatically, enabling complex strategies built from simpler composable pieces — often called "money legos".

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Each account transaction must use the next sequential nonce; this ordering prevents the same signed transaction from being replayed and ensures transactions are processed in sequence.

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"Succinct Non-interactive ARguments of Knowledge" let a verifier confirm a computation was performed correctly via a small proof, without learning the private inputs — foundational to zk-rollups and privacy applications.

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Because validators/miners control transaction ordering within a block, they (or sophisticated searchers) can extract value via strategies like arbitrage, front-running, and sandwich attacks, raising fairness and design concerns.

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Many blockchain designs make explicit trade-offs: e.g., highly decentralized and secure chains may sacrifice throughput, while high-throughput chains may rely on fewer validators (less decentralization).

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Optimistic rollups assume state transitions are valid by default, but allow anyone to submit a fraud proof during the challenge window; only after this period (commonly ~7 days) is withdrawal to L1 finalized without challenge.

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By separating the "commit" (a hash hiding the actual value) from the later "reveal" step, observers cannot front-run based on the hidden value during the commit phase.

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Probabilistic finality (PoW) means confidence increases with confirmations but never reaches absolute certainty; explicit finality mechanisms periodically "checkpoint" blocks, after which reverting would require validators to lose a large portion of stake (slashing).

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Rollups post compressed transaction data so anyone can recompute and verify state, or so users can exit if operators misbehave; without available data, the security guarantees of the rollup break down.

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ERC-4337 enables "smart accounts" with programmable validation (e.g., multi-factor approval, gasless transactions paid by a third party) using a higher-level infrastructure layer rather than consensus-level changes.

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Optimistic systems rely on the threat of fraud proofs to deter invalid state transitions (assume-valid-unless-challenged), while zk-based systems require a validity proof for every batch upfront, removing the need for a challenge period.

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As state grows, running a full node becomes more resource-intensive, potentially centralizing the network among entities that can afford the hardware — motivating solutions like state expiry or statelessness research.

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ECC achieves comparable security with significantly smaller keys and signatures than RSA, which matters at blockchain scale where every transaction includes a signature stored permanently.

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By dividing state and computation across shards that can be processed in parallel, sharding aims to scale capacity beyond what a single chain can handle, while coordinating cross-shard communication carefully.

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After a fork, if both chains share transaction format and history, a transaction valid on chain A may also be valid on chain B; replay protection (e.g., a unique chain ID in signatures) prevents this cross-chain replay.

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Stateless clients shift the burden of proving state correctness to the transaction sender (via cryptographic proofs like Merkle/Verkle proofs), allowing nodes to verify without holding the full state locally.

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HTLCs combine a hash condition (proving knowledge of a secret) with a time-lock (refund if not claimed in time), enabling trustless atomic swaps between chains without a trusted intermediary.

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EIP-1559 introduced an algorithmically adjusted base fee (burned, based on block fullness) plus a priority tip, smoothing fee estimation and reducing the inefficiency of blind-bid first-price auctions.

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Atomic execution underpins complex DeFi composability — e.g., a flash loan, swap, and repayment can be bundled so that if any step fails, the entire transaction reverts as if nothing happened.

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Token-weighted governance can concentrate power among "whales"; alternatives like quadratic voting (cost increases with vote count) or vote delegation aim to balance influence more broadly across participants.

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If different nodes computed different results for the same transaction (e.g., due to nondeterministic randomness or floating-point rounding differences), the network could not agree on a single canonical state — hence smart contract environments avoid such operations or make them deterministic via on-chain sources.

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Verkle trees combine vector commitments with tree structures to drastically shrink proof sizes compared to Merkle Patricia tries, making it more practical for clients to verify state without storing it all (statelessness).