A user is setting up a new hardware wallet. The device displays a 24-word recovery phrase. The user is concerned about the risk of someone observing the phrase during setup. What is the most secure way to handle the recovery phrase during initial setup?

Memorize the phrase and do not write it down

Take a photo of the phrase with a smartphone and store it in a password-protected notes app

Type the phrase into a text file on the computer and save it to a USB drive

Ensure no one else is in the room, write the phrase on a paper backup card, and store the card in a secure location such as a safe

A cryptocurrency exchange operating in a jurisdiction that requires customer funds to be segregated and protected must decide how to store customer private keys. The exchange wants to minimize the risk of a single point of failure while also ensuring that customer funds are not commingled with operational funds. Which approach best satisfies these regulatory and security requirements?

Use a multi-signature wallet with keys distributed across geographically separate secure facilities, and maintain separate wallets for each customer

Store customer keys in an encrypted database on the exchange's servers with a single master key

Use a custodial wallet service provided by another company to hold all customer funds

Store all customer private keys in a single hardware wallet kept in a bank vault

A user has a hardware wallet that was damaged in a fire. The user has the recovery phrase stored on a metal plate that survived the fire. The user wants to restore the wallet on a new hardware wallet. What is the most important consideration during the restoration process?

Enter the recovery phrase into a software wallet first to verify the balance

Verify that the recovery phrase is entered correctly on the new device, as a single typo will result in a different wallet

Update the firmware of the new hardware wallet before entering the recovery phrase

Ensure that the new hardware wallet is from the same manufacturer as the old one

EC-CouncilBlockchain Business Leader Certification

Domain 2Objective 3

Blockchain Wallets and Key Management Techniques BBLC Practice Questions (Page 10)

Part of the Cryptography and Security in Blockchain domain, which makes up ~13% of our current practice bank.

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Questions 46–49

46application · medium
A user is setting up a new hardware wallet. The device displays a 24-word recovery phrase. The user is concerned about the risk of someone observing the phrase during setup. What is the most secure way to handle the recovery phrase during initial setup?
Select an answer first
47application · medium
A cryptocurrency exchange operating in a jurisdiction that requires customer funds to be segregated and protected must decide how to store customer private keys. The exchange wants to minimize the risk of a single point of failure while also ensuring that customer funds are not commingled with operational funds. Which approach best satisfies these regulatory and security requirements?
Select an answer first
48expert · hard
A user has a hardware wallet that was damaged in a fire. The user has the recovery phrase stored on a metal plate that survived the fire. The user wants to restore the wallet on a new hardware wallet. What is the most important consideration during the restoration process?
Select an answer first
49foundation · easy
Which wallet type stores private keys on a dedicated physical device that is typically kept offline and requires physical confirmation for transactions?
Select an answer first

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Blockchain Wallets and Key Management Techniques BBLC Practice Questions (Page 10)

Questions 46–49

A user is setting up a new hardware wallet. The device displays a 24-word recovery phrase. The user is concerned about the risk of someone observing the phrase during setup. What is the most secure way to handle the recovery phrase during initial setup?

A user has a hardware wallet that was damaged in a fire. The user has the recovery phrase stored on a metal plate that survived the fire. The user wants to restore the wallet on a new hardware wallet. What is the most important consideration during the restoration process?

Which wallet type stores private keys on a dedicated physical device that is typically kept offline and requires physical confirmation for transactions?

Keep studying — Cryptography and Security in Blockchain