Quiz about What Is Cryptocurrency
Quiz about What Is Cryptocurrency

What Is Cryptocurrency? Trivia Quiz


Cryptocurrency is still in its infancy as a form of capital. Let's see what you know about this digital technology. Good luck!

A multiple-choice quiz by BigTriviaDawg. Estimated time: 4 mins.
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Time
4 mins
Type
Multiple Choice
Quiz #
408,521
Updated
Mar 16 22
# Qns
10
Difficulty
Average
Avg Score
6 / 10
Plays
154
Last 3 plays: Guest 175 (7/10), Guest 96 (6/10), Guest 173 (8/10).
1. From what is the term cryptocurrency derived?
Hint

It uses encryption to verify the transaction.
The "coiner" of the term loved the show "Tales from the Crypt".
It is mysterious and difficult to understand.
It has its origins on the dark web.

2. Which method do cryptocurrencies use for financial transactions? Hint

Third-party intermediary
Peer to peer
Quantum entanglement
Secure digital bank server

3. Which is NOT a typical way investors store their cryptocurrency wealth?
Hint

As a bond or CD
In an offline digital device
In a digital online wallet
As a mutual fund share

4. In 2009, which became the first cryptocurrency?
Hint

Bitcoin
LiteCoin
Ethereum
Ripple

5. What is the best description of a "blockchain"?

A cryptic firewall is placed around the transaction and only the two parties involved can access it.
Transactions get time stamped and publicly shared making them nearly impossible to be changed.

6. Bitcoins can be earned by mining. How does a person "mine" for a bitcoin?
Hint

By providing the mathematical proof of a new block.
By being the first to confirm the digital ledger of all the transactions in the block.
With your digital miner "Steve", a digital pickaxe, and a really fast computer.
By providing a secure digital server space for block transactions.

7. Which method do cryptocurrencies like Bitcoin and Etherium use to protect users wanting to conduct a transaction?
Hint

They use two-factor authentication.
Insurance policies protect a user from losses.
Each currency has its secure server and only validated users can enter.
All cryptocurrency users must pass a background check and have a crypto license to trade.

8. Which of the choices below is a big challenge with using "blockchain" for crypto transactions?
Hint

Corrupted files are difficult to identify.
It is a risk of being taken over by a rogue state.
It is usually stored in a central location.
Each transaction requires a huge amount of energy.

9. Which is NOT a reason why Cryptocurrencies can be considered risky investments?
Hint

Market value can be volatile.
Coins are easier to mine each year, flooding the market.
Scams can be hard to detect.
There is no transaction trail.

10. Often considered the first financial transaction with Bitcoin, What did Laszlo Hanyecz buy with 10,000 Bitcoin in 2010?
Hint

Two pizzas
A one-year membership to "Steam"
A Lamborghini
A laptop for his wife


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Quiz Answer Key and Fun Facts
1. From what is the term cryptocurrency derived?

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.
2. Which method do cryptocurrencies use for financial transactions?

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.
3. Which is NOT a typical way investors store their cryptocurrency wealth?

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.
4. In 2009, which became the first cryptocurrency?

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.
5. What is the best description of a "blockchain"?

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.
6. Bitcoins can be earned by mining. How does a person "mine" for a bitcoin?

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.
7. Which method do cryptocurrencies like Bitcoin and Etherium use to protect users wanting to conduct a transaction?

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.
8. Which of the choices below is a big challenge with using "blockchain" for crypto transactions?

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.
9. Which is NOT a reason why Cryptocurrencies can be considered risky investments?

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.
10. Often considered the first financial transaction with Bitcoin, What did Laszlo Hanyecz buy with 10,000 Bitcoin in 2010?

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.
Source: Author BigTriviaDawg

This quiz was reviewed by FunTrivia editor rossian before going online.
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