Crypto Trading Security and Risk 3

Question 1

What is 'cold storage' in cryptocurrency?

Accepted Answer

Keeping private keys completely offline

Answer

Cold storage keeps keys offline, isolating them from online threats.

Question 2

A smart contract has not been audited by a reputable firm. What is the main risk of trading its token?

Accepted Answer

Undiscovered vulnerabilities could let attackers drain funds

Answer

Unaudited contracts may contain exploitable bugs that hackers can use to steal locked funds.

Question 3

What is a SIM-swap attack designed to do?

Accepted Answer

Hijack your phone number to intercept SMS-based 2FA codes

Answer

Attackers transfer your number to their SIM to receive your verification codes and reset accounts.

Question 4

Before approving a token allowance on a DeFi platform, why should you check the requested approval amount?

Accepted Answer

An unlimited approval lets the contract move all of that token from your wallet

Answer

Unlimited approvals can be abused by malicious contracts to withdraw your entire token balance.

Question 5

What does diversification help manage in a crypto portfolio?

Accepted Answer

Concentration risk from a single asset crashing

Answer

Spreading funds across assets reduces the impact of any one coin collapsing.

Crypto Trading Practice Test