Cryptocurrency Wallets and Key Management 4

Question 1

What is 'key sharding' in the context of wallet security?

Accepted Answer

Splitting a private key into multiple fragments so that a threshold of fragments is needed to reconstruct it

Answer

Key sharding (often implemented via Shamir's Secret Sharing) splits a private key into shares, requiring a minimum number of shares to reconstruct the key.

Question 2

Which wallet type is MOST resistant to phishing attacks?

Accepted Answer

A hardware wallet with a screen that displays transaction details

Answer

Hardware wallets with displays show the actual transaction details on a trusted screen, preventing malicious software from substituting a different recipient address.

Question 3

What is the function of a 'wallet descriptor' in Bitcoin?

Accepted Answer

A standardized expression that fully describes the script and keys needed to spend from a wallet

Answer

A wallet descriptor encodes the complete spending policy—including key derivation paths and script type—enabling any compatible wallet software to restore the wallet accurately.

Question 4

What does 'address derivation' mean in a hierarchical deterministic wallet?

Accepted Answer

Mathematically generating child public keys and addresses from a master key using a derivation path

Answer

Address derivation uses a deterministic algorithm (e.g., HMAC-SHA512) to produce a sequence of child keys from a master seed, each at a specific path index.

Question 5

Why is it important to verify a hardware wallet's firmware integrity before use?

Accepted Answer

To confirm the firmware has not been tampered with, which could allow key extraction

Answer

Compromised firmware could silently exfiltrate private keys or modify transaction details, so verifying cryptographic signatures on firmware prevents supply-chain attacks.

Cryptocurrency Practice Test

Cryptocurrency Practice Test

Cryptocurrency Wallets and Key Management 4