Blockchain Wallet & Exchange Security Flashcards
6 cards from real Blockchain Technology practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Blockchain Wallet & Exchange Security flashcards as text
What is the defining characteristic of a custodial cryptocurrency wallet?
Answer: A third party holds and controls the private keys on the user's behalf
In a custodial wallet, the service provider manages the private keys, meaning users must trust the custodian's security practices.
What is a Threshold Signature Scheme (TSS) and how does it improve wallet security over traditional multisig?
Answer: TSS generates a single valid signature from distributed key shards without any single party holding the full key
TSS distributes key material so the complete private key is never assembled in one place, reducing single-point-of-compromise risk compared to multisig's on-chain scripts.
What is the recommended first step when a user suspects their non-custodial wallet private key has been compromised?
Answer: Immediately transfer all assets to a new wallet with freshly generated keys
Once a key is suspected compromised, moving assets to a clean wallet is the only reliable mitigation, since the attacker may exploit the key at any moment.
What is a time-lock (CheckLockTimeVerify) used for in blockchain asset protection?
Answer: It makes funds unspendable until a specified block height or timestamp, adding a security delay
CLTV enforces a spending restriction until a future point in time, giving owners a window to detect and react to unauthorized access before funds move.
What security measure should institutional custodians implement to protect signing keys against insider threats?
Answer: Apply multi-party computation (MPC) with role-separated key shards and strict access controls
MPC with role separation ensures no single insider can unilaterally reconstruct or use the full signing key, neutralizing rogue employee risk.
What is the purpose of a withdrawal cooldown period enforced by exchanges after a new withdrawal address is added?
Answer: It gives account owners time to detect and cancel unauthorized address additions before funds are sent
A mandatory delay between adding a new address and allowing withdrawals to it creates a detection window for the legitimate account holder to respond to an attack.