What Is Cryptocurrency? Trivia Quiz

Answer: It uses encryption to verify the transaction.

The name cryptocurrency was chosen because it relies on encryption. The goal of each currency is to make the transaction as secure and safe as possible. Cryptocurrency does not have origins in the dark web and it is not terribly difficult to understand once the basic concepts are learned. We will go deeper into understanding how cryptocurrency works with the following questions.

Answer: Peer to peer

Peer to peer is a transaction where two people can exchange money without having a trusted third-party server mediate the transaction. With traditional currency, banks often fulfill the role of guarantor of the transaction. In theory, quantum entanglement could one day play a part in cybersecurity, but that would require a complete remodel of the current system. By having the transaction peer to peer, cryptocurrency can be traded anywhere in the world where two computers can communicate. Most peer-to-peer transactions take about 10 to 15 seconds to be completed.

Answer: As a bond or CD

Bonds and CDs are tools banks or the government use to borrow capital for their investing. In exchange, the lender (the buyer of the bond) is given a guaranteed rate of return for the capital with the understanding that the money will not be withdrawn for a set period of time.

A digital online wallet is often available for free with the coin record stored on a public server. Cryptocurrency can also be stored in offline tools such as flash drives. In 2021, Bitcoin opened the first mutual fund for investing in cryptocurrency, making it available for public trading.

In its first year, the "Bitcoin Strategy ProFund" outperformed the S&P 500 index.

Answer: Bitcoin

Bitcoin was created and started by Satoshi Nakamoto in 2009. Very little is known about the inventor and some speculate that it may not be just one person but rather a group of people! The original concept was to incorporate peer-to-peer electronic currency exchange to remove the traditional bank. After mining the first "Genesis" block, Satoshi continued mining for just over a year and then backed away from the business entirely. It has been estimated that he/she mined close to a million coins in that year.

Answer: Transactions get time stamped and publicly shared making them nearly impossible to be changed.

Once a transaction is agreed upon by the two parties, and has occurred, a timestamp is placed on the transaction. The transaction is done publicly, so while your exact identity might not be known, the transaction itself can be seen by anyone who knows how to look. Once a block is filled with enough transactions, it is "sealed" and a new block is started. Each block in the chain is connected so that it is impossible to change one block without changing the entire chain. So as more and more blocks are linked, it becomes nearly impossible to alter any transaction in the chain without changing all the blocks in the chain.

Answer: By providing the mathematical proof of a new block.

When each block is closed, there will be a new complex equation that has to be solved to balance the block and link it to all the blocks that come before it. These equations are so complex that it takes an entire building full of computer servers hours to weeks to solve the equation. Once the equation is solved the group that solves it is rewarded in crypto coins.

There is competition to solve the same block, so there is an advantage to having the biggest and fastest computer rigs. The other groups who lose out do get paid service fees for the work they do.

Answer: They use two-factor authentication.

Using two-factor authentication is simpler than you might think. When you wish to buy or sell cryptocurrency, a security code will be sent to the email you provide. You then must correctly supply the security code to establish you are indeed tied to that email address. The other person doing the transaction must complete the same process. Of course, there is always a possibility that the person on the other end is not honest, so like any internet transaction caution is always advised. No background checks or preapprovals are required to trade cryptocurrency.

Answer: Each transaction requires a huge amount of energy.

The blockchains themselves work very well. Unfortunately, solving the equations to secure the block takes an immense amount of energy. A study estimated that one cryptocurrency transaction takes roughly the same amount of energy as an average American household spends for about 3 weeks! Another study suggested that in the year 2018 about the same amount of energy was spent on cryptocurrency as the entire country of Sweden spent on their energy consumption. So from an environmental standpoint, this is a real problem.

As great as blockchain is, it may indeed take something like a quantum computer to find a more energy-efficient way to maintain the same level of security.

Answer: There is no transaction trail.

There is definitely a transaction trail that anyone with the know-how would be able to see since all crypto transactions are public. The cryptocurrency market can be very volatile, making it possible to get rich quickly or lose most of the wealth you invest.

Many who invest in cryptocurrency do so as speculation, and it should be considered as more of a gamble than a safe bet. Coins are getting more difficult to mine each year as the balancing equations are getting more difficult to solve. Plus, over time, the amount of currency a person or group will receive as a reward for solving a block will continue to go down until eventually no coins will be given at all for solving a block.

At that point, there will be a set amount of cryptocoins in the market.

Answer: Two pizzas

Yes, two pizzas! At the time no one was sure you could actually buy anything useful with the "coins". In an interview, Hanyecz said he actually bought more pizzas with bitcoins afterward and figured he probably spent close to 100,000 bitcoins in that fashion. Luckily for him, he said he is still comfortable. As of 2020, several businesses have opened up to accepting bitcoin and other altcoins as payment for goods, including luxury cars.