Blockchain Micro-Transaction System

Blockchain Micro-Transaction System

Answer the following questions

What is the traditional online advertising revenue model?

What are the drawbacks of the online advertising model?

How does cryptocurrency verify the authenticity of transactions?

Explain the "double-spending attack" and how it works in cryptocurrency.

How does blockchain technology solve the double-spending attack problem?

What is "proof of work"?

What is "proof of stake"?

What is the role of "smart contracts" in a blockchain-based system?

Describe the purpose of "shadow ledgers" in the described system.

Explain how this system reduces or eliminates advertising on websites.

Answer

The traditional online advertising revenue model relies on inserting advertisements into website content. Website owners receive revenue from advertisers based on the number of click-throughs or impressions of the ads.

The drawbacks of the online advertising model include: causing interference and deception to users, causing users to be disgusted and use ad blocking technology; reduced advertising effectiveness, reduced user memory and engagement with ads; and privacy issues, because advertisers collect and analyze users' online behavior data in order to deliver targeted ads.

Cryptocurrency uses asymmetric encryption technology to verify the authenticity of transactions. The user digitally signs the transaction information with his private key, and other users in the network can use the user's public key to verify the validity of the signature, thereby confirming that the transaction was initiated by the user.

A "double-spending attack" is when an attacker attempts to spend the same cryptocurrency multiple times. The attacker can do this by broadcasting conflicting transaction information to different parts of the network.

Blockchain technology solves the double-spending attack problem by grouping transactions into blocks and using a consensus mechanism. All transactions are considered unconfirmed until they are packaged into a block and confirmed by the network. Once a transaction is packaged into a block, it becomes part of the blockchain history and cannot be tampered with or revoked, thus preventing double spending.

"Proof of Work" is a consensus mechanism that requires miners to complete a lot of computing work to solve a mathematical puzzle in order to gain the right to create a new block. The first miner to solve the puzzle will receive a block reward, and the block it creates will be added to the blockchain.

"Proof of Stake" is another consensus mechanism that selects nodes to create new blocks based on the amount of cryptocurrency held by the validator in the network. Validators who hold more cryptocurrency are more likely to be selected to create new blocks, thereby receiving block rewards.

In blockchain-based systems, "smart contracts" are computer programs stored on the blockchain and automatically executed by the network. They can be used to automate transactions and enforce agreements without the need for a third-party intermediary.

In the described system, the "shadow ledger" is a centralized database that records transactions that have been verified but not yet posted to the blockchain. It allows transactions to be processed in batches, which reduces transaction fees and increases the speed of transaction processing.

The system allows users to pay for ad-free content or services using virtual currency. Users can earn virtual currency by completing tasks provided by advertisers or website owners. This creates a simpler and more direct online service experience for content providers and users, while providing a new source of income for website service providers.

Essay Questions

Key Terms

Term Definitions Blockchain A decentralized database that records transaction information and is linked together in blocks. Cryptocurrency A digital or virtual currency that uses cryptography to secure transactions and control currency issuance. Smart contracts are computer programs stored on the blockchain and automatically executed by the network. Shadow ledger A centralized database that records transactions that have been verified but not yet posted to the blockchain. Microtransactions are transactions of very small amounts, usually in pennies or less. Proof of WorkA consensus mechanism that requires miners to complete a large amount of computing work to solve a mathematical puzzle in order to obtain the right to create a new block. Proof of StakeA consensus mechanism that selects nodes to create new blocks based on the amount of cryptocurrency held by the validator in the network. Asymmetric encryptionA cryptographic method that uses a public and private key pair to encrypt and decrypt information. Digital signatures use private keys to encrypt data to prove the authenticity and integrity of the data. A double-spending attack occurs when an attacker attempts to spend the same cryptocurrency multiple times.