Block Chain & Crypto-Currencies (CY-702 (B)) - Important Questions

Explain the fundamental properties of cryptographic hash functions used in blockchain systems: pre-image resistance, second pre-image resistance and collision resistance. Give examples of how each property prevents specific attacks in a blockchain.

Explain consensus algorithms used in blockchain. Compare and contrast Proof-of-Work (PoW) and Proof-of-Stake (PoS) in terms of security assumptions, validator incentives, energy/resource usage, finality and resistance to common attacks.

Describe the structure of a Bitcoin block header. Explain the role of each field (version, previous block hash, Merkle root, timestamp, difficulty target, nonce) and how mining uses the header to secure the network.

Explain how Merkle trees are constructed from transaction hashes. Describe how a Merkle proof (Merkle path) is generated and used to verify the inclusion of a transaction in a block.

Given $T$ as the target threshold and $H$ as the hash attempts per second of a miner, derive the expected time to find a valid nonce in a Proof-of-Work system. Express the expected number of hash attempts and the expected time using mathematical formulas.

Provide the expressions: $$\text{Expected\_attempts} = \frac{2^{256}}{T}$$

and

$$\text{Expected\_time} = \frac{2^{256}}{T \cdot H}.$$

Construct a Merkle tree for four transactions with given hash labels $H_1, H_2, H_3, H_4$. Show the computations of intermediate nodes and the Merkle root. Explain how you would provide a compact proof for $H_3$.

Discuss the 51% attack: explain how it is performed in a PoW blockchain, its consequences (double spending, chain reorganization), and defenses or mitigation strategies.

Compare and contrast Delegated Proof-of-Stake (DPoS), Practical Byzantine Fault Tolerance (PBFT) style consensus and Proof-of-Stake (PoS) in terms of throughput, latency, decentralization and fault tolerance. Give example blockchains that use each consensus.

Explain why SHA-256 is used in Bitcoin. Describe its main design properties and discuss any relevant collision or pre-image resistance considerations for blockchain security.

Describe how Merkle roots enable light clients (SPV clients) to verify transactions without downloading full blocks. Explain the protocol messages involved and the security assumptions required for SPV verification.