Free ECCouncil 312-82 Practice Exam with Questions & Answers | Set: 2

Public blockchains most commonly useProof of Work (PoW)as their consensus mechanism, especially in well-established networks such as Bitcoin and, until recently, Ethereum. PoW is a protocol that relies on network participants (miners) solving complex mathematical problems to validate and add transactions to the blockchain. This process ensures the integrity and security of the network, as it requires substantial computational power and resources, making it difficult for any single entity to control the blockchain.

Key Details:

Proof of Work (PoW): PoW, used primarily by Bitcoin, operates by having participants (often referred to as miners) compete to solve cryptographic puzzles. The first to solve the puzzle adds the next block of transactions to the blockchain and is rewarded with newly minted coins. This system is energy-intensive but is widely recognized for its security and resistance to tampering.

Transition in Other Networks: While Ethereum initially used PoW, it transitioned toProof of Stake (PoS)in 2022 with Ethereum 2.0, due to PoS's lower energy requirements and increased scalability. However, Bitcoin, the most prominent public blockchain, still relies on PoW.

Other Consensus Mechanisms: Alternatives such asProof of Stake (PoS)andProof of Burn (PoB)are used by other blockchain networks that aim for different trade-offs in terms of energy efficiency, scalability, and security.Proof of Elapsed Time (PoET)is another mechanism mostly associated with permissioned (private) blockchains rather than public blockchains.

Why PoW for Public Blockchains?: Public blockchains prioritize decentralization and security. PoW provides a robust way to achieve this, despite its high energy consumption. Its high level of security and historical success in Bitcoin’s network often make it the go-to choice for public blockchains.

In summary, the dominance of PoW in public blockchains is due to its established security and proven track record, although PoS and other mechanisms are increasingly gaining popularity for their efficiency in newer blockchain projects.

Ahard forkoccurs when there is a fundamental change in a blockchain’s protocol, resulting in the creation of a new chain that is incompatible with the previous one. After a hard fork, nodes must upgrade to the new version of the blockchain’s software to continue participating in the network. A hard fork can be used to implement new features, fix security issues, or change core aspects of the blockchain.

Key Details:

Differences from Soft Forks: Unlike a soft fork, which is backward-compatible and allows nodes on the previous version to still participate, a hard fork splits the blockchain into two distinct paths, with the upgraded path requiring new software.

Examples: Notable hard forks include Bitcoin Cash from Bitcoin and Ethereum Classic from Ethereum. These forks occurred due to disagreements within the community on how to handle certain protocol changes, leading to the creation of separate blockchains.

Upgrade Requirements: Participants on the blockchain who wish to continue on the new chain after a hard fork must update their software. Those who do not upgrade remain on the original chain, which continues as a separate, incompatible blockchain.

Thus, the correct answer isHard fork (A), as it directly refers to a blockchain split that requires client upgrades for participation.

Ethereum uses Ethashas its Proof of Work (PoW) algorithm, whileBitcoin uses SHA-256for its PoW algorithm. Both are used to secure their respective networks, but they differ in terms of computational complexity and memory requirements.

Key Details:

Ethash (Ethereum): Ethash is a memory-hard hashing algorithm designed to be resistant to ASIC mining, favoring GPU miners instead. It requires substantial memory, which helps to ensure a higher degree of decentralization.

SHA-256 (Bitcoin): Bitcoin’s SHA-256 is a highly secure hashing algorithm that supports ASIC mining. It is computationally intensive but less memory-demanding compared to Ethash.

Purpose in PoW: Both algorithms enable miners to validate transactions and secure the network by solving complex puzzles. Ethash's design helps Ethereum maintain a decentralized network, whereas SHA-256 allows Bitcoin to achieve high levels of security with specialized mining equipment.

Therefore,D. ETHASH SHA-256is the correct answer, as these are the specific PoW algorithms used by Ethereum and Bitcoin, respectively.

APermissioned ledgeris a blockchain where participants are known and trusted, and access to the network is restricted to authorized entities. Permissioned ledgers are commonly used in enterprise and consortium settings where privacy, compliance, and control over data are essential.

Key Details:

Controlled Access: In a permissioned ledger, only pre-approved participants can validate transactions and participate in the consensus process. This model ensures that all network members are identified and trusted, which is ideal for environments requiring a higher level of control and privacy.

Use Cases: Permissioned ledgers are widely used in industries such as finance, healthcare, and supply chain, where it’s important to know and trust participants due to regulatory or operational needs.

Contrast with Permissionless Ledgers: Unlike permissionless ledgers (such as Bitcoin), which allow anyone to join and participate in the network, permissioned ledgers restrict participation to entities that meet specific criteria.

Thus,A. Permissioned ledgeris the correct answer, as it describes a blockchain network where participants are known and trusted.

FinCENrequires money transmitters and companies involved in virtual currency (CVC) transmission to report suspicious transactions as part of their anti-money laundering (AML) responsibilities. This is in addition to maintaining an effective AML program and registering as a money service business (MSB).

Key Details:

AML Program: The program must be reasonably designed to detect and prevent the use of financial services for money laundering or terrorist financing.

Reporting Suspicious Activity: FinCEN mandates that companies must file Suspicious Activity Reports (SARs) for any transactions that appear to be potentially suspicious or indicative of illegal activities.

Regulatory Compliance: This requirement ensures that businesses adhere to federal regulations, contributing to a secure financial system by monitoring and reporting illicit activity.

Therefore,A. Report suspicious transactionsis the correct answer, as this is a key requirement for companies under FinCEN’s regulations regarding money transmission and virtual currencies.