Cryptocurrency Wallets and Key Management 2

Question 1

What is the purpose of a BIP39 mnemonic phrase?

Accepted Answer

To represent a hierarchical deterministic wallet seed in human-readable words

Answer

BIP39 defines a standard for encoding a random seed as a 12- or 24-word mnemonic phrase, making it easier for humans to back up an HD wallet.

Question 2

In a hierarchical deterministic (HD) wallet, what does the derivation path m/44'/0'/0'/0/0 specify?

Accepted Answer

The index of a specific key within the HD tree following the BIP44 standard

Answer

BIP44 defines a standard derivation path structure where each level (purpose, coin type, account, change, index) narrows down to a specific key in the tree.

Question 3

Which attack involves monitoring power consumption or electromagnetic emissions to extract a private key from a hardware wallet?

Accepted Answer

Side-channel attack

Answer

Side-channel attacks exploit physical information leaked during cryptographic operations, such as power usage, timing, or electromagnetic emissions.

Question 4

What is a 'watch-only' wallet?

Accepted Answer

A wallet containing only public keys, used to monitor balances without spending ability

Answer

A watch-only wallet holds public addresses or public keys, allowing balance and transaction monitoring without exposing private keys.

Question 5

What does 'key stretching' accomplish when used in wallet encryption?

Accepted Answer

It makes brute-force attacks more computationally expensive by deriving a stronger key from a password

Answer

Key stretching algorithms like PBKDF2 or bcrypt apply many hash iterations to a password, dramatically increasing the cost of brute-force attempts.

Cryptocurrency Practice Test

Cryptocurrency Practice Test

Cryptocurrency Wallets and Key Management 2