Bitcoin Cross-Chain Functionality Quiz

1. What are cross-chain bridges in the context of Bitcoin technology?

• Cross-chain bridges are tools that only facilitate payments within a single blockchain.
• Cross-chain bridges are protocols that enable the transfer of tokens and data across different blockchains.
• Cross-chain bridges are hardware devices used for storing cryptocurrencies securely.
• Cross-chain bridges are applications that allow for offline cryptocurrency transactions.

2. How does the locking and minting process work in cross-chain bridges?

• Cross-chain bridges work by locking assets on one blockchain and minting equivalent tokens on another blockchain.
• Cross-chain bridges require no involvement of smart contracts to manage asset transfers across blockchains.
• Cross-chain bridges simply transfer tokens without any locking mechanism or minting process.
• Cross-chain bridges convert tokens into fiat currency before moving them to another blockchain.

3. Can you give an example of how Bitcoin can be moved to another blockchain?

• Transferring Bitcoin directly to a centralized exchange.
• Copying Bitcoin to a different cryptocurrency wallet.
• Moving Bitcoin to Ethereum via a cross-chain bridge.
• Selling Bitcoin for Ethereum on a market platform.

4. What is the function of Wrapped Bitcoin (WBTC) in the blockchain ecosystem?

• Wrapped Bitcoin (WBTC) is a new cryptocurrency created by a private company.
• Wrapped Bitcoin (WBTC) is a form of stablecoin pegged to the US dollar.
• Wrapped Bitcoin (WBTC) serves as a bridge for Bitcoin to be used on Ethereum.
• Wrapped Bitcoin (WBTC) is a non-fungible token used for artwork on the blockchain.

5. Describe the process of redeeming original Bitcoin from a cross-chain transaction.

• The process requires sending Bitcoin directly to the Ethereum network without any locks or contracts.
• The process involves burning the WBTC on Ethereum, and the bridge releases the original Bitcoin.
• The process is done by converting Bitcoin into a stablecoin and then transferring it to another blockchain.
• The process entails holding Bitcoin indefinitely on one chain while waiting for approval from a centralized entity.

6. What role do smart contracts play in cross-chain Bitcoin transfers?

• Smart contracts ensure assets are locked and released correctly.
• Smart contracts are only used for transactions within a single blockchain.
• Smart contracts create new assets on the source blockchain.
• Smart contracts eliminate the need for any blockchain infrastructure.

7. What do we mean by cross-chain atomic swaps in cryptocurrency?

• Cross-chain atomic swaps are processes for creating new cryptocurrencies within a single blockchain.
• Cross-chain atomic swaps are systems for storing multiple cryptocurrencies in a single wallet.
• Cross-chain atomic swaps are methods of exchanging different cryptocurrencies directly between two peers without trust or third-party moderation.
• Cross-chain atomic swaps are protocols that facilitate the transfer of tokens between exchanges.

8. How is an atomic swap different from a regular cryptocurrency transaction?

• Atomic swaps only work within the same blockchain for transactions.
• Atomic swaps allow direct exchanges of cryptocurrencies without intermediaries.
• Atomic swaps require a third-party exchange to finalize the transaction.
• Atomic swaps create new tokens in the transaction process.

9. What technology underpins the operation of atomic swaps?

• Hash Timelock Contracts (HTLC)
• Private keys
• Multi-signature wallets
• Centralized exchanges

10. How do Hash Timelock Contracts (HTLC) facilitate secure swaps?

• HTLC eliminates the need for smart contracts entirely.
• HTLC simply tracks transactions on a single blockchain.
• HTLC requires third-party verification for swaps to occur.
• HTLC uses time-bound locks and hashes to ensure secure swaps.

11. Why are atomic swaps considered important in the blockchain realm?

• They increase transaction fees for users.
• They require trust between different blockchains.
• They limit transactions to a single blockchain.
• They remove centralized intermediaries for secure exchanges.

12. What is essential for the successful execution of cross-chain atomic swaps?

• Traditional banking infrastructure
• Centralized exchange authority
• Relative timelock operation
• Single blockchain protocol

13. Explain how cross-chain bridges improve blockchain interoperability.

• Cross-chain bridges serve as a method to secure private keys for blockchain wallets.
• Cross-chain bridges enable asset transfers between different blockchain networks without the need for intermediaries.
• Cross-chain bridges limit users to transactions within the same blockchain network.
• Cross-chain bridges only facilitate trades on centralized exchanges, not on decentralized ones.

14. What security risks are associated with using cross-chain bridges?

• Delayed transaction times
• Increased transaction fees
• Limited asset availability
• Security breaches and hacks

15. How do cross-chain bridges support an interconnected blockchain ecosystem?

• Cross-chain bridges serve as foundational infrastructure for cross-chain swaps, enabling seamless exchange of digital assets between different blockchain networks.
• Cross-chain bridges only allow the trading of assets on a single blockchain without connections to others.
• Cross-chain bridges create a new cryptocurrency that cannot interact with other tokens outside its network.
• Cross-chain bridges exclusively operate by locking all assets in one central location for security reasons.

16. What role do centralized exchanges play in cross-chain transactions?

• Centralized exchanges only allow trading on a single blockchain network.
• Centralized exchanges do not facilitate token transfers between different blockchain ecosystems.
• Centralized exchanges manage the cross-chain transaction process by taking custody of funds.
• Centralized exchanges eliminate the need for any blockchain interaction.

17. Define decentralized exchanges (DEX) within single blockchain contexts.

• A DEX is a type of blockchain that allows only peer-to-peer transactions without any additional functionalities.
• A DEX is a platform that relies on centralized order books for trading cryptocurrencies efficiently.
• A DEX is a specialized wallet used for storing digital assets securely on various blockchains.
• A DEX is a platform where users can trade assets within a single blockchain network without the need for centralized intermediaries.

18. How do cross-chain DEXs differ from traditional DEXs in functionality?

• Cross-chain DEXs only support tokens from a single blockchain.
• Cross-chain DEXs require users to convert tokens before trading.
• Cross-chain DEXs operate solely within centralized platforms.
• Cross-chain DEXs allow trading of assets from multiple blockchains seamlessly.

19. Can you provide an example of executing trades across different blockchains?

• Converting Bitcoin to a stablecoin on a DEX.
• Transferring Ethereum to Litecoin on a centralized exchange.
• Moving Bitcoin to Ethereum using a cross-chain bridge.
• Selling Bitcoin for cash and buying Ethereum.

20. Why is the value peg crucial between original and wrapped tokens?

• The value peg allows wrapped tokens to be sold for profit.
• The value peg ensures that wrapped tokens equal the original ones.
• The value peg creates new coins for trading.
• The value peg only regulates transaction fees.

21. How do cross-chain bridges maintain the equal supply of tokens?

• Cross-chain bridges lock and release assets to maintain token supply.
• Cross-chain bridges duplicate tokens on each blockchain for supply maintenance.
• Cross-chain bridges adjust token prices dynamically to maintain supply.
• Cross-chain bridges merge blockchains to consolidate token supply.

22. What process is referred to as `minting` in cross-chain transactions?

• Locking
• Burning
• Redeeming
• Minting

23. What is meant by `burning` tokens in a cross-chain context?

• The process of eliminating tokens on the source blockchain to facilitate cross-chain transactions.
• Increasing the number of tokens in existence across various chains.
• Creating tokens on multiple blockchains without restrictions.
• Transferring tokens directly without any security measures.

24. How do smart contracts manage data transfer in cross-chain protocols?

• Cross-chain bridges require manual intervention for every data transfer.
• Cross-chain bridges only transfer tokens without managing any data.
• Cross-chain bridges exchange assets without using any smart contracts.
• Cross-chain bridges handle data transfer using smart contracts to manage asset locking and releasing.

25. Describe the primary function of cross-chain bridges in the cryptocurrency ecosystem.

• Create exclusive tokens that only exist on one blockchain.
• Store data solely within a single blockchain network.
• Enable the transfer of tokens and data across different blockchains.
• Facilitate the mining of new cryptocurrencies in one chain.

26. Differentiate between cross-chain bridges and atomic swaps.

• Cross-chain bridges are limited to a single blockchain, whereas atomic swaps operate across many blockchains.
• Cross-chain bridges require a centralized intermediary for trading, while atomic swaps do not.
• Cross-chain bridges involve locking assets to create equivalent tokens, while atomic swaps directly exchange them.
• Cross-chain bridges directly exchange cryptocurrencies without any equivalents, while atomic swaps lock assets.

27. What is the main purpose of Hash Timelock Contracts in secure transactions?

• To increase transaction fees for users in the network.
• To provide a central authority for transaction validation.
• To create new cryptocurrencies with unique identities.
• To automate secure exchanges across blockchains.

28. How do atomic swaps achieve the all-or-nothing principle in exchanges?

• Atomic swaps use smart contracts and HTLC for conditional release.
• Atomic swaps require trust in a third party to execute the exchange process.
• Atomic swaps are executed solely through centralized exchanges without smart contracts.
• Atomic swaps rely on manual escrow services to manage transactions.

29. What benefits arise from using Hash Timelock Contracts during swaps?

• It allows direct trading on exchanges.
• It reduces network fees across platforms.
• It ensures secure and trustless exchanges.
• It improves transaction speeds significantly.

30. Identify requirements for executing cross-chain atomic swaps successfully.

• All involved parties must be registered on a centralized exchange for validation.
• Both chains need some kind of relative timelock operation and the ability to hash a blob of data and check against a given hash.
• Each blockchain must be able to monitor all transactions occurring on the other chain.
• Both chains must be on the same blockchain network and can freely exchange data.