Blockchain and Fintech

Fintech Questions
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Part A
Question 1
Digital ledger technology refers to a system that uses a distributed network to store a database. The database is replicated among multiple computers in the network, which makes it highly improbable for a person or entity to interfere with the data stored in the database.
Blockchain refers to a type of digital ledger technology that is highly transparent and secure. Information is stored in blocks that are interconnected to each other. For each link in the blockchain, a cryptographic signature is used to hash data.
Question 2
Blockchain

Digital Lender Technology (DLT)

A specific type of DLT that uses a network of computers to store information securely in blocks.

Refers to a system using distributed ledgers to make hacking or interreference highly improbable.

The structure is such that each block of information is connected to the next.

Refers to a network of computers each having a copy of similar information.

Very transparent as data in the system is available to the public.

Transparency depends on how the system is implemented.

Question 3
In blockchain technology, data is stored on a distributed network, while data is stored on a central server in traditional databases. Blockchain technology is highly secure, while traditional one is significantly vulnerable as all data is stored in a single server. In addition, blockchain technology requires consensus mechanisms such as proof of work, while a traditional database is centrally controlled.
Question 4
Immutable refers to the quality of being unchanging. In the context of data/ information management, being immutable means that once the data has been recorded, it is highly resistant to changes. In systems that implement immutability, altering data without leaving a trace is highly improbable. Therefore, immutability greatly helps maintain data integrity.
Question 5
It is advantageous to use blockchain as it is highly secure, has a high level of transparency, has a high level of efficiency since most tasks can be automated, and is highly cost-effective. Some disadvantages associated with the use of blockchain technology include complexity in implementation, lack of appropriate regulatory frameworks, which may cause some people/ entities to have low trust, and use of intense energy to carry out operations such as mining.
Question 6
Proof of work refers to the technique used to achieve consensus in blockchain technology. Proof of work has been successfully used in the implementation of Bitcoin. It involves solving a highly complex mathematical problem. The miner who solves the problem gets their block added to the chain, and they receive some form of reward. For the Bitcoin system, the reward is newly made Bitcoin.
Question 7
Proof of Stake is another form of validation used in blockchain technologies like Bitcoin. Here, the entity carrying out validation should prove they have some stake in the network. The more stake one has, the more transactions one can validate. The stake is often measured in terms of tokens. For the Bitcoin network, the number of tokens is directly proportional to the amount of cryptocurrency that one has in the network.
Question 8
Smart contract is a relatively new techn...