From 6b6cccb993c39c7238d0e71cd0ef45525b4e1782 Mon Sep 17 00:00:00 2001
From: jeramino <ifesiekenedilichukwu@gmail.com>
Date: Wed, 19 Nov 2025 13:15:04 +0100
Subject: [PATCH] Week2 Assignment

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+1. Proof of Work (PoW) Analysis
+How PoW Works (Step-by-Step)
+Transactions enter the mempool.
+
+
+Miners bundle transactions into a block.
+
+
+Miners try to solve a cryptographic puzzle (finding a hash below a target).
+
+
+The first miner to solve it broadcasts the valid block.
+
+
+Other nodes verify the solution.
+
+
+Blocks are added to the chain and the miner receives a block reward.
+
+
+What Problem Are Miners Solving?
+They try to find a nonce that produces a block hash below the network’s difficulty target.
+
+
+Difficulty Adjustment
+The network adjusts difficulty so blocks are mined at a consistent rate (e.g Bitcoin adjusts every 2016 blocks).
+
+
+When Two Miners Solve at the Same Time
+Two competing chains form temporarily.
+
+
+The network waits for the next block.
+
+
+The chain with the longest valid work becomes the main chain.
+
+
+
+Security Model
+How PoW Prevents Attacks
+Attacking requires massive computational power.
+
+
+Honest miners always outnumber attackers in well-distributed networks.
+
+
+What is a 51% Attack?
+It is when one entity controls over 50% of the total hash power and can censor transactions and reorganize blocks.
+
+
+Why is it Difficult?
+Requires enormous hardware, energy and cost.
+
+
+Economic Incentives
+Honest mining = predictable rewards.
+
+
+Attacking = expensive, risky and destroys the value of the coin itself.
+
+
+Costs of Attacking PoW
+Hardware cost
+
+
+Electricity
+
+
+Opportunity cost
+
+
+Potential legal risks
+
+
+
+Real-World Examples
+Bitcoin (SHA-256)
+
+
+Litecoin (Scrypt)
+
+
+Dogecoin (AuxPoW)
+
+
+Ethereum Before The Merge
+Used Ethash PoW (GPU-friendly).
+
+
+Functionally similar to Bitcoin but faster block times.
+
+
+Evolution of PoW
+ASIC resistance attempts
+
+
+Hybrid models (PoW + PoS)
+
+
+Improved hardware efficiency
+
+
+
+Trade-offs
+Advantages
+Proven security
+
+
+Highly decentralized (with large miner distribution)
+
+
+Simple and battle-tested
+
+
+Disadvantages
+High energy usage
+
+
+Slower block times
+
+
+Expensive hardware requirements
+
+
+Environmental Impact
+High energy consumption.
+
+
+Carbon footprint depends on the energy source used.
+
+
+Decentralization Considerations
+Large mining pools may cause centralization pressure.
+
+
+
+2. Proof of Stake (PoS) Analysis
+How PoS Works
+Staking Process (Step-by-Step)
+The user locks his/her tokens
+
+
+Validator software runs.
+
+
+Validators are randomly chosen to propose and attest blocks.
+
+
+Validators earn rewards for good behavior.
+
+
+Misbehavior leads to slashing.
+
+
+How Validators Are Selected
+Based on amount of stake
+
+
+Randomness algorithms (e.g Ethereum RANDAO + VDF)
+
+
+What is Slashing?
+Penalty for malicious actions (double-signing, going offline).
+
+
+Takes a portion of the validator’s stake.
+
+
+Finality in PoS
+After enough validator votes, blocks become irreversible (e.g Ethereum uses Casper FFG).
+
+
+
+Security Model
+How PoS Prevents Attacks
+Attackers need to acquire large amounts of the native token.
+
+
+Attacks can be punished by slashing.
+
+
+Economic Penalties
+Loss of staked tokens.
+
+
+Reduced rewards for downtime.
+
+
+Stake Size & Security
+More total stake = higher security.
+
+
+Harder and more expensive to attack.
+
+
+Relationship Between Stake & Rewards
+More stake = higher chance of being chosen as a validator = more rewards.
+
+
+
+Real-World Examples
+Ethereum (PoS)
+
+
+Cardano (Ouroboros)
+
+
+Solana (PoS with Proof of History)
+
+
+Avalanche (Snowball Consensus)
+
+
+Key Differences
+Ethereum: Slashing + economic finality
+
+
+Cardano: Pool-based, no slashing
+
+
+Solana: Fast blocks using Proof of History + PoS
+
+
+
+Trade-offs
+Advantages
+Energy efficient
+
+
+Fast transaction finality
+
+
+Lower entry barriers (via staking pools)
+
+
+Disadvantages
+Wealth concentration risk
+
+
+Complex protocol design
+
+
+Possible governance centralization
+
+3. Comparative Analysis
+Feature
+PoW
+PoS
+Security Model
+Computational
+Economic
+Energy Use
+High
+Very low
+Speed
+Slower
+Faster
+Decentralization
+Hardware-based
+Stake-based
+Entry Barrier
+Expensive hardware
+Requires tokens
+Costs
+Electricity + mining rigs
+Opportunity cost of locked tokens
+Scalability
+Limited
+Higher
+Track Record
+Long (Bitcoin)
+Growing (Ethereum, Cardano)
+
+
+4. Practical Implications for Creatives
+How Consensus Affects NFT Minting Costs
+PoW chains = higher gas fees
+
+
+PoS chains = cheaper transactions
+
+
+Which Is Better?
+Low cost + speed → PoS
+
+
+Maximum security → PoW (rare for NFTs)
+
+
+Gas Fee Differences
+PoW: Congestion = high gas
+
+
+PoS: More stable and predictable gas
+
+
+What Creators Should Consider
+Cost
+
+
+Network popularity
+
+
+Marketplace support
+
+
+User wallet compatibility
+
+
+
+Part 2: Gas, Blocks & Confirmations
+
+1. Gas Economics
+What is Gas?
+Gas is the cost of performing a transaction or computation on a blockchain.
+
+
+It is called “gas” because it fuels computation.
+
+
+Relationship Between Gas & Computation
+More complex operations lead to more gas.
+
+
+
+How Gas Pricing Works
+Gas Price (Gwei)
+Gas price = how much you pay per unit of gas.
+
+
+Who Sets Gas Price?
+Users (choose via wallet).
+
+
+Market demand affects price.
+
+
+Gas Price vs Gas Limit
+Gas Price: Cost per unit
+
+
+Gas Limit: Max units you're willing to spend
+
+
+
+Gas Calculation
+Total Cost = Gas Used × Gas Price
+Typical Gas Costs
+Simple transfer = low gas
+
+
+NFT mint = medium
+
+
+DeFi contract = high
+
+
+Why Different Costs?
+Depends on contract complexity.
+
+
+Estimating Gas
+Wallet estimators
+
+
+Gas trackers (like Etherscan Gas Tracker)
+
+
+
+Gas Optimization Strategies
+Use off-peak hours
+
+
+Use Layer 2 networks (Polygon, Arbitrum)
+
+
+Use batching (combine multiple actions)
+
+
+
+2. Block Structure
+What is a Block?
+A container of transactions that is linked cryptographically to previous blocks.
+
+
+What Blocks Contain
+Block header
+
+
+Transactions
+
+
+Timestamp
+
+
+Validator/miner data
+
+
+
+Block Components
+Block Header: Summary data (hash, root, timestamp)
+
+
+Block Hash: Unique identifier
+
+
+Previous Block Hash: Links to chain
+
+
+Transactions per block: Depends on size
+
+
+
+Block Hash
+Time between blocks
+
+
+Varies by chain (Bitcoin 10 mins, Ethereum ~12s)
+
+
+Relationship with Finality
+Faster block time = faster confirmations
+
+
+
+3. Confirmations
+What Are Confirmations?
+Number of blocks added after your transaction’s block.
+
+
+Why Confirmations Matter
+More confirmations = less chance of reorg
+
+
+Higher security
+
+
+
+Different Confirmation Requirements
+1 confirmation = simple transfers
+
+
+6 confirmations = Bitcoin exchanges
+
+
+More confirmations = more security
+
+
+Risk of Low Confirmations
+Higher chance of chain reorgs
+
+
+Finality Across Chains
+PoW = probabilistic finality
+
+
+PoS = economic finality
+
+
+
+Real-World Application
+1 confirmation = low-risk actions
+
+
+More for big transfers or high-value NFTs
+
+
+Marketplaces wait for safe levels
+
+
+Reorgs cause temporary reversal of blocks
+
+
+
+Part 3: Wallet Security & Types
+
+Custodial Wallets are wallets that hold your keys and are easy to use but less control.
+Examples
+Binance
+
+
+Coinbase
+
+
+Kraken
+
+
+Crypto.com
+
+
+Bitget
+
+
+
+Non-Custodial Wallets are wallets that control the private keys and are more secure if used properly.
+
+
+Examples
+MetaMask
+
+
+Trust Wallet
+
+
+Ledger Live
+
+
+Phantom
+
+
+Exodus
+
+
+
+Comparison Table
+Feature
+Custodial
+Non-Custodial
+Control
+Provider
+User
+Convenience
+High
+Medium
+Recovery
+Easy
+Seed phrase
+Security
+Depends on company
+Highest (if careful)
+Use Case
+Beginners
+Web3 active users
+
+
+When to Use Each
+Custodial: beginners, simple trading
+
+
+Non-Custodial: DeFi, NFTs, high security
+
+
+
+2. Hot vs Cold Wallets
+Hot Wallets are wallets that are always connected to the internet and convenient but with higher risk
+
+
+Examples
+MetaMask
+
+
+Phantom
+
+
+Coinbase Wallet
+
+
+
+Cold Wallets are offline storage that is best for long-term security
+
+
+Examples
+Ledger Nano X
+
+
+Trezor Model T
+
+
+Keystone
+
+
+
+Security Comparison
+Cold wallets = safest
+
+
+Hot wallets = convenient
+
+
+Cold wallets cost money
+
+
+Use hot wallets for small funds
+
+
+
+Recommended Strategy
+Small funds → hot wallet
+
+
+Big savings → cold wallet
+
+
+Use both for safety + convenience
+
+
+
+3. Security Best Practices
+Seed Phrase is a 12–24 word recovery key that is stored offline in order to keep your crypto safe.
+
+
+
+Common Attack Vectors
+Phishing websites
+
+
+Malware
+
+
+Social engineering
+
+
+
+Security Checklist
+Use hardware wallet
+
+
+Verify URLs
+
+
+Never share seed phrase
+
+
+Enable 2FA
+
+
+Backup seed phrase securely
+
+
+Test small transactions first
+
+
+
+Part 4: Testnets & Explorers
+
+1. Testnets
+What Are Testnets? It is a fake blockchain environment for testing a protocol.
+
+
+Popular Testnets
+Ethereum: Sepolia
+
+
+Polygon: Mumbai
+
+
+Using Testnets
+Add testnet to MetaMask
+
+
+Request tokens from a faucet
+
+
+Test sending, minting, deploying
+
+
+
+2. Blockchain Explorers
+What Are Explorers?
+It is a tool used to view blockchain data (transactions, blocks, wallets)
+
+
+Examples
+Etherscan
+
+
+Polygonscan
+
+
+Solscan
+
+
+Uses
+Track transactions
+
+
+Verify NFTs
+
+
+Read smart contracts
+
+
+Check wallet history
+
+
+
+Part 5: MEV
+What is MEV? 
+It is an extra value validators get by reordering, adding or removing transactions.
+Maximal Extractable Value
+
+
+
+Types of MEV
+Front-running
+
+
+Back-running
+
+
+Sandwich attacks
+
+
+Real Examples
+Uniswap trades
+
+
+NFT mints
+
+
+Liquidation bots
+
+
+
+Impact on Users
+Higher gas
+
+
+Failed transactions
+
+
+Worse trade execution
+
+
+NFT mint competition
+
+
+
+MEV Solutions
+Flashbots
+
+
+Private mempools
+
+
+Commit-reveal
+
+
+Layer 2 improvements
+
+
+
+Part 6: Transaction Analysis
+
+Basic information:
+
+0xad75b3762ea0a0ecba286af80abc71922fb58f54bed71daebb57a41e230f3f19
+Success 
+13 minutes ago
+23832855
+69
+
+Party Involved:
+0x396343362be2a4da1ce0c1c210945346fb82aa49
+0xFdDD454E921F5FCDf0fF3399eB7A8ac4dF57B1a3
+
+Value & Fess:
+0.009918818316958401 ETH($30.66)
+0.279202224 Gwei
+21,000 | 21,000 (100%)