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Top 10 Asked Blockchain Interview Questions & Answers

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Blockchain
Blockchain

Since its inception, blockchain, the decade-old technology has found application across most industries with up to 90% of banks across the US and Europe expressing their interest in the revolutionary technology. Other sectors like government, insurance, healthcare, and more have also immensely benefited from a technology that has completely disrupted operations and incredibly transformed service delivery. Yet blockchain’s full potential is yet to be unveiled as more businesses harness the power of blockchain technology to turn their future into a fortune. Industry experts, investors, developers, and other tech enthusiasts are coming up with innovative blockchain solutions every other day. 

India’s Mumbai state has often been regarded as the country’s financial capital attracting not only financial start-ups and investments but also growth in blockchain technology innovation particularly in the fields of banking, insurance, and finance. No doubt the demand for blockchain talent has risen considerably across these industries over the years. There has never been a better time than now for aspiring tech professionals to undertake blockchain certification in Mumbai

Here is a glimpse of some common interview questions that they should expect in their quest for lucrative opportunities. 

1. Why is blockchain a trusted approach? 

There are several reasons that make blockchain a trusted network. These are centered around data storage, distribution, and management. 

To begin with, blockchain is a peer-to-peer network. It uses an advanced security mechanism known as a consensus algorithm to preserve the security of the system and the data contained in it against unauthorized third-party manipulation. Thus, with blockchain, data access is strictly limited to the entity that owns the data.  

Secondly, entries stored in the blockchain network are time-stamped hence traceable anytime through an audit trail of the records. Further, entries in the blockchain network are immutable. Once data is entered, authorized, and encrypted, it cannot be altered. Transparency is also guaranteed in the decentralized nature of blockchain technology. 

Finally, blockchain is capable of being integrated with business systems because it is open-source.

2. How does blockchain, a distributed database system, differ from traditional databases? 

The main distinction between blockchain and traditional databases is that blockchain is a decentralized database. In the blockchain database, blocks are replicated for each participant on the network. Each peer can validate a transaction and updates will be replicated to all the other peers. In the event of an inconsistent record, the blockchain system will detect the record and correct it based on the principles of consensus and smart contracts.   

Although some traditional databases are distributed like blockchain, they are centrally managed by a database administrator whose role is to update records in the database. This makes traditional databases prone to alteration and human error. In addition, traditional databases have the capabilities to perform CRUD operations hence store persistent data.  

3. What are blocks in the blockchain and how are they created? 

Information in blockchain is stored in blocks linked together to form a chain hence the name. Each block in a chain has three key features, the data stored in it,  a unique nonce, and a hash. The most recent transactions are entered in blocks. Once the required volume of data has been entered in a block, a new block is automatically created and entries made into it. A complete block is linked to the previous block referenced by sequenced hash value. Each block’s identifiers are unique.  

4. Explain hashing in blockchain

A hash function is the backbone of blockchain technology. Hashes are typically fixed in length yet the system will use input data of any length to produce the same hash value. This makes entries in the blockchain system more secure as it will be almost impossible for a third party to crack the chain of blocks. 

5. What are Merkle trees in blockchain and what is their function?  

Merkle Trees, also known as hash trees, are blockchain’s data structures created using cryptography. Every leaf node in the Merkle Tree represents the hash of a block of data while the non-leaf nodes represent the hash of its child nodes. Each node usually has up to two children since Merkle Trees have a branching factor of two. Essentially, the Merkle Tree is a presentation of the hashes of all the transactions contained in different blocks of data. 

The Merkle Tree is important for several reasons

  • It allows for fast and secure traceability and verification of individual transactions in the blocks.  
  • It enables participants to check the credibility and validity of the data contained in the blocks
  • Merkle trees use up very little memory, making computation of proofs fast. 

6. What is double-spending and how can double-spending be prevented? 

Double spending happens when a digital currency is spent more than once most often due to the high risk of cloning the digital file contained in the digital currency. This happens without being detected by the network security. 

Blockchain technology is designed to prevent double-spending by confirming the transaction across peers with the help of consensus algorithms before being validated and recorded in a block. Once an entry is made, it becomes immutable.  

7. Explain 51% attack in blockchain

51% attack occurs when more than 50% of a network’s hash capacity is controlled by miners. This gives the miners the power to influence transactions, say, by preventing their entry, verification, or even reversing the transactions already entered into the system. Reversing transactions that have been verified results in double spending which is a cause for inflation and other problems. 

8. What are some common consensus algorithms? 

A consensus algorithm is a mechanism through which the blockchain network protocol ensures that the nodes in a network all agree on the validity of transactions in the network. A consensus algorithm is the blockchain fundamental that achieves security and fault tolerance. 

Some common consensus algorithms include:

  • Proof of Work (PoW) 
  • Proof of stake (PoS) 
  • Delegated Proof of Stake (DPoS)
  • Proof of Elapsed Time (PoET)
  • Practical Byzantine Fault Tolerance (PBFT)
  • Proof of Authority (PoA) 

9. Explain secret sharing. What are the benefits of secret sharing in blockchain?  

Secret sharing, also known as secret splitting, is a system that blockchain technology employs to enable more secure storage of sensitive information such as encryption keys, customer information, and bank account details. In secret sharing, information is stored in a decentralized way across parties such that each node stores only a part and not the full replication of information. This way, the secret can only be reconstructed if the threshold of shares held by a number of the participants has been met and the shares under their control merged.  

Some benefits associated with secret sharing include:  

  • Enabling more secure storage of highly sensitive information 
  • Secret sharing eliminates a single point of failure in the blockchain system that could lead to the loss of sensitive information. 
  • Provides a means of authentication when providing access to a remote system

10. What is dApp and how is it different from a normal app?  

dApps, an abbreviation for decentralized applications, are applications that are designed to run on decentralized systems like blockchain. dApps are open source and are secured in the network using a cryptographic token. Data stored in dApps is public.  

Normal applications, on the other hand, are not designed to run on a peer-to-peer network and are not necessarily open source. Most applications are developed through commercial projects and do not, therefore, allow code sharing.  

Conclusion 

The cost of information leaks to companies and businesses cannot be underestimated. This include:

  • Cost of damaged reputation 
  • Loss of business as a result of loss of customer trust and ultimately their withdrawal 
  • Loss in the course of operations disruption
  • Cost of legal action and regulation non-compliance 
  • Loss of company value during mergers and acquisitions 

Blockchain technology carries a huge potential to mitigate these risks thanks to its potential to support highly private transactions and data confidentiality. Blockchain-powered platforms are not only decentralized but are also scalable and interoperable.  

Tabrez ahemad

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