Blockchain Wallets and Key Management Techniques BBLC Practice Questions (Page 5)

Questions 21–25

1. 21foundation · easy

   What is a common compliance issue related to key management in blockchain environments?

   • AUsing a hardware wallet for key storage
   • BFailure to maintain adequate records of key custody and access
   • CStoring keys in multiple geographic locations
   • DGenerating keys using a random number generator
   Reveal Solution Discussion Select an answer first
2. 22foundation · easy

   What is the primary purpose of a multi-signature (multisig) wallet?

   • ATo require multiple private keys to authorize a transaction
   • BTo encrypt the private key with multiple passwords
   • CTo store private keys in multiple locations
   • DTo generate a new address for each transaction
   Reveal Solution Discussion Select an answer first
4. 23expert · hard

   A user has a hardware wallet with a 24-word recovery phrase. The user stored the phrase in a bank safety deposit box. The bank branch is temporarily closed due to a regional emergency, and the user needs to access funds immediately. The hardware wallet itself is with the user and functional. What is the best course of action?

   • AContact the hardware wallet manufacturer to request a new recovery phrase
   • BWait for the bank to reopen to retrieve the recovery phrase before making any transaction
   • CUse the hardware wallet directly to sign transactions; the recovery phrase is only needed if the device is lost or reset
   • DTry to reconstruct the recovery phrase from memory
   Reveal Solution Discussion Select an answer first
5. 24application · medium

   A developer is building a wallet application and needs to generate a new HD wallet for each user. The developer plans to use a pseudo-random number generator (PRNG) seeded with the current timestamp. What is the primary security risk of this approach?

   • AThe timestamp will generate the same public key for all users
   • BThe timestamp may produce a mnemonic phrase that is too short to be valid
   • CThe timestamp is predictable, so an attacker could reproduce the same seed and derive the wallet's private keys
   • DThe timestamp will cause the wallet to be incompatible with other HD wallets
   Reveal Solution Discussion Select an answer first
6. 25expert · hard

   A regulated financial institution must comply with a rule that requires 'effective control' over customer funds held in blockchain wallets. The institution is evaluating whether to use a non-custodial wallet where customers hold their own keys, or a custodial wallet where the institution holds the keys. Which consideration is most important for meeting the regulatory requirement?

   • ANon-custodial wallets are always exempt from regulatory oversight
   • BCustodial wallets are automatically compliant with all key-management regulations
   • CThe institution should choose the wallet type that minimizes its own liability, regardless of customer protection
   • DThe institution must be able to demonstrate that it has the authority and technical ability to execute transactions on behalf of customers, regardless of who holds the keys
   Reveal Solution Discussion Select an answer first