Bitcoin Smart Contracts Quiz

1. What is a Bitcoin smart contract?

• A method for creating new Bitcoin outside the blockchain.
• A digital agreement stored and executed across all nodes in the Bitcoin (BSV) Blockchain network.
• A currency that can only be used for online purchases.
• A physical contract signed by users to trade Bitcoin.

2. Who coined the term `Smart Contracts`?

• Satoshi Nakamoto
• Nick Szabo
• Vitalik Buterin
• Hal Finney

3. What is the primary function of a Bitcoin smart contract?

• To create new cryptocurrencies through mining.
• To store large amounts of data securely on the blockchain.
• To facilitate, verify, or enforce the terms of an agreement without a third party.
• To generate random numbers for gambling applications.

4. How are Bitcoin smart contracts stored and executed?

• They are stored and executed across all nodes in the Bitcoin (BSV) Blockchain network.
• They are stored in personal wallets and executed locally.
• They are stored on a central server and executed remotely.
• They are embedded within traditional databases and run via APIs.

5. What is the scripting language used for Bitcoin smart contracts?

• Ruby
• Python
• JavaScript
• Script

6. What is P2SH (Pay-to-Script-Hash)?

• A technique that encrypts Bitcoin transactions for safety.
• A type of wallet that stores Bitcoin securely.
• A method that allows complex scripts, such as multi-signature and smart contracts, to be used without revealing the script details in the transaction.
• A protocol for trading Bitcoin anonymously.

7. How do Bitcoin smart contracts work?

• They function similarly to traditional contracts, requiring lawyers for validation.
• They use Bitcoin`s scripting language to encode conditions into Bitcoin transactions, which must be met for the transaction to be completed.
• They are stored only on a single server and executed manually by human operators.
• They are automatically executed by central authorities after a transaction is initiated.

8. What is the purpose of using P2SH addresses?

• To eliminate the need for transaction confirmations entirely.
• To increase transaction fees by revealing full script details.
• To create a new type of cryptocurrency every month.
• To reduce storage requirements and improve network efficiency by storing only the hash of the Script.

9. What is the key attribute of Bitcoin smart contracts?

• They operate solely on textual agreements.
• They are immutable and tamper-proof.
• They are self-destructing after use.
• They require a central authority for execution.

10. Can Bitcoin smart contracts automatically execute transactions?

• No, they must be manually executed through a specified command.
• Yes, they can trigger payments based on pre-defined conditions without involvement.
• Yes, they automatically process transactions without any external input.
• No, they require some form of human interaction with a smart contract’s public key to trigger the code.

11. What is the benefit of using Bitcoin smart contracts?

• They require manual intervention for every transaction, making agreements slower.
• They complicate transactions by introducing additional third parties into agreements.
• They eliminate the need for costly intermediaries and provide speed, efficiency, and transparency to agreements.
• They function solely as a storage method without any transaction capabilities.

12. How do Bitcoin smart contracts handle complex conditions?

• They utilize advanced artificial intelligence to determine complex conditions.
• They use Script to handle complex conditions, such as multi-signature requirements.
• They execute complex conditions solely on the user`s local device.
• They rely on external databases to manage complex conditions.

13. What is the analogy for understanding Bitcoin smart contracts?

• A GPS device that provides navigation instructions.
• A lottery system that randomly selects winners.
• A vending machine that automatically dispenses a snack based on the selection and payment.
• A computer program that edits photos in real-time.

14. What are some examples of basic smart contract functions in Bitcoin?

• Network confirmations, mining rewards, transaction fees.
• Instant payments, token creation, data storage.
• Escrows, time-bound payments, multi-party agreements.
• Simple transfers, fee calculation, address generation.

15. What are some limitations of Bitcoin`s scripting language?

• It can easily change past transaction details without consensus.
• It lacks opcodes that can read and write the current state of the blockchain.
• It allows for integration with all external programming languages.
• It has unlimited data storage capacity for transactions.

16. How do Bitcoin Improvement Proposals (BIPs) contribute to smart contract capability?

• They introduce complex programming languages for smart contracts.
• They increase transaction fees for all smart contracts.
• They allow basic smart contract functions like escrows and time-bound payments.
• They completely eliminate smart contract functionality.

17. What is OP_RETURN in the context of Bitcoin smart contracts?

• It encrypts transaction data for privacy.
• It allows short messages in transactions.
• It manages user identities in the blockchain.
• It executes complex scripts automatically.

18. What is OP_CHECKLOCKTIMEVERIFY?

• It allows transactions to pass instantly.
• It creates new Bitcoin without mining.
• It timelocks funds until a specified date.
• It encrypts the Bitcoin wallet with a password.

19. What is OP_CHECKSEQUENCEVERIFY?

• It timelocks funds until a specified block.
• It enables unlimited fund withdrawals at any time.
• It allows immediate fund transfer.
• It restricts access to funds after a fixed amount of time.

20. What is the benefit of using P2SH addresses in terms of privacy?

• It allows for unlimited access to the blockchain data.
• It increases the complexity of transaction validation.
• The Script remains private until the transaction is spent, enhancing user privacy.
• It makes transactions faster and reduces fees.

21. How do Bitcoin smart contracts handle multi-signature requirements?

• They rely on a centralized authority to manage signature approvals.
• They impose limits on the number of signatures required for validation.
• They use P2SH to handle multi-signature requirements without revealing the script details.
• They convert multi-signature requests into standard transactions automatically.

22. What is the role of Oracles in Bitcoin smart contracts?

• They store all transactions on the blockchain directly.
• They process structured data from outside the environment of the smart contract.
• They mine Bitcoin using complex algorithms.
• They create new Bitcoin blocks on the network.

23. What is the key difference between traditional and smart contracts?

• Smart contracts auto-execute once conditions are met, and no middlemen are required.
• Traditional contracts are secured through physical copies and signatures.
• Smart contracts can only be used for cryptocurrency transactions.
• Traditional contracts have more complex legal language and require notarization.

24. How do Bitcoin smart contracts manage agreements between multiple parties?

• They store complex data separately before facilitating agreements among parties.
• They require multiple human agents to validate each agreement between parties.
• They use Script to manage agreements between multiple parties by encoding conditions into Bitcoin transactions.
• They rely on intermediaries to oversee agreements between multiple parties.

25. What is the purpose of using Bitcoin Improvement Proposals (BIPs) for smart contracts?

• To enhance security and predictability by allowing basic smart contract functions.
• To facilitate peer-to-peer file sharing and storage solutions.
• To create a centralized database for financial institutions.
• To introduce new cryptocurrencies unrelated to contracts.

26. What is the benefit of using Bitcoin smart contracts in commerce?

• They guarantee profits for all parties involved in the contract.
• They ensure all transactions are completely anonymous and untraceable.
• They create a physical record of the agreement for legal purposes.
• They eliminate the need for costly intermediaries and provide speed, efficiency, and transparency to agreements.

27. What is the role of Script in Bitcoin smart contracts?

• It converts Bitcoin to other cryptocurrencies through smart contracts.
• It stores all transaction history for validation purposes.
• It allows Bitcoin to be used in online voting systems.
• It enhances security and predictability by encoding conditions into Bitcoin transactions.

28. How do Bitcoin smart contracts handle token management?

• They automatically distribute tokens to all network users without conditions.
• They require third-party approval for any token transactions and changes.
• They allow unlimited token creation without restrictions or oversight.
• They provide features to freeze, thaw, and confiscate tokens, enabling effective token management and compliance with laws and regulations.

29. What is the limitation of Bitcoin`s Script in terms of complexity?

• It supports loops and recursion within smart contracts.
• It lacks opcodes that can read and write the current state of the blockchain, limiting its complexity.
• It allows for complex conditional statements beyond basic arithmetic operations.
• It can execute transactions without any user input or external data.

30. How do Bitcoin smart contracts handle structured data from outside their environment?

• They encode the data directly in the Bitcoin transaction itself.
• They use Oracles to process structured data from outside their environment.
• They rely solely on user inputs for all necessary data.
• They require third-party verification for outside data.