Cryptocurrency Fundamentals and Wallets BFC Practice Questions (Page 7)

Questions 31–35

1. 31application · medium

   A cryptocurrency exchange wants to offer a wallet service that allows users to trade quickly without requiring them to manage private keys. However, the exchange is concerned about the risk of a single point of failure if the central server is compromised. Which wallet architecture best balances user convenience with reduced centralization risk?

   • AA custodial hot wallet where the exchange controls the private keys and enables fast withdrawals
   • BA non-custodial cold wallet where users hold their own private keys on hardware devices
   • CA multi-signature wallet where the exchange holds one key and the user holds another, requiring both to authorize withdrawals
   • DA paper wallet for each user, stored offline by the exchange
   Reveal Solution Discussion Select an answer first
2. 32foundation · easy

   What is the first step in the lifecycle of a cryptocurrency transaction?

   • AThe recipient confirms receipt of the funds.
   • BMiners add the transaction to a new block.
   • CThe transaction is broadcast to the network.
   • DThe sender creates and signs the transaction with their private key.
   Reveal Solution Discussion Select an answer first
4. 33foundation · easy

   Which of the following is a key role of a cryptocurrency wallet?

   • AProviding a centralized authority to reverse transactions.
   • BGenerating and storing the private keys that authorize transactions.
   • CMining new blocks to earn transaction fees.
   • DRegulating the supply of the cryptocurrency.
   Reveal Solution Discussion Select an answer first
5. 34expert · hard

   A startup is planning to raise funds by issuing a token that will give holders a share of the company's future profits. They are unsure whether to classify it as a security token or a utility token. Which factor is most important in this decision?

   • AThe token's price volatility
   • BThe expectation of profit derived from the efforts of others
   • CThe total supply of the token
   • DThe blockchain platform on which the token is issued
   Reveal Solution Discussion Select an answer first
6. 35foundation · easy

   How does Proof of Work (PoW) secure a cryptocurrency network?

   • ABy using a trusted third party to verify all transactions before they are added to the blockchain.
   • BBy requiring validators to lock up a certain amount of coins as collateral, which they lose if they act dishonestly.
   • CBy encrypting the blockchain with a secret key that only authorized nodes possess.
   • DBy requiring miners to solve complex mathematical puzzles, which makes it computationally expensive to alter the blockchain.
   Reveal Solution Discussion Select an answer first