Question 1(a) [3 marks]

Explain benefits of using distributed ledger systems.

Answer:

Table: Benefits of Distributed Ledger Systems

Benefit	Description
Transparency	All participants can view transaction history
Security	Cryptographic protection against tampering
Decentralization	No single point of failure or control
Immutability	Records cannot be altered once confirmed

Mnemonic: "T-S-D-I" (Transparent, Secure, Decentralized, Immutable)

Question 1(b) [4 marks]

Define: 1) Blockchain 2) Distributed systems

Answer:

Table: Key Definitions

Term	Definition
Blockchain	A chain of blocks containing transaction data, linked using cryptographic hashes
Distributed Systems	Network of independent computers working together as a single system

Key Features:

Blockchain: Uses hash pointers, consensus mechanisms, and merkle trees
Distributed Systems: Fault tolerance, scalability, and resource sharing

Mnemonic: "Chain-Hash-Consensus" for Blockchain, "Network-Independent-Together" for Distributed

Question 1(c) [7 marks]

Illustrate CAP theorem with the help of Blockchain network.

Answer:

Table: CAP Theorem Components

Property	Description	Blockchain Context
Consistency	All nodes see same data	All nodes have identical ledger
Availability	System remains operational	Network stays accessible
Partition Tolerance	Works despite network failures	Continues during node disconnections

Diagram:

graph TD
    A[CAP Theorem] --> B[Consistency]
    A --> C[Availability] 
    A --> D[Partition Tolerance]
    B --> E[Bitcoin prioritizes C+P]
    C --> F[Some systems choose A+P]
    D --> G[Essential for blockchain]

Key Points:

Trade-off: Can only achieve 2 out of 3 properties simultaneously
Blockchain Choice: Most blockchains choose Consistency + Partition Tolerance
Example: Bitcoin may become temporarily unavailable but maintains consistency

Mnemonic: "CAP-2-out-of-3" (Choose Any 2 Properties out of 3)

Question 1(c) OR [7 marks]

List and explain applications of blockchain network.

Answer:

Table: Blockchain Applications

Application	Description	Example
Cryptocurrency	Digital money transactions	Bitcoin, Ethereum
Supply Chain	Track products from origin	Walmart food tracing
Healthcare	Secure patient records	Medical data sharing
Voting	Transparent elections	Estonia e-voting
Real Estate	Property ownership records	Land registries

Key Benefits:

Transparency: All transactions visible to participants
Security: Cryptographic protection against fraud
Efficiency: Reduced intermediaries and costs

Mnemonic: "C-S-H-V-R" (Crypto, Supply, Health, Vote, Real estate)

Question 2(a) [3 marks]

Define and explain a permissionless blockchain in detail.

Answer:

Definition: A blockchain where anyone can participate without requiring permission from a central authority.

Table: Permissionless Blockchain Features

Feature	Description
Open Access	Anyone can join and participate
Public Verification	All transactions are publicly verifiable
Decentralized	No central controlling authority

Key Characteristics:

Consensus: Uses proof-of-work or proof-of-stake
Examples: Bitcoin, Ethereum mainnet

Mnemonic: "Open-Public-Decentralized" (OPD)

Question 2(b) [4 marks]

Draw a figure and provide a brief explanation of a data structure of a blockchain.

Answer:

Diagram: Blockchain Data Structure

+-------------------+    +-------------------+    +-------------------+
|     Block 1       |    |     Block 2       |    |     Block 3       |
|-------------------|    |-------------------|    |-------------------|
| Previous Hash: 0  |--->| Previous Hash: H1 |--->| Previous Hash: H2 |
| Merkle Root: MR1  |    | Merkle Root: MR2  |    | Merkle Root: MR3  |
| Timestamp: T1     |    | Timestamp: T2     |    | Timestamp: T3     |
| Nonce: N1         |    | Nonce: N2         |    | Nonce: N3         |
| Transactions: TX1 |    | Transactions: TX2 |    | Transactions: TX3 |
+-------------------+    +-------------------+    +-------------------+

Key Components:

Previous Hash: Links blocks together creating chain
Merkle Root: Summary of all transactions in block
Timestamp: When block was created
Nonce: Number used once for proof-of-work

Mnemonic: "P-M-T-N" (Previous, Merkle, Time, Nonce)

Question 2(c) [7 marks]

Explain the core components of blockchain with suitable diagrams.

Answer:

Table: Core Components of Blockchain

Component	Function	Purpose
Blocks	Data containers	Store transaction information
Hash Functions	Create digital fingerprints	Ensure data integrity
Merkle Trees	Transaction summaries	Efficient verification
Consensus Mechanism	Agreement protocol	Validate new blocks
Digital Signatures	Identity verification	Authenticate transactions

Diagram: Merkle Tree Structure

graph TD
    A[Root Hash] --> B[Hash AB]
    A --> C[Hash CD]
    B --> D[Hash A]
    B --> E[Hash B]
    C --> F[Hash C]
    C --> G[Hash D]
    D --> H[Transaction A]
    E --> I[Transaction B]
    F --> J[Transaction C]
    G --> K[Transaction D]

Key Points:

Immutability: Hash functions make tampering detectable
Efficiency: Merkle trees allow fast verification
Decentralization: Consensus mechanisms eliminate central authority

Mnemonic: "B-H-M-C-D" (Blocks, Hash, Merkle, Consensus, Digital)

Question 2(a) OR [3 marks]

Define and explain permissioned blockchain in detail.

Answer:

Definition: A blockchain where participation requires explicit permission from a governing authority.

Table: Permissioned Blockchain Features

Feature	Description
Restricted Access	Only authorized users can participate
Private Network	Controlled membership
Centralized Control	Governing body manages permissions

Key Characteristics:

Privacy: Enhanced confidentiality for sensitive data
Performance: Faster transactions due to fewer validators
Examples: Hyperledger Fabric, R3 Corda

Mnemonic: "Restricted-Private-Centralized" (RPC)

Question 2(b) OR [4 marks]

Explain types of wallets in the context of blockchain. Also discuss the factors to be considered while selecting wallet for the specific need.

Answer:

Table: Types of Blockchain Wallets

Wallet Type	Description	Security Level
Hot Wallets	Connected to internet	Medium
Cold Wallets	Offline storage	High
Hardware Wallets	Physical devices	Very High
Paper Wallets	Printed keys	High (if stored safely)

Selection Factors:

Security Requirements: Higher value needs better security
Frequency of Use: Regular use favors hot wallets
Technical Expertise: Simple wallets for beginners

Mnemonic: "H-C-H-P" (Hot, Cold, Hardware, Paper)

Question 2(c) OR [7 marks]

Explain sidechain in detail with suitable diagrams.

Answer:

Definition: A separate blockchain that is attached to a parent blockchain using a two-way peg.

Diagram: Sidechain Architecture

graph LR
    A[Main Chain] <--> B[Two-Way Peg]
    B <--> C[Sidechain]
    A --> D[Bitcoin/Ethereum]
    C --> E[Specialized Functions]
    E --> F[Smart Contracts]
    E --> G[Privacy Features]
    E --> H[Faster Transactions]

Table: Sidechain Benefits

Benefit	Description
Scalability	Reduces load on main chain
Experimentation	Test new features safely
Specialized Functions	Custom applications
Interoperability	Connect different blockchains

Key Mechanisms:

Two-Way Peg: Allows asset transfer between chains
SPV Proofs: Simplified payment verification
Federated Control: Multiple parties manage transfers

Mnemonic: "S-E-S-I" (Scalability, Experimentation, Specialized, Interoperability)

Question 3(a) [3 marks]

With respect to transaction in a blockchain network, define the terms "Confirmation" and "Finality".

Answer:

Table: Transaction States

Term	Definition
Confirmation	Number of blocks built on top of transaction block
Finality	Point where transaction becomes irreversible

Key Points:

Confirmation Count: More confirmations = higher security
Bitcoin Standard: 6 confirmations for high-value transactions
Finality Types: Probabilistic (Bitcoin) vs Absolute (some PoS systems)

Mnemonic: "Count-Blocks-Security" for Confirmation, "Irreversible-Point" for Finality

Question 3(b) [4 marks]

Differentiate Proof of Work and Proof of Stake.

Answer:

Table: PoW vs PoS Comparison

Aspect	Proof of Work (PoW)	Proof of Stake (PoS)
Resource	Computational power	Stake ownership
Energy Use	High	Low
Security	Hash rate dependent	Stake dependent
Rewards	Mining rewards	Staking rewards
Examples	Bitcoin, Ethereum (old)	Ethereum 2.0, Cardano

Key Differences:

Mechanism: PoW uses mining, PoS uses validators
Environmental Impact: PoS is more eco-friendly
Barriers to Entry: PoS requires initial stake, PoW needs hardware

Mnemonic: "Work-vs-Stake" (Computational Work vs Financial Stake)

Question 3(c) [7 marks]

With respect to blockchain network, explain 51% attack.

Answer:

Definition: An attack where a single entity controls more than 50% of the network's mining power or stake.

Diagram: 51% Attack Scenario

graph LR
    A[Network Hash Rate] --> B[Honest Miners 49%]
    A --> C[Attacker 51%]
    C --> D[Can Create Longer Chain]
    D --> E[Double Spending]
    D --> F[Transaction Reversal]
    D --> G[Block Withholding]

Table: Attack Capabilities and Limitations

Can Do	Cannot Do
Double spend own coins	Steal others' coins
Reverse recent transactions	Create coins from nothing
Block specific transactions	Change consensus rules
Fork the blockchain	Access private keys

Prevention Measures:

Diversified Mining: Encourage multiple mining pools
Checkpoint Systems: Periodic finality markers
Economic Incentives: Make attacks unprofitable

Impact:

Network Disruption: Temporary service interruption
Economic Loss: Reduced trust and value
Recovery: Network usually recovers after attack ends

Mnemonic: "Majority-Control-Attack" (51% = Majority Control = Attack Power)

Question 3(a) OR [3 marks]

Define the terms "Hard fork" and "Soft fork"

Answer:

Table: Fork Types

Fork Type	Definition	Compatibility
Hard Fork	Non-backward compatible protocol change	Not compatible
Soft Fork	Backward compatible protocol change	Compatible

Key Characteristics:

Hard Fork: Creates new blockchain branch, requires all nodes to upgrade
Soft Fork: Tightens rules, old nodes can still operate

Examples:

Hard Fork: Bitcoin Cash split from Bitcoin
Soft Fork: SegWit activation in Bitcoin

Mnemonic: "Hard-Breaks-Compatibility" vs "Soft-Keeps-Compatibility"

Question 3(b) OR [4 marks]

List various types of consensus mechanisms and explain any one in detail.

Answer:

Table: Consensus Mechanisms

Mechanism	Description	Energy Use
Proof of Work	Computational puzzle solving	High
Proof of Stake	Stake-based validation	Low
Delegated PoS	Voted representatives validate	Very Low
Proof of Authority	Pre-approved validators	Minimal

Detailed Explanation - Proof of Stake (PoS):

Process:

Validator Selection: Based on stake amount and randomization
Block Creation: Selected validator proposes new block
Validation: Other validators verify and attest to block
Rewards: Validators earn fees and new tokens

Advantages: Lower energy consumption, reduced centralization risk Disadvantages: "Nothing at stake" problem, initial distribution issues

Mnemonic: "Stake-Select-Validate-Reward" (PoS Process)

Question 3(c) OR [7 marks]

With respect to blockchain network, explain sybil attack.

Answer:

Definition: An attack where a single adversary creates multiple fake identities to gain disproportionate influence in the network.

Diagram: Sybil Attack Structure

graph TD
    A[Attacker] --> B[Fake Identity 1]
    A --> C[Fake Identity 2]
    A --> D[Fake Identity 3]
    A --> E[Fake Identity N]
    B --> F[Network Influence]
    C --> F
    D --> F
    E --> F
    F --> G[Consensus Manipulation]

Table: Attack Methods and Defenses

Attack Method	Description	Defense
Identity Flooding	Create many fake nodes	Proof of Work/Stake
Routing Manipulation	Control network paths	Reputation systems
Consensus Disruption	Influence voting	Resource requirements

Impact on Blockchain:

Network Partitioning: Isolate honest nodes
Double Spending: Facilitate fraudulent transactions
Consensus Failure: Prevent network agreement

Prevention Mechanisms:

Resource Requirements: PoW/PoS make attacks expensive
Identity Verification: KYC/AML procedures
Network Monitoring: Detect suspicious behavior patterns
Reputation Systems: Track node behavior over time

Real-world Examples:

P2P Networks: BitTorrent, Gnutella vulnerabilities
Social Networks: Fake account creation
Blockchain: Potential threat to permissionless networks

Mnemonic: "Single-Multiple-Influence" (Single Attacker, Multiple Identities, Network Influence)

Question 4(a) [3 marks]

Define the terms "Merkle Tree" and "Hyperledger".

Answer:

Table: Key Definitions

Term	Definition
Merkle Tree	Binary tree of hashes that efficiently summarizes all transactions
Hyperledger	Open-source blockchain platform hosted by Linux Foundation

Key Features:

Merkle Tree: Enables efficient verification without downloading full blockchain
Hyperledger: Enterprise-focused, modular architecture, multiple frameworks

Mnemonic: "Tree-Hash-Efficient" for Merkle, "Enterprise-Modular-Linux" for Hyperledger

Question 4(b) [4 marks]

Explain classic Byzantine generals problem in detail.

Answer:

Scenario: Multiple generals must coordinate attack on a city, but some may be traitors.

Table: Problem Components

Component	Description
Generals	Network nodes/participants
Messages	Transactions/communications
Traitors	Malicious/faulty nodes
Consensus	Agreement on action

Solution Requirements:

Agreement: All honest generals decide on same action
Validity: If all honest generals want to attack, they should attack
Termination: Decision must be reached in finite time

Blockchain Relevance: Ensures network agreement despite malicious nodes

Mnemonic: "Generals-Messages-Traitors-Consensus" (GMTC)

Question 4(c) [7 marks]

Explain the process of Merkle tree creation with suitable example and supporting diagrams.

Answer:

Process Steps:

Hash each transaction individually
Pair hashes and hash the pairs
Continue until single root hash remains

Example: 4 Transactions

                    Root Hash
                   /           \
              Hash(AB)         Hash(CD)
             /        \       /        \
        Hash(A)    Hash(B) Hash(C)  Hash(D)
           |          |       |        |
         Tx A       Tx B    Tx C     Tx D

Table: Merkle Tree Benefits

Benefit	Description
Efficiency	Verify transactions without full data
Security	Any change affects root hash
Scalability	Log(n) verification complexity

Verification Process:

To verify Tx A: Need Hash(B), Hash(CD), and Root Hash
Path verification: Hash(A) + Hash(B) = Hash(AB)
Hash(AB) + Hash(CD) = Root Hash

Applications:

Bitcoin: Block headers contain Merkle root
SPV Clients: Light wallets use Merkle proofs
Git: Version control system uses similar structure

Mnemonic: "Hash-Pair-Repeat-Root" (Merkle Tree Creation Process)

Question 4(a) OR [3 marks]

List various types of Hyperledger projects.

Answer:

Table: Hyperledger Projects

Project	Type	Purpose
Fabric	Framework	Permissioned blockchain platform
Sawtooth	Framework	Modular blockchain suite
Iroha	Framework	Simple blockchain for mobile/web
Burrow	Framework	Ethereum Virtual Machine
Caliper	Tool	Blockchain performance benchmark
Composer	Tool	Business network development

Categories:

Frameworks: Core blockchain platforms
Tools: Development and testing utilities

Mnemonic: "F-S-I-B-C-C" (Fabric, Sawtooth, Iroha, Burrow, Caliper, Composer)

Question 4(b) OR [4 marks]

Explain Practical Byzantine Fault Tolerance algorithm in detail.

Answer:

Definition: Consensus algorithm that works correctly even when up to 1/3 of nodes are faulty or malicious.

Table: PBFT Phases

Phase	Description	Purpose
Pre-prepare	Primary broadcasts request	Initiate consensus
Prepare	Nodes validate and broadcast	Verify proposal
Commit	Nodes commit to decision	Finalize agreement

Algorithm Steps:

Client sends request to primary replica
Primary broadcasts pre-prepare message
Backups send prepare messages if valid
After receiving 2f+1 prepares, send commit
Execute after receiving 2f+1 commits

Key Properties:

Safety: Never produces inconsistent results
Liveness: Eventually produces results
Fault Tolerance: Works with f < n/3 faulty nodes

Mnemonic: "Pre-Prepare-Commit" (3 Phases of PBFT)

Question 4(c) OR [7 marks]

"Eventual consistency is evident in the context of bitcoin." Justify the given statement.

Answer:

Definition: Eventual consistency means the system will become consistent over time, even if it's temporarily inconsistent.

Bitcoin Implementation:

Table: Bitcoin Consistency Mechanisms

Mechanism	Description	Purpose
Chain Reorganization	Replace shorter chain with longer	Maintain consensus
Confirmation Delays	Wait for multiple blocks	Increase certainty
Fork Resolution	Longest chain wins	Resolve conflicts

Scenarios Demonstrating Eventual Consistency:

Temporary Forks: When two miners find blocks simultaneously
Network Partitions: Isolated nodes may have different views
Double Spending Attempts: Conflicting transactions in different blocks

Resolution Process:

Mining Continues: Miners build on their preferred chain
Longest Chain Rule: Network adopts chain with most work
Automatic Convergence: All nodes eventually agree

Diagram: Fork Resolution

graph LR
    A[Block N] --> B[Block N+1a]
    A --> C[Block N+1b]
    B --> D[Block N+2a]
    C --> E[Dies - Shorter Chain]
    D --> F[Becomes Main Chain]

Justification Points:

Probabilistic Finality: Longer confirmation time = higher certainty
No Immediate Consistency: New transactions aren't instantly final
Convergence Guarantee: Network will eventually agree on single chain
Time-based Resolution: Consistency improves with time

Practical Implications:

Merchant Waiting: Wait for confirmations before accepting payment
Exchange Policies: Different confirmation requirements for different amounts
Risk Management: Balance speed vs security based on transaction value

Mnemonic: "Time-Brings-Consistency" (Eventual Consistency = Time + Convergence)

Question 5(a) [3 marks]

Explain advantages of ERC 20.

Answer:

Table: ERC-20 Token Advantages

Advantage	Description
Standardization	Common interface for all tokens
Interoperability	Works with all Ethereum wallets/exchanges
Liquidity	Easy trading and exchange

Key Benefits:

Developer Friendly: Simple implementation standard
Market Adoption: Widely supported across platforms
Smart Contract Integration: Easy DeFi integration

Mnemonic: "Standard-Interoperable-Liquid" (SIL)

Question 5(b) [4 marks]

Describe working mechanism of a smart-contract in detail.

Answer:

Table: Smart Contract Workflow

Step	Description
Code Deployment	Contract uploaded to blockchain
Trigger Conditions	Predefined conditions monitored
Automatic Execution	Contract executes when conditions met
State Update	Blockchain state modified

Working Process:

Development: Write contract in Solidity/Vyper
Compilation: Convert to bytecode
Deployment: Upload to blockchain network
Execution: Triggered by transactions or events

Mnemonic: "Deploy-Trigger-Execute-Update" (DTEU)

Question 5(c) [7 marks]

What is smart-contract? Explain features and applications of smart-contract in detail.

Answer:

Definition: Self-executing contracts with terms directly written into code, running on blockchain.

Table: Smart Contract Features

Feature	Description	Benefit
Autonomous	Executes without intermediaries	Cost reduction
Transparent	Code visible on blockchain	Trust building
Immutable	Cannot be changed once deployed	Security
Deterministic	Same input produces same output	Predictability

Diagram: Smart Contract Architecture

graph LR
    A[Smart Contract] --> B[Trigger Conditions]
    B --> C[Automatic Execution]
    C --> D[State Changes]
    D --> E[Event Emissions]
    A --> F[External Calls]
    F --> G[Other Contracts]

Applications:

Table: Smart Contract Applications

Domain	Use Case	Example
Finance	Automated lending	DeFi protocols
Insurance	Claim processing	Flight delay insurance
Supply Chain	Product tracking	Food provenance
Real Estate	Property transfers	Automated escrow
Gaming	Digital assets	NFT marketplaces

Advantages:

Efficiency: Reduced processing time and costs
Trust: No need for trusted third parties
Accuracy: Eliminates human errors
Global Access: Available 24/7 worldwide

Limitations:

Immutability: Difficult to fix bugs after deployment
Oracle Problem: Need external data sources
Gas Costs: Execution costs can be high
Complexity: Requires technical expertise

Development Considerations:

Security Audits: Essential before deployment
Testing: Extensive testing on testnets
Upgradability: Design patterns for updates
Gas Optimization: Minimize execution costs

Mnemonic: "Auto-Transparent-Immutable-Deterministic" (ATID) for features

Question 5(a) OR [3 marks]

Explain disadvantages of ERC20.

Answer:

Table: ERC-20 Token Disadvantages

Disadvantage	Description
Limited Functionality	Only basic token operations
No Built-in Security	Vulnerable to common attacks
Gas Dependency	Requires ETH for transactions

Key Issues:

Transfer Limitations: Cannot handle complex transfers
Approval Risks: Double spending vulnerabilities
Network Congestion: High fees during peak times

Mnemonic: "Limited-Vulnerable-Dependent" (LVD)

Question 5(b) OR [4 marks]

Describe steps for Launching of a Decentralized Autonomous Organization (DAO)?

Answer:

Table: DAO Launch Steps

Step	Description
Concept Design	Define purpose and governance rules
Smart Contract Development	Code governance mechanisms
Token Distribution	Allocate voting rights
Community Building	Attract members and contributors

Detailed Process:

Whitepaper Creation: Document vision and tokenomics
Technical Implementation: Deploy governance contracts
Initial Funding: Raise capital through token sales
Operations Launch: Begin decentralized operations

Mnemonic: "Design-Develop-Distribute-Deploy" (4D Launch)

Question 5(c) OR [7 marks]

What is Decentralized Autonomous Organization (DAO)? Explain its advantages and disadvantages in detail.

Answer:

Definition: A blockchain-based organization governed by smart contracts and token holders rather than traditional management.

Table: DAO Structure

Component	Description	Function
Smart Contracts	Governance rules in code	Automated decision execution
Tokens	Voting rights and ownership	Democratic participation
Proposals	Suggested changes or actions	Community-driven initiatives
Treasury	Shared funds	Resource allocation

Diagram: DAO Governance Flow

graph LR
    A[Token Holders] --> B[Submit Proposals]
    B --> C[Community Discussion]
    C --> D[Voting Period]
    D --> E[Execution if Passed]
    E --> F[Smart Contract Updates]
    F --> G[Treasury Actions]

Advantages:

Table: DAO Benefits

Advantage	Description	Impact
Decentralization	No single point of control	Reduced corruption risk
Transparency	All decisions on blockchain	Enhanced accountability
Global Participation	Anyone can join	Diverse perspectives
Efficiency	Automated execution	Faster decision implementation
Democratic Governance	Token-based voting	Fair representation

Disadvantages:

Table: DAO Challenges

Disadvantage	Description	Risk
Technical Complexity	Smart contract bugs	System failures
Legal Uncertainty	Unclear regulatory status	Compliance issues
Coordination Problems	Difficult decision making	Slow progress
Token Concentration	Wealthy holders control votes	Centralization risk
Security Vulnerabilities	Code exploits possible	Financial losses

Types of DAOs:

Investment DAOs: Collective investment decisions
Protocol DAOs: Blockchain protocol governance
Social DAOs: Community-driven organizations
Collector DAOs: NFT and art collecting

Success Factors:

Clear Purpose: Well-defined mission and goals
Robust Governance: Effective voting mechanisms
Community Engagement: Active member participation
Technical Security: Audited smart contracts
Legal Compliance: Regulatory compliance where applicable

Notable Examples:

MakerDAO: Decentralized finance protocol
Uniswap: Decentralized exchange governance
Compound: Money market protocol

Future Outlook:

Regulatory Clarity: Evolving legal frameworks
Technical Improvements: Better governance tools
Mainstream Adoption: Growing corporate interest
Integration: Hybrid traditional-DAO models

Mnemonic: "Decentralized-Autonomous-Organization" (DAO = Democratic Automated Ownership)