CBP Bitcoin Transactions and Wallets 2 — Questions and Answers
Question 1: What is the purpose of the 'locktime' field in a Bitcoin transaction?
- Encrypts the transaction data
- Specifies the earliest block height or timestamp at which the transaction can be included (Correct answer)
- Sets the expiry time for unconfirmed transactions
- Determines how long miners must wait before claiming fees
Correct answer: Specifies the earliest block height or timestamp at which the transaction can be included
Locktime specifies the earliest block height or Unix timestamp before which the transaction cannot be mined into a block.
Question 2: In a Bitcoin wallet, what does a BIP39 mnemonic seed phrase represent?
- A list of wallet addresses
- An entropy value encoded as human-readable words used to derive a hierarchical deterministic wallet (Correct answer)
- The private key in Base58Check format
- A checksum of the wallet's transaction history
Correct answer: An entropy value encoded as human-readable words used to derive a hierarchical deterministic wallet
BIP39 encodes entropy as 12–24 human-readable words that serve as the root seed for deriving all keys in an HD wallet.
Question 3: What happens to the UTXOs used as inputs when a Bitcoin transaction is confirmed?
- They are archived in a sidechain
- They are marked as spent and removed from the UTXO set (Correct answer)
- They are returned to the mempool
- They remain spendable for 6 more blocks
Correct answer: They are marked as spent and removed from the UTXO set
Confirmed transaction inputs are consumed and their UTXOs are permanently removed from the UTXO set.
Question 4: Which script type requires multiple private keys to authorize a transaction?
- P2PKH
- P2SH multisig (Correct answer)
- P2PK
- OP_RETURN
Correct answer: P2SH multisig
P2SH multisig (Pay-to-Script-Hash) wraps a redeem script requiring M-of-N signatures to spend funds.
Question 5: What is 'change' in the context of a Bitcoin transaction?
- The miner's reward for including the transaction
- Leftover value from a consumed UTXO sent back to the sender (Correct answer)
- A fee discount for long-term holders
- The difference between the block reward and the transaction fee
Correct answer: Leftover value from a consumed UTXO sent back to the sender
When a UTXO's value exceeds the payment amount, the excess is sent to a change address controlled by the sender.
Question 6: A Bitcoin wallet described as 'non-custodial' means:
- The wallet is hosted on a centralized exchange
- The user controls their own private keys without relying on a third party (Correct answer)
- The wallet requires KYC verification
- The wallet stores keys on a remote server
Correct answer: The user controls their own private keys without relying on a third party
Non-custodial wallets give users direct control of private keys, eliminating reliance on a third party to secure funds.
Question 7: What role does the 'sequence number' field in a transaction input serve in Replace-By-Fee (RBF)?
- It sets the fee rate in satoshis per byte
- An input with sequence number below 0xFFFFFFFE signals the transaction is replaceable via RBF (Correct answer)
- It identifies which UTXO is being spent
- It timestamps when the input was created
Correct answer: An input with sequence number below 0xFFFFFFFE signals the transaction is replaceable via RBF
BIP125 defines that setting an input's sequence number to 0xFFFFFFFD or lower signals opt-in RBF, allowing fee bumping.
CBP Bitcoin Transactions and Wallets 2
What is the purpose of the 'locktime' field in a Bitcoin transaction?