HEC LAUSANNE

Exam Questions

Session/year : Winter 2020

Title of the course : Blockchain and Distributed Ledgers
Professor : Thomas Schmelzer

# pages of this document

3 pages.

Scratch paper
Scratch paper is available at the end of this document.

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1. Please answer honestly for my internal statistics
(a) (0 points) What fraction of lectures have you attended?
(b) (0 points) How many comments did you write on Moodle?

2. Mathematics
(a) (2 points) Render the hexadecimal number AF F E16 as a binary number.
(b) (2 points) Compute 810 × 1101012 . State the result as a binary number.
(c) (3 points) A (hash) function H maps any text (e.g. a string of any length) to a(n
integer) hexadecimal number 1 ≤ x < 2256 . Can H be an invertible function?
Explain your answer.

3. Heloise wants to send messages to Peter without revealing any content to the evil uncle
Fulbert (who may or may not listen to their channel).
(a) (2 points) Peter’s first idea is to send Heloise a key she can use to cipher the message
(using a simple XOR operation). Using the same key Peter can decipher the message
from Heloise. What’s the drawback of this symmetric key exchange?
(b) (3 points) Heloise’s better idea is to use a key-pair with a private key pk and a public
key Pk where Pk = pk ×G. Here G is a common basis of the particular cryptography
scheme (e.g. elliptic curve). Heloise and Peter agree to use the mutual secret key

K = pHeloise
k pPeter
k × G.

How can Heloise compute this secret key while knowing only the public key of Peter?
How can Peter compute K without knowing the private key of Heloise?
(c) (2 points) Fulbert listing to the channel of Heloise and Peter can only see the
exchange of public keys. Neither Heloise nor Peter ever send their private keys over
the channel. Explain why the computation of K is very, very hard for Fulbert.

4. Heloise receives a somewhat creepy message from Peter. She is concerned that it is
from Fulbert pretending to be Peter. Heloise got very excited about elliptic curves (e.g.
enumerated sets of discrete points). Together with Peter they decided to use the cyclic
group
(7, 5) 7→ (8, 5) 7→ (11, 8) 7→ (11, 5) 7→ (8, 8) 7→ (7, 8) 7→ ∞
of the elliptic curve y 2 ≡ x3 + 7 over the tiny Galois Field F13 . Here G = (7, 5) and
n = 7.
(a) (2 points) Heloise asks Peter to sign all his messages. Peter therefore has to con-
struct a NONCE i and compute the point i × G where G = (7, 5). Assume Peter
is using the NONCE i = 4. Compute P = i × G and i−1 . In order to compute the
inverse i−1 solve i × i−1 ≡ 1 mod 7.
(b) (2 points) Give r = xp mod 7 where P = (xp , yp ) and compute s = [i−1 (t +
rpk )] mod 7. Assume for the hash digest t = 4 and for the private key of Peter
pk = 3.
 (c) (2 points) Heloise can verify the signature of Peter by computing the combination
of the public key (of Peter) and the generator G
(x1 , y1 ) = u1 G + u2 Pk
where Heloise chooses the coefficients as u1 = ts−1 mod 7 and u2 = rs−1 mod 7.
Compute both x1 and y1 . Compare your result with P computed above.
(d) (2 points) The tiny cyclic group given above is of prime order. Explain why this is
important.
(e) (2 points) The bitcoin network relies on much larger (but still finite) Galois fields
and cyclic groups, too. Give an approximation for the number n of the cyclic group
in the Bitcoin network. Using the algorithm of Schoof one can count the elements
of an elliptic curve over a finite Galois field without computing those solutions
explicitly and counting them as n would be far too large.
5. Cash and the definition of money
(a) (2 points) Heloise and Peter agree that society has to overcome cash. What are
some of the problems with cash?
(b) (3 points) What are the 3 primary functions that define money.
(c) (3 points) Given these functions discuss whether bitcoin qualifies as money.
6. As discussed in lecture there is a Pizzeria in Leukerbad accepting your (fragments of a)
Bitcoin to pay for your pizza. Being a dubious character at heart you are tempted to
get away without paying for your pizza.
(a) (2 points) Explain what approach based on the bitcoin protocol you could use to
avoid paying for your pizza.
(b) (2 points) Discuss whether a centralised database could help to mitigate such prob-
lems?
(c) (4 points) Discuss the idea of using a central authority when it comes to currencies.
7. The Blockchain
(a) (4 points) A group of miners are racing to mine the next block. This process is
using huge resources and on average only every 10 minutes a new block is created.
What makes this problem so hard? Describe what (mathematical) problem a miner
is trying to solve? What is the incentive for miners to do so?
(b) (3 points) You are approached by a company claiming to have produced a pile of
blocks and release them successively once there are promising highly paid transac-
tions available. Explain why can you debunk this idea immediately as nonsense?
(c) (3 points) Most blocks are mined by the same Chinese companies. Why is that? Is
that a danger for the bitcoin network?
8. (5 points (bonus)) Argue for or against a Nobel Memorial Prize in Economics for Dis-
tributed Ledger Technology. Who should or who shouldn’t win?
HEC Lausanne

Answer Booklet
Session / year : Winter 2020
Title of the course : Blockchain and Distributed Ledgers
Professor(s) : Thomas Schmelzer
Date of the exam : 30.01.2020
Duration of the exam : 2 hours.
# pages of this document : 5 pages.

To be completed :

Last and first name :

Student number :

Place number :

Procedures :
Documentation : No
Calculator : No
Pen : Pens (ink) only are authorized.

Reserved for grading

Participation Course work Exam Final grade

Grade : Grade : Grade : /6 Grade : /6

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Scratch paper - WINTER 2020