Question

Question 3 (20 marks) a) Compare and contrast regular currency with cryptocurrency such as Bitcoin-tabulate and discuss six differences. (18 marks) b) Identify two underlying technologies that power the Bitcoin to guarantee its validity and trustworthiness. (2 marks)

Answer 1

The 2 questions asked are

a) Compare and contrast regular currency with cryptocurrency such as Bitcoin -- tabulate and discuss six differences.

b) Identify two underlying technologies that power the Bitcoin to guarantee its validity and trustworthiness.

a) Let us look at the differences

Cryptocurrency	Regular currency
It is a decentralized type of currency	It is regulated by government and banks
Regular users do mining for transactions	Bank servers are used to do transactions
It is completely anonymous	Government and banks have data on all kinds of transactions
Transaction time is dependent on network speed, but completes in few minutes	International Transactions may take upto several days
No refund, as there is no central system transactions can't be reversed.	Refund can be done, subject to few conditions.
Transaction is strictly between two parties.	A third party like bank is needed to complete transaction.

b) Technologies that power the Bitcoin to guarantee its validity and trustworthiness are

As we know bitcoin is powered by blockchain.

In blockchain, Blocks are arranged one after the other in a continuous process with the help of mining. Here if a hacker wants to manipulate the numbers, then they must create a parallel chain of blocks as long as the current one, but creation of this seems to be next to impossible because they require huge computing power.

For miners, in order to add new block to the chain, they will have verify the hash value of the block. If there is any tampering, then hash value will differ. This is how the validity is checked.

Trustworthiness increases when the chain is of big length and it attracts more miners in addition to increase the trust among a group of peers.

Hope, this answer helps.