Blockchain 101 Certification Tokens, Wallets & Digital Assets 2

Question 1

What is the primary difference between a hot wallet and a cold wallet?

Accepted Answer

Hot wallets are connected to the internet; cold wallets are kept offline

Answer

Hot wallets store tokens on exchanges; cold wallets store tokens in smart contracts

Answer

Hot wallets use public keys; cold wallets use private keys only

Answer

Hot wallets support NFTs; cold wallets only support fungible tokens

Question 2

In blockchain, what does a private key allow its holder to do?

Accepted Answer

Sign and authorize outgoing transactions from the associated address

Answer

View anyone's transaction history on the network

Answer

Discover new blocks and earn mining rewards

Answer

Generate a public blockchain address for others to send funds to

Question 3

What is a Hierarchical Deterministic (HD) wallet?

Accepted Answer

A wallet that generates a tree of key pairs from a single master seed

Answer

A wallet that requires multiple signatures to approve any transaction

Answer

A wallet specifically designed for institutional custody of digital assets

Answer

A wallet that automatically swaps tokens to maintain a fixed portfolio ratio

Question 4

What is a mnemonic seed phrase (recovery phrase) used for in cryptocurrency wallets?

Accepted Answer

Backing up and restoring access to a wallet's private keys using human-readable words

Answer

Encrypting transactions before they are broadcast to the network

Answer

Two-factor authentication when logging into a crypto exchange

Answer

Generating a new wallet address for each incoming transaction

Question 5

Which type of hardware device is considered one of the most secure methods for storing cryptocurrency private keys?

Accepted Answer

A hardware security module (HSM) wallet like Ledger or Trezor

Answer

A mobile phone with a dedicated crypto app

Answer

A browser extension wallet like MetaMask

Answer

A custodial exchange account with 2FA enabled

Question 6

What is the key distinction between a custodial and a non-custodial wallet?

Accepted Answer

In a custodial wallet a third party controls the private keys; in non-custodial the user holds their own keys

Answer

Custodial wallets only hold NFTs; non-custodial wallets hold fungible tokens

Answer

Custodial wallets are hardware devices; non-custodial wallets are software applications

Answer

Custodial wallets operate on private blockchains; non-custodial on public blockchains

Question 7

What is a multi-signature (multisig) wallet?

Accepted Answer

A wallet that requires a defined number of separate private key signatures to authorize a transaction

Answer

A wallet that signs each transaction multiple times to prevent replay attacks

Answer

A wallet that stores multiple types of cryptocurrencies in a single address

Answer

A wallet that automatically signs recurring payments on a schedule