CBP - Certified Bitcoin Professional Wallets and Key Management Questions and Answers 1

Question 1

A user wants to store a significant amount of Bitcoin for long-term holding with the highest level of security against online threats. Which of the following wallet types is the MOST appropriate for this purpose?

Accepted Answer

A hardware wallet

Answer

A hardware wallet is the most secure option for long-term storage because it keeps the private keys offline, making them immune to online hacking attempts, malware, and phishing attacks. Web, mobile, and exchange wallets are considered 'hot' wallets, meaning they are connected to the internet and carry a higher risk of being compromised.

Question 2

What is the primary advantage of using a Hierarchical Deterministic (HD) wallet, as defined by BIP 32?

Accepted Answer

It allows a user to restore all keys and addresses from a single master seed.

Answer

The main feature of HD wallets (BIP 32) is that they can generate a nearly infinite sequence of key pairs and addresses from a single master seed. This means the user only needs to back up the initial seed phrase (typically 12-24 words) to be able to recover the entire wallet, including all past and future transactions and addresses.

Question 3

A business wants to secure its corporate Bitcoin funds by requiring approvals from multiple executives before any transaction can be sent. Which key management technique should they implement?

Accepted Answer

Multi-signature (multisig) scheme

Answer

A multi-signature (multisig) wallet requires a specified number of private keys (e.g., 2 out of 3) to sign a transaction before it is broadcast. This is ideal for corporate governance as it distributes control and prevents a single point of failure or unauthorized access to funds.

Question 4

When a user restores a Bitcoin wallet using a 12-word mnemonic seed phrase, what is being recovered?

Accepted Answer

The master private key, from which all other keys and addresses are derived.

Answer

The mnemonic seed phrase (as specified in BIP 39) is a human-readable representation of the master seed. This seed is the root from which all private keys, public keys, and addresses within an HD wallet are mathematically derived. By restoring from the seed, the wallet can regenerate the master private key and subsequently all associated addresses to find and control the funds on the blockchain.

Question 5

Which of the following is a characteristic of a non-deterministic wallet?

Accepted Answer

It is often referred to as a 'Just a Bunch Of Keys' (JBOK) wallet.

Answer

A non-deterministic wallet, sometimes called a JBOK wallet, generates each key pair randomly and independently. The keys are not related to each other. This means that every time a new key is generated, a new backup of that key must be made, making it cumbersome to manage.

(CBP) Certified Bitcoin Professional Practice Test

(CBP) Certified Bitcoin Professional Practice Test

CBP - Certified Bitcoin Professional Wallets and Key Management Questions and Answers 1