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Quizzes > Quizzes for Business > Finance

Take the Cryptocurrency Knowledge Quiz

Challenge Your Crypto Understanding with Multiple-Choice Questions

Difficulty: Moderate
Questions: 20
Learning OutcomesStudy Material
Colorful paper art depicting elements related to Cryptocurrency Knowledge Quiz.

This cryptocurrency quiz helps you check your grasp of blockchain, wallets, and trading across 15 multiple-choice questions. You'll get instant feedback to spot gaps and build confidence as you go. When you're done, keep practicing with the basics quiz or go further with the fundamentals quiz .

What is the core purpose of a blockchain in cryptocurrency?
A centralized database for financial institutions
A programming language for smart contracts
A decentralized ledger that records transactions
A system to manage traditional bank accounts
A blockchain functions as a distributed ledger that chronologically records all transactions across a peer-to-peer network. Its decentralization ensures no single authority controls the record of transactions.
What is the term for the smallest unit of Bitcoin?
Gwei
Satoshi
Wei
Ether
The smallest divisible unit of a Bitcoin is called a satoshi, or 0.00000001 BTC. Other units like wei and gwei refer to denominations in the Ethereum network.
Which key is used to spend funds in a cryptocurrency wallet?
Mnemonic phrase
Wallet address
Private key
Public key
The private key is the secret value used to sign transactions and authorize the spending of funds. The public key and wallet address are derived from the private key but cannot themselves authorize spending.
In cryptocurrency, what does decentralization refer to?
A single central authority validating all transactions
State control over financial ledgers
Distribution of control among network participants
Storing data on a single server
Decentralization means that transaction validation and ledger maintenance are carried out by many independent nodes rather than a central authority. This spreads trust and reduces the risk of a single point of failure.
Which of the following best describes a 'hot wallet'?
A paper-based offline wallet
A hardware device kept in a safe
A wallet connected to the internet
An air-gapped cold storage solution
A hot wallet is any cryptocurrency wallet that is connected to the internet, making it convenient for frequent transactions. This connectivity also makes it more vulnerable to online attacks compared to cold storage.
What consensus mechanism does Bitcoin use?
Delegated Proof of Stake
Proof of Authority
Proof of Work
Proof of Stake
Bitcoin uses Proof of Work, which requires miners to solve complex computational puzzles to validate blocks. This mechanism secures the network by making malicious attacks computationally expensive.
Which term describes a digital contract that executes code when conditions are met?
NFT
DAO
Smart contract
dApp
A smart contract is a self-executing agreement with the terms directly written into code on the blockchain. It automatically enforces and executes actions when predefined conditions are met.
What does the gas fee in Ethereum primarily pay for?
Compute operations on the network
Minting NFTs exclusively
Reorganizing the blockchain
Storing tokens in a wallet
Gas fees compensate miners or validators for computing transactions and executing smart contracts on the Ethereum network. The fee varies with network demand and the complexity of the transaction.
Which attack involves controlling over 50% of a network's hash rate to double-spend?
Sybil attack
Replay attack
51% attack
DDoS attack
A 51% attack occurs when an entity gains majority control of the network's hashing power, allowing it to reverse transactions or double-spend coins. Other attack types do not rely on majority hashing power.
What is a multi-signature (multisig) wallet?
A wallet requiring multiple private keys to authorize a transaction
A wallet that stores coins on multiple blockchains
A wallet that automatically splits funds
A mobile wallet with group consensus
A multisig wallet mandates authorization from more than one private key before processing a transaction, enhancing security. It prevents unauthorized spending even if a single key is compromised.
How does a cold wallet enhance security?
By using stronger online encryption
By connecting only to secure websites
By storing private keys offline
By updating firmware automatically
Cold wallets keep private keys completely offline, protecting them from online hacks and malware. They are considered the safest storage method for long-term holdings.
Which cryptocurrency is known for smart contract functionality and the ERC-20 token standard?
Bitcoin
Ethereum
Litecoin
Ripple
Ethereum introduced a blockchain capable of executing smart contracts and standardized the ERC-20 token format for fungible tokens. Bitcoin does not natively support such contract capabilities.
What is the function of a hash in blockchain technology?
To store transaction logs directly
To sign transactions with a private key
To encrypt block data so no one can read it
To uniquely represent data as a fixed-size value
A cryptographic hash takes input data and produces a fixed-size string that uniquely identifies the data. It ensures integrity by making any change to input easily detectable.
Why are confirmations important in cryptocurrency transactions?
They increase user anonymity
They reduce transaction fees automatically
They verify the transaction is included in a block
They assign a new wallet address
Each confirmation indicates that a block containing the transaction has been added to the blockchain, making it increasingly immutable. Multiple confirmations reduce the risk of double-spending.
Which use case demonstrates blockchain in supply chain management?
Tracking provenance of goods
Testing quantum computing algorithms
Streaming music to users
Printing 3D models remotely
Blockchain supply chain solutions record each stage of a product's journey, ensuring authenticity and traceability. Other options do not leverage decentralized ledger properties for tracking.
What enables off-chain rapid transactions for Bitcoin by opening payment channels between users?
Sharding
Lightning Network
SegWit
Plasma
The Lightning Network creates bi-directional payment channels off-chain, allowing instant and low-cost Bitcoin transfers between participants. It settles the net result on the main chain to reduce congestion.
Which technique allows preserving transaction privacy via cryptographic proofs without revealing data?
Merkle proofs
Public - private key pairing
SHA-256 hashing
Zero-knowledge proofs
Zero-knowledge proofs enable one party to prove knowledge of data without exposing it, enhancing privacy in transactions. Merkle proofs verify data inclusion but do not conceal the underlying content.
What is sharding in the context of blockchain scalability?
Dividing network nodes into groups that process subsets of transactions
Increasing block size across the entire network
Compressing old blocks for storage
Merging multiple blockchains into one
Sharding partitions the blockchain network into smaller segments called shards, each handling a portion of transactions, thereby improving throughput. Other methods like block size increases do not achieve horizontal scaling as effectively.
In atomic swaps, what property ensures that either both parties exchange assets or neither does?
Decentralization
Atomicity
Immutability
Consensus
Atomicity guarantees an all-or-nothing exchange in atomic swaps, preventing one party from defaulting after the other has transferred assets. This mirrors traditional atomic transaction principles in computing.
Which feature differentiates proof-of-stake from proof-of-work?
It uses a more complex hashing algorithm
Transactions confirm faster by default
Validators stake tokens instead of solving computational puzzles
It relies on miners' specialized hardware
Proof-of-Stake selects validators based on the number of tokens they lock up (stake), reducing energy use compared to Proof-of-Work miners solving puzzles. Other options confuse features or outcomes rather than core differences.
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Learning Outcomes

  1. Analyse the fundamentals of blockchain technology
  2. Identify key terms and concepts in cryptocurrency
  3. Demonstrate understanding of digital wallet security
  4. Evaluate transaction processes across different cryptocurrencies
  5. Apply best practices for safe crypto trading
  6. Compare major cryptocurrency features and use cases

Cheat Sheet

  1. Understand Blockchain Fundamentals - Dive into how blockchains act as decentralized, tamper-proof ledgers where each block links securely to the previous one through cryptographic hashes, creating an unbreakable chain of trust. This technology powers everything from digital currencies to supply chain tracking, ensuring every transaction is transparent and verifiable. Ready to unravel the mystery?
  2. Learn Key Cryptocurrency Terms - Build a solid foundation by getting comfortable with buzzwords like decentralization, consensus mechanisms, mining, and more. These terms are your passport to understanding the crypto conversation and won't sound like alphabet soup once you've mastered them.
  3. Explore Digital Wallet Security - Your cryptocurrency is only as safe as your wallet, so discover why hardware wallets and cold storage methods are the gold standard for guarding private keys offline. Learn best practices for backups, PINs, and recovery phrases to sleep soundly at night knowing your digital coins are locked down.
  4. Examine Transaction Processes - See how transactions travel from your wallet into the blockchain through validation, block creation, and network consensus. Whether it's powering Proof of Work miners or staking in Proof of Stake, you'll understand what keeps the ledger honest and in sync.
  5. Apply Safe Trading Practices - Navigate exchanges like a pro by researching reputation, fee structures, and security measures before you trade. Understanding market volatility and setting stop-loss orders can help shield you from nasty surprises in the wild ride of crypto markets.
  6. Compare Major Cryptocurrencies - Get to know the big players, Bitcoin and Ethereum, by comparing their block times, consensus mechanisms, and real-world use cases. This side-by-side showdown will help you spot each blockchain's unique strengths and potential applications.
  7. Understand Smart Contracts - Picture contracts that execute themselves once conditions are met - no middlemen needed! These self-executing agreements on platforms like Ethereum streamline everything from payouts to legal clauses with foolproof code.
  8. Learn About Consensus Algorithms - Discover how networks agree on which transactions are valid - whether it's the energy-intensive Proof of Work or the energy-saving Proof of Stake model. Understanding these mechanisms will give you insight into blockchain security, speed, and scalability trade-offs.
  9. Study Cryptographic Hash Functions - These mathematical algorithms turn any data into a fixed-size string of characters, making it nearly impossible to reverse-engineer the original input. Hash functions are the glue that binds blocks together and ensure no one tampers with transaction history.
  10. Explore Decentralized Finance (DeFi) - Step into the world of DeFi, where lending, borrowing, and yield farming happen without banks, all powered by smart contracts. This financial frontier is reshaping how we think about saving, trading, and earning interest.
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