Question 1(a) [3 marks]

Differentiate between Private key and Public key in Blockchain.

Answer:

Aspect	Private Key	Public Key
Purpose	Used for signing transactions	Used for verification
Sharing	Must be kept secret	Can be shared publicly
Function	Decrypts data, creates signatures	Encrypts data, verifies signatures
Ownership	Only owner knows it	Everyone can access it

Private Key: Secret mathematical code that proves ownership
Public Key: Open address that others use to send transactions
Security: Private key loss = permanent fund loss

Mnemonic: "Private is Personal, Public is Posted"

Question 1(b) [4 marks]

Explain Distributed Ledger in detail.

Answer:

Distributed Ledger is a database spread across multiple locations and participants.

Table: Key Features

Feature	Description
Decentralized	No single control point
Synchronized	All copies stay updated
Transparent	All participants can view
Immutable	Cannot be easily changed

Diagram:

graph TD
    A[Participant 1] --> D[Distributed Ledger]
    B[Participant 2] --> D
    C[Participant 3] --> D
    D --> E[Synchronized Copy 1]
    D --> F[Synchronized Copy 2]
    D --> G[Synchronized Copy 3]

Benefits: Eliminates intermediaries, increases trust, reduces fraud
Working: All participants maintain identical copies of records

Mnemonic: "Distributed = Divided but Identical"

Question 1(c) [7 marks]

Define Blockchain. Describe applications and limits of Blockchain.

Answer:

Blockchain Definition: A chain of blocks containing transaction records, linked using cryptography.

Applications Table:

Sector	Application	Benefit
Finance	Cryptocurrency, payments	Faster, cheaper transfers
Healthcare	Patient records	Secure, accessible data
Supply Chain	Product tracking	Transparency, authenticity
Real Estate	Property records	Fraud prevention
Voting	Digital elections	Transparent, tamper-proof

Limits Table:

Limitation	Impact
Scalability	Slow transaction processing
Energy Usage	High electricity consumption
Complexity	Difficult for users to understand
Regulation	Legal uncertainty
Storage	Growing data size problems

Architecture Diagram:

graph LR
    A[Block 1] --> B[Block 2]
    B --> C[Block 3]
    C --> D[Block 4]
    
    A1[Hash] --> A
    B1[Hash] --> B
    C1[Hash] --> C
    D1[Hash] --> D

Security: Cryptographic linking makes tampering difficult
Transparency: All transactions visible to network participants

Mnemonic: "Blocks Chained = Blockchain, Apps Many = Limits Many"

Question 1(c) OR [7 marks]

Write a short note on: CAP Theorem in Blockchain

Answer:

CAP Theorem states that distributed systems can only guarantee 2 out of 3 properties simultaneously.

CAP Components Table:

Property	Description	Example
Consistency	All nodes have same data	Same balance shown everywhere
Availability	System always responds	Network never goes down
Partition Tolerance	Works despite network failures	Functions even if nodes disconnect

Blockchain Trade-offs:

graph TD
    A[CAP Theorem] --> B[Consistency]
    A --> C[Availability]
    A --> D[Partition Tolerance]
    
    E[Bitcoin] --> B
    E --> D
    F[Private Blockchain] --> B
    F --> C

Real-world Applications:

Blockchain Type	Chooses	Sacrifices
Bitcoin	Consistency + Partition	Availability
Ethereum	Consistency + Partition	Availability
Private Networks	Consistency + Availability	Partition Tolerance

Impact: Blockchain designers must choose which property to sacrifice
Trade-off: Perfect systems impossible in distributed networks

Mnemonic: "Can't Always Please - Choose 2 of 3"

Question 2(a) [3 marks]

Explain Data Structure of a Blockchain.

Answer:

Blockchain Data Structure consists of linked blocks containing transaction data.

Block Structure Table:

Component	Purpose
Block Header	Contains metadata
Previous Hash	Links to previous block
Merkle Root	Summary of all transactions
Timestamp	When block was created
Transactions	Actual data/transfers

Visual Structure:

+------------------+
|   Block Header   |
|------------------|
| Previous Hash    |
| Merkle Root      |
| Timestamp        |
| Nonce            |
+------------------+
|   Transactions   |
|  [TX1, TX2, TX3] |
+------------------+

Linking: Each block points to previous block using hash
Integrity: Changing one block breaks the entire chain

Mnemonic: "Header Holds, Transactions Tell"

Question 2(b) [4 marks]

What are the benefits of Decentralization?

Answer:

Decentralization Benefits:

Benefit	Explanation
No Single Point of Failure	Network continues if one node fails
Censorship Resistance	No authority can block transactions
Transparency	All participants see same information
Reduced Costs	Eliminates intermediary fees
Trust	No need to trust central authority

Comparison Diagram:

graph TD
    subgraph Centralized
        A[Central Authority] --> B[User 1]
        A --> C[User 2]
        A --> D[User 3]
    end
    
    subgraph Decentralized
    		direction LR
        E[User 1] --> F[User 2]
        F --> G[User 3]
        G --> E
    end

Security: Multiple copies prevent data loss
Democracy: All participants have equal rights
Resilience: System survives individual failures

Mnemonic: "Distributed = Durable, Democratic, Direct"

Question 2(c) [7 marks]

Differentiate between Public Blockchain and Private Blockchain.

Answer:

Comprehensive Comparison:

Aspect	Public Blockchain	Private Blockchain
Access	Open to everyone	Restricted to specific users
Permission	Permissionless	Requires permission
Control	Decentralized	Centralized control
Speed	Slower (consensus needed)	Faster (fewer validators)
Security	High (many validators)	Medium (fewer validators)
Cost	Transaction fees required	Lower operational costs
Transparency	Fully transparent	Limited transparency
Examples	Bitcoin, Ethereum	Hyperledger, R3 Corda

Network Architecture:

graph TD
    subgraph "Public Blockchain"
        A[Anyone] --> B[Global Network]
        C[Anyone] --> B
        D[Anyone] --> B
    end
    
    subgraph "Private Blockchain"
        E[Authorized User 1] --> F[Private Network]
        G[Authorized User 2] --> F
        H[Authorized User 3] --> F
    end

Use Cases:

Type	Best For
Public	Cryptocurrencies, public records
Private	Banking, supply chain, healthcare

Trade-offs: Public offers more security, Private offers more control
Choice: Depends on transparency vs. privacy needs

Mnemonic: "Public = People's, Private = Permitted"

Question 2(a) OR [3 marks]

Describe Core Components of Block Chain with suitable diagram.

Answer:

Core Components:

Component	Function
Blocks	Store transaction data
Hash Functions	Create unique fingerprints
Digital Signatures	Verify transaction authenticity
Consensus Mechanism	Agree on valid transactions
Peer-to-Peer Network	Connect all participants

System Architecture:

graph LR
    A[Peer-to-Peer Network] --> B[Consensus Mechanism]
    B --> C[Block Creation]
    C --> D[Hash Functions]
    D --> E[Digital Signatures]
    E --> F[Transaction Validation]
    F --> G[Block Addition]
    G --> H[Blockchain Updated]

Integration: All components work together for security
Purpose: Each component serves specific blockchain function

Mnemonic: "Blocks Build, Hash Holds, Signatures Secure"

Question 2(b) OR [4 marks]

Define and explain permissioned blockchain in detail.

Answer:

Permissioned Blockchain Definition: A blockchain where participation requires explicit permission from network administrators.

Characteristics Table:

Feature	Description
Access Control	Only approved users can join
Validation Rights	Selected nodes validate transactions
Governance	Central authority manages network
Privacy	Transaction details can be private

Permission Levels:

graph TD
    A[Network Administrator] --> B[Full Access]
    A --> C[Read/Write Access]
    A --> D[Read Only Access]
    A --> E[No Access]
    
    B --> F[Can validate blocks]
    C --> G[Can submit transactions]
    D --> H[Can view data only]
    E --> I[Blocked from network]

Benefits: Better privacy, regulatory compliance, faster processing
Drawbacks: Less decentralized, requires trust in administrators

Mnemonic: "Permission = Participation Permitted"

Question 2(c) OR [7 marks]

Explain sidechain in brief.

Answer:

Sidechain Definition: A separate blockchain connected to main blockchain, allowing asset transfer between chains.

Sidechain Architecture:

graph LR
    A[Main Chain] <--> B[Sidechain 1]
    A <--> C[Sidechain 2]
    A <--> D[Sidechain 3]
    
    B --> E[Specific Purpose 1]
    C --> F[Specific Purpose 2]
    D --> G[Specific Purpose 3]

Benefits and Features:

Aspect	Benefit
Scalability	Reduces main chain load
Experimentation	Test new features safely
Specialization	Optimized for specific use cases
Interoperability	Connect different blockchains

Transfer Process:

Step	Action
1. Lock	Assets locked on main chain
2. Proof	Cryptographic proof generated
3. Release	Equivalent assets released on sidechain
4. Use	Assets used on sidechain
5. Return	Reverse process to return assets

Real Examples:

Sidechain	Purpose
Lightning Network	Fast Bitcoin payments
Plasma	Ethereum scaling
Liquid	Bitcoin trading

Security: Maintains connection to secure main chain
Flexibility: Each sidechain can have different rules
Innovation: Allows blockchain ecosystem expansion

Mnemonic: "Side Supports, Main Maintains"

Question 3(a) [3 marks]

Define Consensus Mechanism and explain any one in detail.

Answer:

Consensus Mechanism Definition: A protocol that ensures all network participants agree on the blockchain's current state.

Proof of Work (PoW) Explanation:

Component	Function
Mining	Solving complex mathematical puzzles
Competition	Miners compete to solve first
Verification	Network verifies solution
Reward	Winner gets cryptocurrency reward

PoW Process:

graph LR
    A[New Transaction] --> B[Miners Collect Transactions]
    B --> C[Create Block]
    C --> D[Solve Mathematical Puzzle]
    D --> E[First Solution Wins]
    E --> F[Block Added to Chain]
    F --> G[Miner Gets Reward]

Security: Computational work makes tampering expensive
Example: Bitcoin uses Proof of Work consensus

Mnemonic: "Consensus = Common Sense, Work = Win"

Question 3(b) [4 marks]

Why is Forking needed in Blockchain? List various types of Forks in Blockchain.

Answer:

Why Forking is Needed:

Reason	Purpose
Upgrades	Add new features to blockchain
Bug Fixes	Correct security vulnerabilities
Rule Changes	Modify consensus rules
Community Disagreement	Split when no consensus reached

Types of Forks:

Fork Type	Description	Compatibility
Soft Fork	Tightens rules	Backward compatible
Hard Fork	Changes rules completely	Not backward compatible
Accidental Fork	Temporary split	Resolves automatically
Contentious Fork	Community disagreement	Permanent split

Fork Visualization:

graph LR
    A[Original Chain] --> B[Block N]
    B --> C[Soft Fork - Tighter Rules]
    B --> D[Hard Fork - New Rules]
    
    C --> E[Old nodes still work]
    D --> F[Old nodes rejected]

Impact: Forks can create new cryptocurrencies
Examples: Bitcoin Cash (hard fork), Ethereum updates (soft forks)

Mnemonic: "Fork = Future Options, Rules Kept"

Question 3(c) [7 marks]

What is Bitcoin Mining? Explain working, difficulty and benefits of Bitcoin mining in detail.

Answer:

Bitcoin Mining Definition: Process of adding new transactions to Bitcoin blockchain by solving computational puzzles.

Mining Process:

Step	Action	Details
1. Collection	Gather pending transactions	From mempool
2. Block Creation	Form new block	Include transactions
3. Puzzle Solving	Find correct nonce	Trial and error
4. Verification	Network checks solution	Validates block
5. Addition	Add block to chain	Permanent record
6. Reward	Miner gets Bitcoin	Currently 6.25 BTC

Mining Workflow:

graph LR
    A[Pending Transactions] --> B[Miners Collect]
    B --> C[Create Block Header]
    C --> D[Guess Nonce Value]
    D --> E[Calculate Hash]
    E --> F{Hash < Target?}
    F -->|No| D
    F -->|Yes| G[Broadcast Solution]
    G --> H[Network Validates]
    H --> I[Block Added + Reward]

Difficulty Adjustment:

Aspect	Mechanism
Target Time	10 minutes per block
Adjustment Period	Every 2016 blocks (~2 weeks)
Auto-Regulation	Increases if blocks too fast
Purpose	Maintain consistent block time

Benefits of Mining:

Benefit	Description
Financial Reward	Earn Bitcoin for successful mining
Network Security	More miners = more secure network
Transaction Processing	Enables Bitcoin transfers
Decentralization	No central authority needed

Energy: Mining requires significant electricity
Competition: Difficulty increases with more miners
Hardware: Specialized ASIC miners most efficient

Mnemonic: "Mining = Money, Math, Maintenance"

Question 3(a) OR [3 marks]

Differentiate Soft fork and Hard fork.

Answer:

Fork Comparison:

Aspect	Soft Fork	Hard Fork
Compatibility	Backward compatible	Not backward compatible
Rules	Makes rules stricter	Changes rules completely
Node Updates	Optional for old nodes	Mandatory for all nodes
Chain Split	No permanent split	Can create permanent split
Consensus	Easier to implement	Requires majority agreement
Examples	SegWit (Bitcoin)	Bitcoin Cash, Ethereum Classic

Visual Representation:

graph LR
    A[Original Blockchain] --> B[Fork Point]
    B --> C[Soft Fork - Stricter Rules]
    B --> D[Hard Fork - New Rules]
    
    C --> E[Old nodes still valid]
    D --> F[Old nodes incompatible]
    
    E --> G[Single chain continues]
    F --> H[Two separate chains]

Risk: Hard forks can split community and create competing currencies
Safety: Soft forks are generally safer and less disruptive

Mnemonic: "Soft = Same Direction, Hard = Huge Difference"

Question 3(b) OR [4 marks]

What is the importance of Finality in the World of Blockchain?

Answer:

Finality Definition: The guarantee that once a transaction is confirmed, it cannot be reversed or altered.

Importance Table:

Aspect	Importance
Trust	Users confident transactions are permanent
Business Use	Companies can rely on completed transactions
Legal Certainty	Courts can enforce blockchain records
Settlement	Financial institutions can clear payments

Types of Finality:

Type	Description	Time
Probabilistic	Becomes more certain over time	Bitcoin: ~1 hour
Absolute	Immediate guarantee	Some private chains
Economic	Cost of reversal too high	Varies by network

Finality Process:

graph LR
    A[Transaction Submitted] --> B[First Confirmation]
    B --> C[Multiple Confirmations]
    C --> D[Probabilistic Finality]
    D --> E[Practical Finality]

Bitcoin: 6 confirmations generally considered final
Ethereum: Moving toward faster finality with Proof of Stake
Challenge: Balance between speed and security

Mnemonic: "Final = Forever, Important = Irreversible"

Question 3(c) OR [7 marks]

What is a 51% attack in Blockchain? Explain in brief.

Answer:

51% Attack Definition: When a single entity controls more than 50% of network's mining power or validators, allowing them to manipulate the blockchain.

Attack Mechanism:

Step	Attacker Action	Impact
1. Control	Gain >50% mining power	Dominate network
2. Double Spend	Create secret chain	Prepare alternative history
3. Execute	Release longer chain	Network accepts fake version
4. Profit	Spend coins twice	Steal from victims

Attack Visualization:

graph LR
    A[Honest Chain] --> B[Block N]
    C[Attacker's Secret Chain] --> D[Block N']
    
    B --> E[Block N+1]
    D --> F[Block N'+1]
    D --> G[Block N'+2 - Longer Chain]
    
    G --> H[Network Accepts Attacker's Chain]
    E --> I[Honest Chain Abandoned]

Possible Attacks:

Attack Type	Description
Double Spending	Spend same coins twice
Transaction Reversal	Cancel confirmed transactions
Mining Monopoly	Block other miners' work
Censorship	Prevent specific transactions

Prevention Methods:

Method	How It Helps
Decentralization	Spread mining across many participants
High Hash Rate	Make attack economically unfeasible
Proof of Stake	Attackers lose their staked coins
Monitoring	Detect suspicious mining activity

Real Examples:

Blockchain	Status
Bitcoin	Never successfully attacked
Ethereum Classic	Attacked multiple times
Small Altcoins	More vulnerable due to low hash rate

Cost: Attacking major networks extremely expensive
Detection: Attacks usually detected quickly
Recovery: Networks can implement countermeasures

Mnemonic: "51% = Majority Mischief, Control = Chaos"

Question 4(a) [3 marks]

Describe various types of Hyperledger projects.

Answer:

Hyperledger Project Types:

Project	Purpose	Use Case
Fabric	Modular blockchain platform	Enterprise applications
Sawtooth	Scalable blockchain suite	Supply chain, IoT
Iroha	Mobile-focused blockchain	Identity management
Indy	Digital identity platform	Self-sovereign identity
Besu	Ethereum-compatible client	Public/private Ethereum
Burrow	Smart contract platform	Permissioned networks

Project Categories:

graph TD
    A[Hyperledger Projects] --> B[Frameworks]
    A --> C[Tools]
    
    B --> D[Fabric - Enterprise]
    B --> E[Sawtooth - Scalable]
    B --> F[Iroha - Mobile]
    
    C --> G[Caliper - Performance]
    C --> H[Composer - Development]
    C --> I[Explorer - Monitoring]

Focus: Enterprise and business blockchain solutions
Open Source: All projects are freely available

Mnemonic: "Hyper = High Performance, Ledger = Large Enterprise"

Question 4(b) [4 marks]

Differentiate between Blockchain and Bitcoin.

Answer:

Comprehensive Comparison:

Aspect	Blockchain	Bitcoin
Definition	Technology/Platform	Digital Currency
Scope	Broader concept	Specific application
Purpose	Record keeping system	Peer-to-peer payments
Applications	Many industries	Primarily financial
Flexibility	Can be customized	Fixed protocol
Creator	Multiple contributors	Satoshi Nakamoto
Launch	Concept evolved over time	Launched 2009

Relationship Diagram:

graph TD
    A[Blockchain Technology] --> B[Bitcoin Cryptocurrency]
    A --> C[Ethereum Platform]
    A --> D[Supply Chain Apps]
    A --> E[Healthcare Records]
    
    B --> F[Digital Payments]
    B --> G[Store of Value]

Key Differences:

Category	Blockchain	Bitcoin
Type	Infrastructure	Application
Usage	Multiple purposes	Currency only
Modifications	Can be changed	Protocol fixed

Analogy: Blockchain is like the internet, Bitcoin is like email
Dependency: Bitcoin needs blockchain, but blockchain doesn't need Bitcoin

Mnemonic: "Blockchain = Building Block, Bitcoin = Specific Brick"

Question 4(c) [7 marks]

Write a short note on: Merkle Tree

Answer:

Merkle Tree Definition: A binary tree structure where each leaf represents a transaction hash, and each internal node contains the hash of its children.

Structure and Components:

Component	Description
Leaf Nodes	Individual transaction hashes
Internal Nodes	Hash of two child nodes
Root Hash	Single hash representing entire tree
Path	Route from leaf to root

Merkle Tree Diagram:

                    Root Hash
                   /         \
              Hash AB       Hash CD
             /       \     /       \
        Hash A   Hash B Hash C   Hash D
          |        |      |        |
        TX A     TX B   TX C     TX D

Construction Process:

Step	Action
1	Hash each transaction individually
2	Pair hashes and hash them together
3	Continue pairing until single root
4	Store root hash in block header

Benefits Table:

Benefit	Explanation
Efficiency	Quick verification without downloading all data
Security	Any change detected immediately
Scalability	Verification time stays constant
Storage	Only root hash needed in block header

Verification Process:

graph LR
    A[Transaction to Verify] --> B[Get Merkle Path]
    B --> C[Hash with Sibling Nodes]
    C --> D[Compute Path to Root]
    D --> E[Compare with Stored Root]
    E --> F{Match?}
    F -->|Yes| G[Valid Transaction]
    F -->|No| H[Invalid Transaction]

Real-world Applications:

Use Case	Application
Bitcoin	Transaction verification
Git	Version control
IPFS	Distributed storage
Certificate Transparency	SSL certificate logs

Inventor: Named after Ralph Merkle (1988)
Efficiency: Allows verification with O(log n) complexity
Security: Tampering with any transaction changes root hash

Mnemonic: "Merkle = Many Made One, Tree = Trustworthy"

Question 4(a) OR [3 marks]

Discuss briefly about Hash pointer and how it is used in Merkle tree.

Answer:

Hash Pointer Definition: A data structure containing both the location of data and cryptographic hash of that data.

Components:

Component	Purpose
Pointer	Shows where data is stored
Hash	Proves data hasn't changed
Combination	Links data with integrity check

Hash Pointer in Merkle Tree:

        Root Hash Pointer
       /                 \
   Hash Ptr AB        Hash Ptr CD
   /         \        /         \
Hash A     Hash B  Hash C     Hash D
  |          |       |          |
 TX A       TX B    TX C       TX D

Usage in Merkle Tree:

Level	Hash Pointer Function
Leaf Level	Points to transaction, contains transaction hash
Internal Nodes	Points to children, contains combined hash
Root	Points to tree structure, contains overall hash

Verification: Can detect any change in tree structure
Navigation: Allows efficient traversal of tree

Mnemonic: "Hash Pointer = Location + Verification"

Question 4(b) OR [4 marks]

What is Hashing in Blockchain? How it is useful in Bitcoin?

Answer:

Hashing Definition: Mathematical function that converts input data into fixed-size string of characters.

Hashing Properties:

Property	Description
Deterministic	Same input always produces same output
Fixed Size	Output always same length (256 bits for SHA-256)
Avalanche Effect	Small input change = completely different output
One-way	Cannot reverse to find original input
Collision Resistant	Extremely hard to find two inputs with same output

Bitcoin Usage:

Use Case	Purpose
Block Linking	Each block contains hash of previous block
Mining	Find hash meeting difficulty requirement
Transaction IDs	Unique identifier for each transaction
Merkle Root	Summarize all transactions in block
Addresses	Create Bitcoin addresses from public keys

Hashing Process:

graph LR
    A[Input Data] --> B[SHA-256 Function]
    B --> C[256-bit Hash Output]
    
    D[Small Change in Input] --> E[SHA-256 Function]
    E --> F[Completely Different Hash]

Algorithm: Bitcoin uses SHA-256 hashing
Security: Makes blockchain tamper-evident
Efficiency: Quick to compute and verify

Mnemonic: "Hash = Fingerprint, Bitcoin = Built on Hashing"

Question 4(c) OR [7 marks]

Explain classic Byzantine generals problem and Practical Byzantine Fault Tolerance in detail.

Answer:

Byzantine Generals Problem: A classic computer science problem about achieving consensus in distributed systems with potentially unreliable participants.

Problem Scenario:

Element	Description
Generals	Represent network nodes
City	Represents the system state
Attack Plan	Represents consensus decision
Traitors	Represent malicious/faulty nodes
Communication	Messages between nodes

Problem Visualization:

graph TD
    A[General A - Honest] --> D[City Under Siege]
    B[General B - Traitor] --> D
    C[General C - Honest] --> D
    E[General D - Honest] --> D
    
    A --> F[Vote: Attack]
    B --> G[Vote: Attack to A, Retreat to C]
    C --> H[Vote: Attack]
    E --> I[Vote: Attack]

Practical Byzantine Fault Tolerance (pBFT):

pBFT Algorithm Phases:

Phase	Action	Purpose
Pre-prepare	Leader broadcasts proposal	Initiate consensus round
Prepare	Nodes validate and broadcast agreement	Ensure proposal is seen by all
Commit	Nodes commit to decision	Finalize consensus

pBFT Process Flow:

sequenceDiagram
    participant C as Client
    participant P as Primary Node
    participant B1 as Backup Node 1
    participant B2 as Backup Node 2
    
    C->>P: Request
    P->>B1: Pre-prepare
    P->>B2: Pre-prepare
    B1->>B2: Prepare
    B2->>B1: Prepare
    B1->>B2: Commit
    B2->>B1: Commit
    P->>C: Reply

Fault Tolerance:

Aspect	Capability
Maximum Faulty Nodes	Can tolerate up to 1/3 faulty nodes
Network Requirement	Synchronous or partially synchronous
Message Complexity	O(n²) messages per consensus
Finality	Immediate finality achieved

Applications:

System	Usage
Hyperledger Fabric	Consensus mechanism
Tendermint	Byzantine fault tolerant consensus
Zilliqa	Practical Byzantine fault tolerance

Advantage: Fast finality, good for permissioned networks
Limitation: High communication overhead, doesn't scale well

Mnemonic: "Byzantine = Bad actors, pBFT = Practical Fix"

Question 5(a) [3 marks]

List and explain cryptocurrency wallets in blockchain.

Answer:

Cryptocurrency Wallet Types:

Wallet Type	Description	Security Level
Hardware Wallet	Physical device storing keys	Very High
Software Wallet	Application on computer/phone	Medium to High
Paper Wallet	Keys printed on paper	High (if stored safely)
Web Wallet	Online wallet service	Medium
Brain Wallet	Keys memorized	Variable

Storage Methods:

Method	Accessibility	Security
Hot Wallet	Always online	Lower security
Cold Wallet	Offline storage	Higher security

Wallet Functions:

graph TD
    A[Cryptocurrency Wallet] --> B[Store Private Keys]
    A --> C[Generate Addresses]
    A --> D[Sign Transactions]
    A --> E[Check Balances]
    A --> F[Send/Receive Crypto]

Key Point: Wallets don't store coins, they store keys to access coins
Backup: Always backup wallet seed phrase

Mnemonic: "Wallet = Key Keeper, Not Coin Container"

Question 5(b) [4 marks]

Write advantages and disadvantages of ERC-20 token.

Answer:

ERC-20 Token Definition: Standard protocol for creating tokens on Ethereum blockchain.

Advantages:

Advantage	Benefit
Standardization	All tokens work the same way
Interoperability	Compatible with all Ethereum wallets
Easy Development	Simple to create new tokens
Wide Support	Supported by exchanges and services
Smart Contract Integration	Can interact with DeFi protocols

Disadvantages:

Disadvantage	Problem
Gas Fees	Expensive transactions during network congestion
Scalability	Limited by Ethereum's transaction throughput
Security Risks	Smart contract bugs can cause token loss
Centralization	Many tokens have centralized control
Environmental Impact	High energy consumption

Comparison Table:

Aspect	Advantage	Disadvantage
Adoption	Widely accepted	Market oversaturation
Development	Easy to create	Easy to create scam tokens
Functionality	Standard features	Limited customization

Usage: Most popular standard for creating cryptocurrency tokens
Examples: USDT, LINK, UNI are ERC-20 tokens

Mnemonic: "ERC-20 = Easy and Expensive"

Question 5(c) [7 marks]

What are dApps used for? Explain advantages and disadvantages of dApps.

Answer:

dApps Definition: Decentralized Applications that run on blockchain networks without central authority.

dApps Usage Categories:

Category	Examples	Purpose
DeFi	Uniswap, Compound	Financial services
Gaming	CryptoKitties, Axie Infinity	Blockchain games
Social Media	Steemit, Minds	Censorship-resistant platforms
Marketplaces	OpenSea, Rarible	NFT trading
Governance	Aragon, DAOstack	Decentralized organizations
Storage	Filecoin, Storj	Distributed file storage

dApp Architecture:

graph LR
    A[Frontend - User Interface] --> B[Web3 Connection]
    B --> C[Smart Contracts]
    C --> D[Blockchain Network]
    D --> E[Distributed Storage]
    
    F[Traditional App] --> G[Central Server]
    G --> H[Central Database]

Advantages:

Advantage	Description
Censorship Resistance	No single point of control
Transparency	Code and data publicly verifiable
Global Access	Available worldwide without restrictions
No Downtime	Distributed across many nodes
User Ownership	Users control their data and assets
Trustless	No need to trust intermediaries

Disadvantages:

Disadvantage	Description
Poor User Experience	Complex interfaces, slow transactions
Scalability Issues	Limited transaction throughput
High Costs	Gas fees for every interaction
Technical Complexity	Difficult for non-technical users
Regulatory Uncertainty	Unclear legal status
Energy Consumption	High environmental impact
Immutable Bugs	Cannot easily fix smart contract errors

Development Challenges:

Challenge	Impact
Gas Optimization	Must minimize transaction costs
Security Auditing	Critical to prevent hacks
User Onboarding	Difficult to attract mainstream users
Scalability Solutions	Need Layer 2 or alternative chains

Popular dApp Platforms:

Platform	Characteristics
Ethereum	Most established, highest fees
Binance Smart Chain	Lower fees, more centralized
Polygon	Ethereum Layer 2, faster and cheaper
Solana	High throughput, newer ecosystem

Future: Moving toward better user experience and lower costs
Adoption: Still early stage but growing rapidly

Mnemonic: "dApps = Decentralized but Difficult"

Question 5(a) OR [3 marks]

Explain tokenized and token less Blockchain in detail.

Answer:

Tokenized Blockchain:

Feature	Description
Definition	Blockchain with native cryptocurrency token
Token Purpose	Incentivize network participation
Examples	Bitcoin (BTC), Ethereum (ETH)
Function	Pay transaction fees, reward miners/validators

Token-less Blockchain:

Feature	Description
Definition	Blockchain without native cryptocurrency
Access	Permission-based participation
Examples	Hyperledger Fabric, R3 Corda
Function	Record keeping, process automation

Comparison Table:

Aspect	Tokenized	Token-less
Incentive Model	Economic rewards	Permission-based
Access	Open to anyone with tokens	Restricted access
Governance	Token holder voting	Centralized control
Use Case	Public networks	Private/enterprise
Security	Economic game theory	Traditional security

Architecture Differences:

graph TD
    subgraph "Tokenized Blockchain"
        A[Token Rewards] --> B[Miners/Validators]
        B --> C[Secure Network]
        C --> D[Public Access]
    end
    
    subgraph "Token-less Blockchain"
        E[Permission System] --> F[Authorized Nodes]
        F --> G[Secure Network]
        G --> H[Private Access]
    end

Choice: Depends on whether you need public participation or private control
Trend: Most public blockchains are tokenized, most private ones are token-less

Mnemonic: "Token = Public Participation, Token-less = Private Permission"

Question 5(b) OR [4 marks]

Write advantages and disadvantages of Hyperledger.

Answer:

Hyperledger Definition: Open-source collaborative framework for developing enterprise-grade blockchain solutions.

Advantages:

Advantage	Description
Enterprise Focus	Designed for business use cases
Modular Architecture	Customize components as needed
Privacy	Confidential transactions possible
Performance	Higher transaction throughput
Governance	Professional development standards
No Cryptocurrency	Avoids regulatory crypto issues
Permissioned Network	Control who can participate

Disadvantages:

Disadvantage	Description
Centralization	Less decentralized than public blockchains
Complexity	Requires technical expertise to implement
Limited Adoption	Smaller ecosystem compared to Ethereum
Vendor Lock-in	May depend on specific technology providers
Scalability	Still faces some scaling challenges
No Token Economy	Cannot leverage crypto incentives

Hyperledger Projects Comparison:

Project	Strengths	Limitations
Fabric	Mature, flexible	Complex setup
Sawtooth	Scalable	Less documentation
Iroha	Simple, mobile-friendly	Limited features

Use Case Suitability:

Good For	Not Ideal For
Supply chain tracking	Public cryptocurrencies
Healthcare records	Fully decentralized systems
Banking consortiums	High-frequency trading
Government systems	Anonymous transactions

Target: Large enterprises and consortiums
Support: Backed by Linux Foundation

Mnemonic: "Hyperledger = High Performance, Low Publicity"

Question 5(c) OR [7 marks]

Explain Smart contract. Write various applications of smart contract.

Answer:

Smart Contract Definition: Self-executing contracts with terms directly written into code, automatically enforced on blockchain.

Key Characteristics:

Feature	Description
Automated	Executes automatically when conditions met
Immutable	Cannot be changed after deployment
Transparent	Code is publicly visible
Trustless	No intermediaries needed
Deterministic	Same input always produces same output

Smart Contract Workflow:

graph LR
    A[Contract Created] --> B[Deployed to Blockchain]
    B --> C[Conditions Monitored]
    C --> D{Conditions Met?}
    D -->|Yes| E[Contract Executes]
    D -->|No| F[Continue Monitoring]
    E --> G[Automatic Settlement]
    F --> C

Applications by Industry:

Industry	Application	Benefit
Finance	Automated loans, insurance claims	Faster processing, lower costs
Real Estate	Property transfers, rental agreements	Reduced fraud, instant settlements
Supply Chain	Product tracking, quality assurance	Transparency, automated compliance
Healthcare	Patient consent, insurance claims	Privacy protection, automated payouts
Entertainment	Royalty distribution, content licensing	Fair payment, transparent accounting
Gaming	In-game assets, tournaments	True ownership, automated prizes

Specific Smart Contract Examples:

Application	Function	Platform
Uniswap	Automated token trading	Ethereum
Compound	Lending and borrowing	Ethereum
CryptoKitties	Digital pet ownership	Ethereum
Chainlink	Oracle data feeds	Multiple platforms
Aave	Flash loans	Ethereum

Development Platforms:

Platform	Language	Features
Ethereum	Solidity	Most mature ecosystem
Binance Smart Chain	Solidity	Lower fees, faster
Cardano	Plutus	Academic approach
Solana	Rust	High performance

Benefits:

Benefit	Traditional Contract	Smart Contract
Speed	Days to weeks	Minutes to hours
Cost	High legal fees	Low gas fees
Trust	Requires intermediaries	Trustless execution
Accuracy	Human error possible	Coded precision

Limitations:

Limitation	Description
Code Bugs	Errors can cause financial loss
Oracle Problem	Difficulty getting real-world data
Immutability	Hard to fix after deployment
Gas Costs	Can be expensive on congested networks
Legal Status	Unclear regulatory framework

Real-world Impact:

Sector	Transformation
DeFi	$100+ billion locked in smart contracts
NFTs	New digital ownership models
DAOs	Decentralized governance systems
Insurance	Parametric insurance products

Future: Integration with IoT, AI, and traditional business systems
Evolution: Moving toward more user-friendly development tools

Mnemonic: "Smart Contract = Self-executing, Solves Problems"