Blockchain and Crypto Cryptocurrency Trading & Wallets

Question 1

What is a hot wallet?

Accepted Answer

A cryptocurrency wallet that is connected to the internet

Answer

A hot wallet is a cryptocurrency wallet that remains connected to the internet, offering convenience for frequent transactions but with greater exposure to security risks.

Question 2

What is a cold wallet (cold storage)?

Accepted Answer

An offline cryptocurrency storage solution that keeps private keys disconnected from the internet

Answer

A cold wallet is an offline cryptocurrency storage solution that keeps private keys disconnected from the internet, providing superior security against online threats.

Question 3

What is a seed phrase (mnemonic phrase) in cryptocurrency?

Accepted Answer

A sequence of 12 or 24 words used to recover a crypto wallet and its private keys

Answer

A seed phrase is a sequence of 12 or 24 words generated by a wallet that can recover all associated private keys and funds if a device is lost.

Question 4

What is a custodial cryptocurrency wallet?

Accepted Answer

A wallet where a third party holds the private keys on behalf of the user

Answer

A custodial wallet is one where a third party such as an exchange holds the private keys on the user's behalf, meaning the user lacks direct control over their funds.

Question 5

What is a multi-signature (multisig) wallet?

Accepted Answer

A wallet requiring multiple private key signatures to authorize a transaction

Answer

A multi-signature wallet requires a predefined number of private key signatures (e.g., 2-of-3) to authorize a transaction, enhancing security for high-value crypto holdings.

Blockchain and Crypto Practice Test

Blockchain and Crypto Practice Test

Blockchain and Crypto Cryptocurrency Trading & Wallets