Cryptocurrency Wallets and Key Management 3

Question 1

What does the 'gap limit' setting in an HD wallet determine?

Accepted Answer

How many consecutive unused addresses the wallet scans before stopping discovery

Answer

The gap limit defines how many empty (unused) consecutive addresses the wallet checks during blockchain scanning before assuming no further addresses are active.

Question 2

What is the main security advantage of using a hardware wallet over a software wallet on an internet-connected device?

Accepted Answer

Private keys are generated and stored in an isolated secure element, never exposed to the host computer

Answer

Hardware wallets keep private keys inside a secure chip that never exposes them to the connected computer, protecting against malware and remote attacks.

Question 3

In the context of cryptocurrency wallets, what is 'coin control'?

Accepted Answer

The ability to manually select which UTXOs are used as inputs in a transaction

Answer

Coin control lets users choose specific unspent transaction outputs (UTXOs) to use in a transaction, improving privacy and fee management.

Question 4

What is a 'custodial' wallet?

Accepted Answer

A wallet where a third party holds and controls the private keys on behalf of the user

Answer

In a custodial wallet, a service provider like an exchange holds the private keys, meaning the user must trust that provider to access or transfer funds.

Question 5

Which cryptographic curve is used by Bitcoin and Ethereum for key generation?

Accepted Answer

secp256k1

Answer

Both Bitcoin and Ethereum use the secp256k1 elliptic curve for their ECDSA-based key pairs.

Cryptocurrency Practice Test

Cryptocurrency Practice Test

Cryptocurrency Wallets and Key Management 3