Describe how a Merkle tree stores the hash addresses for the blockchain technology.

Explain why the residents of Santa Monica may be concerned by the lack of a central authority to manage MONS transactions.

Award [4 Max]
A transaction is hashed and added (as a leaf node);
A pair of leaf nodes are combined (hashed) to form the hash of a parent;
When the number of nodes on the same level is odd the rightmost node is copied to the parent (For example, 10, 5, 3, 2, 1);
This is repeated (recursively) until the Merkle root node is created;
The root node hash is created to represent all of the hashes of the nodes;

Award marks for a diagram that shows the steps.

Award [4 Max]
Award [2 max] for a Governance technology concern with example and a further [2 max] for expansion and consequence.

Technology example answer 1 [4 marks]
Concerns that there is no way to correct errors;
A transaction sent to the wrong person;
Relies on the receiver’s honesty to return the funds;
But difficult to identify the receiver from their signature;

Technology example answer 2 [4 marks]
Residences may be concerned that errors or mistakes won’t be corrected;
Their wallet password may be compromised and transactions made from their account;
They would need to put in a request to Pablo (Santa Monica mayor) to trace the transactions;
Pablo (Mayor) is unlikely to act since it isn’t a major breech on the blockchain;

Technology example answer 3 [4 marks]
The MONS currency may be subject to a 51% attack;
With no central authority to roll back the blockchain;
Double spend problem will occur;
Currency would lose credibility/residences may stop using it.

Technology example answer 4 [4 marks]
Residences are trusting that the software is designed well and secure;
Since it is open-source they may be concerned that hackers will find a flaw;
With no central authority to manage the blockchain, which is distributed;
There could be concerns that necessary updates/patches won't get rolled out.

Award [2 max] for a Governance non-technology example

Non-technology example answer 1 [2 marks]
Human nature to trust in authority;
When there is no Governance there may be irrational concern;
They may worry about the currency's value going down;
Because there is no way to influence the exchange rate;

Non-technology example answer 2 [2 marks]
The MONS currency could be abused by the criminal element;
It may be used for money laundering / fraud / illegal payments;
The anonymity of digital signatures makes this possible;
No central authority to prevent this;

Do not award marks for saying how to overcome concerns.