Top Blockchain Interview Questions

A Blockchain is a constantly growing ledger(file) that keeps a permanent record of all the transactions that have taken place, in a secure, chronological, and immutable way. It can be used for the secure transfer of money, property, contracts, etc. without requiring a third-party intermediary like a bank or government.

 

Blockchain is the backbone of the most famous cryptocurrency named Bitcoin. It is a peer-to-peer electronic cash system and a decentralized network that allows users to make transactions directly without the involvement of a third party to manage the exchange of funds. Some of the frequently asked questions in the interview are given below:

 

 

• What is Blockchain?

 

Blockchain is a peer-to-peer network with its own algorithm for reaching consensus. The main reason for its trustworthiness is the way it stores and handles data. It employs cryptographic algorithms to safeguard data against third-party malicious actors. This means that only the entity that owns the data will have access to it.

 

Furthermore, the data stored in the blockchain can be traced at any time, increasing transparency. Another feature that makes blockchain trustworthy is data integrity. Data cannot be changed after it has been written using this feature.

 

Blockchain is a method of recording information that makes it impossible or difficult for the system to be changed, hacked, or manipulated. A blockchain is a distributed ledger that duplicates and distributes transactions across the network of computers participating in the blockchain.

 

Blockchain technology is a structure that stores public transactional records, also known as blocks, in several databases connected by peer-to-peer nodes in a network. Typically, this storage is referred to as a ‘digital ledger.’

 

Every transaction in this ledger is authorized by the owner's digital signature, which authenticates the transaction and prevents it from being tampered with. Hence, the information the digital ledger contains is highly secure.

 

In a nutshell, the digital ledger is similar to a Google spreadsheet shared among multiple computers on a network, where transactional records are stored based on actual purchases. The fascinating angle is that anybody can see the data, but they can’t corrupt it.

 

After the success of Bitcoin, Blockchain technology came to the limelight. Today, it has emerged as one of the most popular and digitally disruptive technologies in the industry. While Blockchain has already made it big in the Finance sector, other sectors like Healthcare, Manufacturing & Retail, and Logistics are also adopting the breakthrough tech. As a result, the demand for Blockchain skills is increasing right now. According to Glassdoor data, between August 2017 and August 2017, the number of blockchain jobs in the United States increased by 300%!

 

Also Read | What is a Blockchain and How does it work?

 

 

• How does Blockchain Technology Work? 

 

In recent years, you may have noticed many businesses around the world integrating Blockchain technology. But how does Blockchain technology actually work? Is this a significant change or a simple addition? The advancements of Blockchain are still young and have the potential to be revolutionary in the future; so, let’s begin demystifying this technology.

 

Blockchain is a combination of three leading technologies:

 

1. Cryptographic keys
2. A peer-to-peer network containing a shared ledger
3. A means of computing, to store the transactions and records of the network

 

Cryptography keys consist of two keys – A private key and a Public key. These keys help in performing successful transactions between two parties. Each individual has these two keys, which they use to produce a secure digital identity reference. This secured identity is the most important aspect of Blockchain technology. In the world of cryptocurrency, this identity is referred to as a ‘digital signature’ and is used for authorizing and controlling transactions.

 

The digital signature is merged with the peer-to-peer network; a large number of individuals who act as authorities use the digital signature in order to reach a consensus on transactions, among other issues. When they authorize a deal, it is certified by a mathematical verification, which results in a successful secured transaction between the two network-connected parties. To summarize, Blockchain users use cryptography keys to perform various types of digital interactions across the peer-to-peer network.

 

Firstly, a user or a node will initiate a transaction by signing it with its private key. Basically, the private key will generate a unique digital signature and make sure that no one can alter it. In reality, if the transaction information is changed, the digital signature will change dramatically and no one will be able to verify it. As a result, it will be dismissed.

 

The transaction will then be broadcast to the verifying nodes. Basically, here, the blockchain platform can use different methods to verify whether the transaction is valid or not. These methods or algorithms are called consensus algorithms.

 

A bitcoin block is a component of the bitcoin network. A block stores transactional data indefinitely. Also, the blocks are always sequential, and new data is added to the latest block. Simply put, it is a record book with a fixed size. When a block is finished, a new block is generated and added to the chain of blocks. This is where the name of the “block” chain came from. All the information in the block is encrypted and can only be accessed by the receiver and sender.

 

 

• What are the types of Blockchains?

There are four different types of blockchains. They are as follows:

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Types of Blockchain 

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Private Blockchain Networks:

 

Private blockchains operate on closed networks and tend to work well for private businesses and organizations. Companies can use private blockchains to tailor their accessibility and authorization preferences, network parameters, and other critical security features. Only one authority manages a private blockchain network.

 

 

Public Blockchain Networks:

 

Bitcoin and other cryptocurrencies originated from public blockchains, which also played a role in popularizing distributed ledger technology (DLT). Public blockchains also help to eliminate certain challenges and issues, such as security flaws and centralization. With DLT, data is distributed across a peer-to-peer network, rather than being stored in a single location. A consensus algorithm is used for verifying information authenticity; proof of stake (PoS) and proof of work (PoW) are two frequently used consensus methods.

 

 

Permissioned Blockchain Networks:

 

Also sometimes known as hybrid blockchains, permissioned blockchain networks are private blockchains that allow special access for authorized individuals. Organizations typically set up these types of blockchains to get the best of both worlds, and it enables better structure when assigning who can participate in the network and in what transactions.

 

Consortium Blockchains:

 

Similar to permissioned blockchains, consortium blockchains have both public and private components, except multiple organizations will manage a single consortium blockchain network. Although these types of blockchains can initially be more complex to set up, once they are running, they can offer better security. Furthermore, consortium blockchains are ideal for collaboration among multiple organizations.

 

Also Read| What is a Consortium Blockchain?

 

 

• What are the Pros and Cons of Blockchain Technology? 

 

Blockchain cryptography has the potential to significantly alter the future. However, a technology with this much clout will have both positive and negative consequences. Below are the pros and cons to consider for individuals, businesses, and other entities.

 

Pros:- 

 

1. Blockchain Technology Is Decentralized:

 

The primary distinction between the US dollar and blockchain-powered cryptocurrencies is the lack of a centralized regulatory body. The Federal Reserve issues and regulates the US dollar. However, digital currency is not controlled by any government agency.

 

Therefore, it is challenging for an external influence to destroy the existence of the blockchain network. With no intermediaries charging fees, the decentralized landscape of digital currency reduces overall costs. The blockchain network is also continuously operational 24 hours a day, seven days a week, 365 days a year.

 

2. Precision and Security:

 

The blockchain network has an extremely low error rate. Because humans are not involved in each transaction, there is less chance for mistakes.
 

The network of nodes confirms and verifies each blockchain subtransaction, which makes the whole blockchain accurate. It is also difficult to alter information or financial data, reducing the possibility of fraudulent activity.

 

 

Cons:- 

 

1. Blockchain cryptocurrency prices are volatile, making them a risky investment.

 

Cryptocurrency investors seek massive returns with numerous options. Because there is a lot of freedom within cryptocurrency transactions, this concept makes it prone to volatility. A lack of central authority has advantages, but no governing body can regulate a significant price change.

 

2. Criminals Make Use of Cryptocurrency.

 

Criminals were among the first to use cryptocurrency due to the anonymity provided by blockchain technology. Bitcoin would be used to buy and sell illegal goods on underground marketplaces such as the Silk Road. Although blockchain cryptography allows both parties to maintain their privacy, criminals have undoubtedly taken advantage of the system.

 

3.  Inefficient Bitcoin Blockchain Processing Time.

 

Aside from bitcoin, there are numerous cryptocurrencies with faster processing times. However, bitcoin transaction processing is significantly slower than that of a traditional credit card company. While Bitcoin can process seven transactions per second, Visa can process 24,000 transactions per second.

 

Conclusion:

 

Blockchain technology is only scratching the surface. As more people adopt the technology, we will begin to see how it will change life for businesses, supply chains, medical networks, and individual investors.

 

Although Bitcoin and Ethereum are the two most popular blockchain applications, the technology is used by thousands of other digital currencies. We are still learning whether the digital currency will replace traditional payment methods, but the potential applications are limitless.

 

The future of blockchain is bright. It is currently in its growth phase, which means it is expanding both technologically and in terms of adoption. Its applications in nearly every industry speak volumes about its future. As more investors become interested in blockchain technology, we will see a significant impact on the blockchain, both industrially and in everyday life. It will also be used in conjunction with other technologies, such as AI and big data, to improve its effectiveness and practicality.

 

All of these blockchain technology questions will help you prepare for the big interview. But keep in mind that a blockchain interview requires extensive preparation. So, make sure to go through all of the questions and solidify your fundamentals.

Also Read | 4 Types of Blockchain