Blockchain Interview Questions

Blockchain is like a digital ledger or notebook that is shared with many people. Imagine you and your friends are keeping track of who owes whom money, but instead of one person writing everything down, everyone has the same copy of the notebook. Whenever someone writes a new entry (like a payment), everyone updates their notebook.

Each page in the notebook is like a block, and the pages are linked together in order, creating a chain of blocks — hence the name Blockchain.

• Decentralized: There is no single person in charge. Everyone in the group shares and verifies the information.
• Secure and Transparent: Once something is written in the notebook, it cannot be easily changed, and everyone can see the same version.
• Used for Trust: This system helps people trust each other even if they don’t know each other — like in cryptocurrencies such as Bitcoin.

So in simple terms, blockchain is a way to record information that is secure, transparent, and shared with many people instead of being controlled by one central authority.

Blockchain technology offers several key features that make it unique and secure for handling digital transactions and data storage:

• Decentralized: There is no central authority managing the network. Every node holds a copy of the ledger and collectively contributes to verifying transactions.
• Immutable: Once a transaction is recorded on the blockchain, it cannot be changed or tampered with. This ensures the integrity of the data over time.
• Security: Transactions are validated by the majority of nodes before being added to the chain. Blockchain also uses strong cryptographic algorithms like SHA-256 to protect data.
• Open Ledger: Every transaction is visible to all participants in the network. This transparency builds trust among users as everyone can verify the activities independently.
• Consensus Mechanism: Blockchain networks follow a consensus algorithm to agree on the current state of the ledger. This process ensures that all nodes have a consistent and validated version of the data.

The Consensus Mechanism in Blockchain is a set of rules and procedures used to achieve agreement among distributed nodes on the validity of transactions and blocks. It ensures that only one valid version of the ledger exists, eliminating issues like double-spending and fraud. No block is added to the chain unless all nodes agree on it.

This mechanism is critical for ensuring reliability, consistency, and trust in a decentralized network.

Common Consensus Algorithms:

• Proof of Work (PoW): Miners solve complex mathematical puzzles to validate transactions. Used in Bitcoin.
• Proof of Stake (PoS): Validators are chosen based on the number of coins they hold and are willing to 'stake.'
• Proof of Elapsed Time (PoET): Random wait time is assigned to each node, and the one with the shortest time gets to add the block.
• Proof of Capacity: Uses available hard drive space for mining rather than computing power.
• Proof of Burn: Involves 'burning' coins by sending them to an unusable address to demonstrate commitment.

Bitcoin and Ethereum are both popular blockchain-based cryptocurrencies, but they differ in their goals, features, and capabilities.

Key Differences:

A Merkle Tree is a binary tree data structure used in blockchain technology to efficiently and securely verify the integrity of large sets of data, such as transactions in a block.

Each leaf node in a Merkle Tree is a cryptographic hash of a block of transaction data. Each non-leaf node is a hash of its two child nodes. The process continues recursively until the topmost node is formed, known as the Merkle Root.

Key Features of Merkle Tree:

• Efficient Verification: Enables quick verification of data integrity and consistency.
• Security: Uses cryptographic hashing to secure data, ensuring any change in transaction data changes the Merkle root.
• Compact Proof: Allows Merkle Proofs (a small amount of data) to prove a specific transaction exists in a block without revealing the entire data.

This structure is critical in blockchain systems like Bitcoin and Ethereum for validating transactions and ensuring data has not been tampered with.

Blockchain and Hyperledger are both distributed ledger technologies, but they differ in purpose, accessibility, and use cases.

Key Differences:

A 51% attack is a situation in blockchain technology where a single entity or group gains control of more than 50% of the network’s mining or computational power.

This majority control allows the attacker to:

• Prevent new transactions from being confirmed, effectively halting payments between users.
• Double-spend coins by reversing transactions that were previously confirmed.
• Monopolize mining and gain unfair rewards.

Such an attack compromises the integrity and trust of the blockchain, especially in smaller networks where gaining majority power is easier.

Double Spending is a scenario in which the same digital currency is spent more than once. Since digital tokens are essentially data files, they can be duplicated and fraudulently reused, leading to unauthorized transactions.

This issue can cause:

• Inflation – more coins in circulation than actually exist.
• Financial losses for merchants and users.
• Loss of trust in the digital currency system.

How Blockchain Prevents Double Spending:

• Each transaction must be verified and validated by the network before being added to the blockchain.
• Once confirmed, the transaction is permanently recorded in a block, making it immutable.
• Other nodes check the transaction history to ensure the same coins haven’t already been spent.

This decentralized confirmation process ensures security, trust, and data integrity in blockchain-based systems.

Blockchain is a distributed database of immutable records called blocks, which are secured using cryptography. A block contains a previous hash, transaction details, a nonce, and a target hash value. Each block is like a record of a transaction.

Once a block is verified, it is recorded in chronological order in the main blockchain. After the data is recorded, it cannot be modified.

There are three main types of blockchain:

• Public Blockchain: Ledgers are visible to everyone on the internet, and any user can verify and add transactions. Examples include Bitcoin and Ethereum.
• Private Blockchain: Ledgers are visible to users on the internet, but only specific users within an organization can verify and add transactions. Example: Blockstack.
• Consortium Blockchain: The consensus process is controlled by specific nodes, but ledgers are visible to all participants. Example: Ripple.

In blockchain, deploying a file with multiple contracts is not possible. The compiler only deploys the last contract from the uploaded file, and the remaining contracts are ignored.

The genesis block is the first block in the blockchain, also known as block 0. It is the only block that does not reference a previous block. The genesis block defines the blockchain's parameters, such as:

• Level of difficulty
• Consensus mechanism
• Other settings needed to mine blocks

The process of generating a block signature involves:

1. Passing transaction details through a one-way hash function, such as SHA-256.
2. Running the output through a signature algorithm (like ECDSA) with the user's private key.

The resulting encrypted hash, along with information such as the hashing algorithm used, is called the digital signature.

The main difference between public and private blockchains is the level of access:

• Public Blockchain: Anyone can read, write, or audit the blockchain. It is completely open and decentralized.
• Private Blockchain: Access is restricted to specific participants, and permissions are controlled by an organization or group.

Blockchain technology can be developed using various programming languages, including:

• C++
• Java
• Python
• Solidity

Blockchain technology is used in various real-world scenarios, such as:

• Cryptocurrencies (e.g., Bitcoin, Ethereum)
• Supply chain management
• Secure voting systems
• Healthcare data management
• Intellectual property protection
• Decentralized Finance (DeFi)
• Identity verification

A smart contract is a self-executing program stored on a blockchain that automatically enforces the terms of an agreement. Once deployed, it runs as programmed without the need for intermediaries, making transactions faster, cheaper, and more secure.

Smart contracts are widely used in decentralized applications (DApps), decentralized finance (DeFi), supply chain automation, and token issuance.

Consensus in blockchain refers to the process by which all nodes in the network agree on the validity of transactions and the state of the ledger. It ensures that the blockchain remains consistent and tamper-proof across all participants.

Common consensus mechanisms include Proof of Work (PoW), Proof of Stake (PoS), and Delegated Proof of Stake (DPoS).

A fork in blockchain occurs when the blockchain diverges into two potential paths. This can happen intentionally (hard fork) to implement major changes or unintentionally (soft fork) due to temporary differences in consensus between nodes.

Examples include Bitcoin Cash (a hard fork of Bitcoin) and protocol upgrades that remain backward-compatible (soft fork).

Mining in blockchain is the process of validating and adding new transactions to the blockchain by solving complex cryptographic puzzles. Miners compete to solve these puzzles, and the first to succeed adds the next block to the chain and receives a reward (usually in cryptocurrency).

Mining is essential for maintaining security, decentralization, and consensus in Proof of Work blockchains.