15 Essential Blockchain Developer Interview Questions

The crypto industry's inherent volatility was on full display in 2022, with its controversies, price swings, and frenetic cycles of hype just being part and parcel of a disruptive, constantly-evolving paradigm-shifting technology like blockchain technology.

And despite a bearish 2022, blockchain development professionals remain in exceedingly high demand in the crypto space – especially for individuals with provable expertise and a demonstrable track record in the web3 space.

After all, Stamford, CT-based management consulting firm Gartner predicts that the combined business value of blockchain will surpass US$3 trillion by 2030 and that the job market for both tech and non-tech blockchain professionals is teeming with opportunities – especially when it comes to experienced blockchain developers, who earn a median average of approximately US$150,000.

Here's the thing: it isn't exactly a cakewalk to hire a blockchain developer in this day and age, despite the abundance of demand in the marketplace. That's not to mention the extremely tight competition for these plum positions, with plenty of organizations implementing a combination of stringent technical interviews to determine candidates' suitability to separate the wheat from the chaff.

That said, if you're trying to get into a blockchain development role, you'll want to know the most common blockchain interview questions HR professionals ask in order to demonstrate your mastery of blockchain technology and its underlying concepts, such as smart contracts, cryptography, cryptocurrencies, and blockchain applications, to name just a few.

Likewise, if you're a hiring manager or HR professional looking to onboard potential candidates that have the requisite ability and provable expertise in developing blockchain applications, you'll want to filter candidates that have the requisite technical and soft skills, ambition, and intangibles by asking the same questions – and knowing the right answers to them.

Here's a list of the 15 most frequently asked blockchain interview questions and answers to help you prepare for your technical interview as a candidate, or to help you screen candidates if you're an employer.

1) What is blockchain technology?

Blockchain is a decentralized, distributed ledger composed of immutable records managed by a cluster of computers called "nodes" and generally not owned by any singular entity. The blockchain ledger keeps a permanent, incorruptible record of all the transactions that have taken place, which can be leveraged to record the ownership of digital assets, a history of economic/financial transactions, or any other transaction data for that matter.

Blockchain technology can be used to securely transfer money, property, and agreements without the need for any third-party intermediaries such as governments, regulatory bodies, or banks.

2) What are "blocks" within the context of blockchain technology?

Blockchains are composed of "blocks" that contain transaction data, a timestamp, and a hash pointer that links that block to the previous block – with all blocks combined to form a "blockchain."

Blocks, in essence, are a permanent record of all transactional activity in chronological order – much like a page on a record book or ledger does IRL.

3) How are blocks on a blockchain recognized?

Blocks can be thought of as "digital vaults" where transaction data is immutably stored and locked forever. The data within a block cannot be altered or deleted. Blockchains recognize blocks based on their block height and block header hash value

Since blocks contain time-stamped data, every hash pointer found in every block effectively links it to the previous block, ensuring the integrity of the data and chronology of events recorded on the blockchain ledger.

4) Is it possible to alter transaction data after it has been written and stored on a block?

It is technically impossible to alter or edit data once a block has been created. It's an irreversible process that would require you to erase the data from every block to expunge any residual data – something that's technically unfeasible to perform.

5) What are the three types of blockchain systems?

Companies can leverage a blockchain system in several ways: namely, by deploying a public blockchain, private blockchain, or consortium blockchain as part of their blockchain project implementation strategy. Here are the main differences between all three.

• Public. Public blockchains, as the name implies, enable anyone and everyone who wishes to use the blockchain for whatever purpose it may serve any type of business – no single person or entity is in charge, and everyone has read/write access to the blockchain. Examples of public, permissionless blockchains include the Bitcoin blockchain and Ethereum blockchain.
• Private. Private blockchains, on the other hand, are peer-to-peer networks owned and operated by a central entity that oversees the network and enables specific individuals within a given organization to gain access to the ledger to accomplish particular corporate functions. Only those authorized to join are allowed to access, read and/or write on the private blockchain, making it a suitable blockchain implementation for enterprise clients. Examples of private, permissioned blockchains are R3 Corda and Hyperledger.
• Consortium. Lastly, a consortium blockchain is a cooperative of multiple private blockchains owned by different organizations. Each organization is represented by a node on the blockchain as part of the stakeholders in the consortium. Nodes can join or leave the network only under the express authorization of the stakeholders that comprise the consortium blockchain.

6) What are the primary elements of a blockchain ecosystem?

A blockchain ecosystem consists of four main components: first, a shared ledger that serves as the data structure managed from within the node application; second, a node application or a computer application that enables it to communicate with the blockchain protocol they wish to interact with; third, we have the consensus algorithm that enables all the nodes to agree on data values scattered across distributed systems or process, such as the rules of the blockchain; and finally, a virtual machine that every participant within the blockchain ecosystem runs.

7) What is the difference between a proof-of-work (PoW) and a proof-of-stake (PoS) consensus algorithm?

Here are the main differences between the primary consensus algorithms in blockchain technology as follows.

• Proof-of-Work (PoW). Proof-of-work (PoW) refers to a consensus mechanism to direct computing resources and effort in solving a hexadecimal puzzle. PoW is also known as "mining," because nodes are typically rewarded with the blockchain's cryptocurrency for "solving" the hashes to finish transactions, as is the case with the Bitcoin blockchain. Proof-of-work consensus requires tremendous amounts of energy since it takes ample computing effort to solve the hashes – which only increases in complexity as more miners join the network.
• Proof-of-Stake (PoS). Proof-of-Stake (PoS) is a consensus algorithm used in blockchain networks as a means to validate transactions and preserve the integrity of the blockchain protocol itself. Unlike proof-of-work, proof-of-stake doesn't pit miners against each other to finalize transactions. Instead, stakeholders in a PoS consensus mechanism act as network validators. Stakeholders in a proof-of-work consensus mechanism are required to stake a certain amount of cryptocurrency tokens to participate, where stakers are then rewarded with a portion of the proceeds arising from transaction fees, often in the form of the native token of the blockchain. Proof-of-stake significantly reduces the blockchain's energy consumption since there is no need for miners to compete for rewards – in turn, reducing the overall costs of operating the network. Examples of blockchains that use the PoS mechanism include the Ethereum blockchain.

8) Do blockchain protocols need tokens to operate? Why or why not?

Coins or tokens are used to implement changes between blockchain states, such as when a transaction is performed on-chain. Tokens act as the primary medium with which users can interact, create, and run decentralized apps as well as facilitate on-chain transactions. Transactions may also contain supplemental data, and in order to change said data, this requires a change of state – the only way to do so is in an immutable blockchain. While blockchains do not require tokens to run their most important operations per se, in such a situation, blockchain developers and engineers need to find another way to manage the changing of world states and a way to verify and complete transactions.

9) What role does cryptography play in distributed ledger technology?

Cryptography is the bedrock on which distributed ledger technologies and distributed networks are built. The following are three cryptographic algorithms in blockchain technology.

• Symmetric Key Cryptography. Symmetric key cryptography enables secure communications between two parties by sharing identical (hence "symmetric") keys for encrypting and decrypting data.
• Asymmetric Key Cryptography. Asymmetric key cryptographic algorithms are used in distributed ledger technologies that produce digital signatures that confirm the veracity of a particular transaction, ensuring that the transaction is coming from the right user. Asymmetric key cryptography is also known as public key cryptography.
• Hash Functions. Hash functions are a type of cryptography that doesn't use public and private keys. Instead, hash functions generate unique digital signatures or fingerprints that can be confirmed, checked, and stored on-chain. Hash functions leverage ciphers to generate a fixed-length hash value from plain text. It is virtually impossible to recover the human-readable contents of the plain text to be pulled from the cipher text.

10) What is an RSA algorithm?

The Rivest-Shamir-Adelman is one of the oldest public key cryptographic algorithms used extensively for keeping data secure during transmission. The RSA algorithm is an example of an asymmetric cryptographic algorithm, indicating that it uses two public and private keys to encrypt and decrypt messages sent through computer systems.

11) What are trapdoor functions used for in blockchain development?

Trapdoor functions are functions that are easily processed and computed one way but may be complex to compute in reverse. Trapdoor functions are integral to public key encryption, making them widely used in blockchain development, particularly to represent the concepts of private keys and wallet addresses.

12) Are there any prerequisites for using blockchain technology in an organization?

There are no particular prerequisites that stand in the way of organizations implementing blockchain technology in an organizational or enterprise setting. However, there are best practices in harnessing blockchain technology for organizations, such as the following:

• Understanding the core tenets and underlying theories of distributed ledger technology. Blockchains are basically distributed ledgers leveraging disciplines such as cryptography, consensus algorithms, and smart contracts.
• Clear, organization-specific use cases. Blockchain technology can end up being a solution looking for a problem for organizations that don't have a clear use case for wanting to implement blockchain technology in their respective organizations.
• Ample financial and human capital. The financial and operational costs associated with setting up and maintaining a blockchain network – not to mention hiring an in-house or outsourced blockchain developer team – can cost quite a pretty penny. Organizations need to ensure that they have the financial and human resources to implement blockchain technology.

13) What is a coinbase transaction?

Coinbase transactions are not to be confused with the Coinbase.com cryptocurrency exchange. In the Bitcoin blockchain, a coinbase transaction simply refers to the first Bitcoin transaction that occurs in a particular block. Miners on the Bitcoin blockchain create coinbase transactions to collect block rewards. Any other transaction fees incurred by the miner are sent in this coinbase transaction.

14) What kinds of transactional records can be stored in a blockchain database?

There are no limits imposed by blockchain technology as far as what kind of transactional records can be stored and maintained. Virtually any record type can be stored in a blockchain database to secure and protect the integrity and immutability of a wide array of documents.

They can store anything from digital assets, cryptocurrencies, and NFTs, to medical records, transaction records, identity management, and documentation.

15) What are decentralized applications (dapps)?

Decentralized applications, or dapps, are computer programs built on distributed computing systems, such as blockchain networks. However, despite their name, decentralized applications don't necessarily have to run on a blockchain protocol.

Dapps have come to the forefront of blockchain development with the rise to prominence of the Ethereum blockchain, where blockchain developers can create programs and deploy them on the latter using smart contracts. Ethereum is known for being the pre-eminent smart contract platform, which can effectively support dapps, contributing greatly to their popularity in the space.

Hiring the right talent starts by asking the right questions

Blockchain developers remain in high demand across verticals and a wide array of Fortune 500 businesses, fintech unicorns, and startups – and that demand isn't going away anytime soon.

There is still a massive shortfall in blockchain talent and and abundance of opportunities, considering the fact that proven talent with real-world experience in blockchain development are quite rare – with only one seriously qualified blockchain developer for every five available blockchain development roles available in the job market today.

As an employer or hiring manager, attracting, onboarding, and retaining the right talent starts by asking the right questions. Likewise, novice and experienced blockchain developers seeking employment can increase their chances of landing a lucrative job in the web3/crypto/blockchain space by actually knowing the answers to the questions that employers will most likely ask in the battery of interviews candidates are expected to go through.

Lastly, there is more to interviewing candidates than asking tricky, overly-technical blockchain developer interview questions, so consider our list of questions as a supplemental guide to help you get started in hiring talent rather than a hard-and-fast standard that must be followed at all times. Not every candidate will be able to answer every blockchain-related curveball hiring managers might throw at them, and neither does a candidate parroting all the right answers make them a shoo-in for the job description.

In the final accounting, hiring for any position – and especially more so for a blockchain career – is a nuanced, fine art and science that takes a lot of work, gumption, and yes, a bit of luck.

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