CBSE Key Management and Wallet Security 2

Question 1

What fundamentally distinguishes a non-custodial wallet from a custodial wallet?

Accepted Answer

In a non-custodial wallet, the user alone controls and holds their private keys

Answer

Non-custodial wallets support a wider range of cryptocurrencies

Answer

Custodial wallets are always implemented as hardware devices

Answer

Non-custodial wallets always require identity verification

Question 2

Why is storing a seed phrase in a digital file on an internet-connected device considered a critical security failure?

Accepted Answer

It exposes the seed phrase to malware, keyloggers, cloud breaches, and unauthorized access

Answer

Digital storage degrades the cryptographic integrity of the seed phrase

Answer

It violates BIP-39 protocol storage requirements

Answer

Seed phrases are incompatible with standard digital file formats

Question 3

Which attack type specifically manipulates users into voluntarily revealing wallet credentials or seed phrases?

Accepted Answer

Phishing and social engineering attacks

Answer

51% attack on the blockchain network

Answer

Eclipse attack on network nodes

Answer

Replay attack on signed transactions

Question 4

What is the core security purpose of the BIP-32 standard?

Accepted Answer

To specify the hierarchical deterministic (HD) wallet key derivation standard

Answer

To define fungible token standards compatible with ERC-20

Answer

To encrypt communications between blockchain nodes

Answer

To define on-chain transaction fee calculation structures

Question 5

What is the primary security vulnerability associated with paper wallets?

Accepted Answer

Physical loss, theft, or destruction permanently destroys access to funds

Answer

Paper wallets cannot hold large cryptocurrency balances

Answer

Paper wallets are incompatible with hardware signing devices

Answer

Paper wallets cannot generate multi-signature addresses

Question 6

What does Shamir's Secret Sharing (SSS) accomplish in blockchain key management?

Accepted Answer

It splits a secret into shares where a minimum threshold can reconstruct the original

Answer

It duplicates keys across multiple servers for redundant storage

Answer

It encrypts private keys using the recipient's public key

Answer

It generates child keys from a parent key using one-way derivation

Question 7

In blockchain security, what specifically does 'cold storage' refer to?

Accepted Answer

Keeping private keys on systems that have never been connected to the internet

Answer

Archiving keys in refrigerated, humidity-controlled data centers

Answer

Archiving historical blockchain transactions to save storage space

Answer

Using low-power validation nodes to reduce energy consumption