Wallets and Security Flashcards

What is a hardware wallet's primary advantage over a software wallet?

Answer: Private keys never touch an internet-connected device

Hardware wallets store private keys in an isolated chip that is never exposed to the internet, protecting against malware and remote attacks.

Which attack involves tricking a user into revealing their seed phrase through a fake customer support interaction?

Answer: Social engineering

Social engineering exploits human trust rather than technical vulnerabilities, often through impersonation of support staff to extract seed phrases.

A BIP39 seed phrase typically consists of how many words?

Answer: 12 or 24

BIP39 defines seed phrase lengths of 12 or 24 words, which encode 128 or 256 bits of entropy respectively.

What does 'change address' mean in a Bitcoin transaction?

Answer: The address that receives unspent funds returned to the sender

Bitcoin transactions consume entire UTXOs, and any excess amount beyond the payment is sent back to the sender via a change address.

What risk does address reuse introduce in a cryptocurrency wallet?

Answer: Reduced privacy by linking transactions to one identity

Reusing addresses allows anyone to trace the full transaction history of that address, degrading financial privacy.

Which type of wallet is considered 'non-custodial'?

Answer: A wallet where only the user controls the private keys

Non-custodial wallets give sole control of private keys to the user, meaning no third party can freeze or access funds.

What is the purpose of a passphrase (sometimes called the '25th word') added to a BIP39 seed?

Answer: It creates an additional layer of encryption for an extra hidden wallet

A BIP39 passphrase generates a completely different wallet derivation path, acting as a second factor so a stolen seed phrase alone is insufficient.