Bitcoin Custodial Solutions Quiz

1. What is Bitcoin custodial custody?

• Bitcoin custodial care refers to simply storing coins in a wallet.
• Digital asset custody is a broad term that includes various methods of storing and protecting digital assets on behalf of their owners.
• It means transferring Bitcoin directly between users without intermediaries.
• Bitcoin custodial custody is exclusively about trading Bitcoin on exchanges.

2. Who are custodial institutions for Bitcoin?

• Reputable third-party custodians
• Retail stores
• Private individuals
• Government agencies

3. Which institutions offer digital asset custody solutions?

• Coinbase
• Walmart
• PayPal
• Chase Bank

4. What security measures do custodial institutions adhere to?

• They rely on unregulated protocols for asset management.
• They use low-cost storage solutions for digital assets.
• They employ minimal security checks to reduce operational costs.
• They adhere to high standards in terms of security measures, insurance, audits, and compliance.

5. What is the purpose of physical security in custodial solutions?

• To enhance the speed of transactions.
• To promote cryptocurrency trading.
• To create new digital assets.
• To safeguard the Bitcoin entrusted to them.

6. What is the role of cold storage in custodial solutions?

• Cold storage is used to increase Bitcoin market value.
• Cold storage is used to manage customer service inquiries.
• Cold storage is used to protect Bitcoin from unauthorized access.
• Cold storage is used to accelerate transaction speeds.

7. What are operational security workflows in custodial solutions?

• They focus on both hardware and software integration.
• These workflows ensure the secure management of digital assets.
• They deal exclusively with transaction speed enhancements.
• They are only concerned with customer service protocols.

8. What are access controls in custodial solutions?

• Access controls are based on the geographical location of users.
• Access controls include passwords or passphrases to secure digital assets.
• Access controls rely on biometric scanning for identity verification.
• Access controls involve public keys for verifying transactions.

9. Can owners regain access to their digital assets if they forget their password?

• No, digital assets are permanently lost.
• Yes, but only with special software.
• No, passwords cannot be recovered ever.
• Yes, custodians can verify the owner`s identity to regain access.

10. What are the benefits of using a personal wallet for digital asset management?

• It guarantees profit from digital investments without effort.
• It gives owners more control over their keys but also places greater responsibility on them to protect those keys.
• It eliminates all risks associated with digital asset storage.
• It transfers ownership of assets to a third party for management.

11. What are cryptocurrency exchanges in the context of custodial solutions?

• They are among the largest custodians in the industry, offering sophisticated crypto custody solutions.
• They are online platforms for trading stocks and bonds easily.
• They are traditional banks providing savings accounts for cryptocurrencies.
• They are websites for digital asset auctioning and bidding.

12. Which financial institutions have entered the crypto custody solutions landscape?

• Established banks have entered the space driven by client demand and clearer regulations.
• Nonprofit organizations have entered the space driven by philanthropic interests.
• Traditional retailers have entered the space driven by consumer demand and market trends.
• Small tech startups have entered the space driven by innovation and competition.

13. What is the role of specialist digital custodians in the crypto custody ecosystem?

• They provide the underlying infrastructure that powers other institutions` custody services.
• They develop new cryptocurrencies for institutional investors.
• They conduct all blockchain transactions on behalf of clients.
• They allow users to trade digital assets without any security measures.

14. What is the difference between direct and sub-custody models?

• Both custody models provide identical services with no differences.
• Direct custody involves higher fees compared to sub-custody models.
• Direct custody gives institutions greater control, while sub-custody accelerates market entry but limits service offerings.
• Sub-custody offers more control but is less secure than direct custody.

15. What is multisig in Bitcoin custody?

• Multisig means Bitcoin can only be accessed by one person at a time.
• Multisig locks Bitcoin so that multiple signatures from different private keys are required to access it.
• Multisig requires only one signature to authorize all Bitcoin transactions.
• Multisig allows Bitcoin to be stored in a single wallet without extra security.

16. How is multisig described in notation?

• a-of-b notation
• m-of-n notation
• n-of-m notation
• k-and-l notation

17. What is the purpose of multisig policies?

• To increase the speed of transactions and reduce fees.
• To simplify the user experience in digital asset management.
• To centralize control and streamline access for users.
• To offer joint control over a coin and avoid single points of failure or trust.

18. What is a 3-of-3 multisig?

• It allows multiple participants to spend Bitcoin without signatures.
• It enables a single signature to authorize Bitcoin transactions.
• It locks Bitcoin until a specified time regardless of participant signatures.
• It locks Bitcoin so that it can only be spent if all three specified participants sign the same transaction.

19. What is a 2-of-3 multisig?

• It allows one participant to spend the coin freely.
• It locks Bitcoin so that any two participants of a specified set of three can spend the coin.
• It requires all three participants to spend the coin at once.
• It enables any participant to spend the coin without needing signatures.

20. What is the Liquid Network in Bitcoin custody?

• It is a protocol for creating Bitcoin derivatives and futures trading.
• It is a method for anonymously sending Bitcoin transactions.
• It is a layer-2 sidechain implemented since 2015, overseen by a federation of businesses and exchanges.
• It is a storage solution for Bitcoin private keys and passwords.

21. What are the benefits of using the Liquid Network?

• It increases the time for transaction processing and verification significantly.
• Users benefit from reduced counterparty risk, faster block confirmations, confidential transactions, and extended Bitcoin scripting capabilities.
• It allows for unlimited withdrawal limits without any security checks.
• It reduces the need for digital asset privacy measures and anonymity.

22. What is a Chaumian ecash mint?

• It is a government-backed financial institution for managing cash transactions.
• It is a decentralized exchange platform for trading digital assets.
• It is a system that accepts deposits from users and issues them an equivalent balance of electronic cash notes using blinded signatures.
• It is a type of cryptocurrency that operates on a public ledger like Ethereum.

23. How does a Chaumian ecash mint ensure user privacy?

• It allows the mint’s operator(s) to track all transactions on the network easily.
• It requires users to disclose their identities for transaction validation.
• It ensures that the mint’s operator(s) are unable to determine users’ balances, transaction destinations, identities, and other transaction metadata.
• It stores all user data in a public ledger for transparency.

24. What is Cashu in the context of Chaumian ecash?

• It is a digital wallet specifically designed for Bitcoin storage.
• It is a type of cryptocurrency exchange platform for trading.
• It is an open-source implementation of a Chaumian ecash where there is a singular mint operator.
• It is a method for tracking Bitcoin transactions on the blockchain.

25. What is the purpose of blinded signatures in an ecash mint?

• To provide instant transactions for all users at once.
• To allow the operator to track users` spending habits easily.
• To increase the value of the electronic cash notes issued.
• To ensure user privacy and prevent the mint`s operator from determining transaction details.

26. What is the role of a custodian in Bitcoin custody?

• A custodian holds the private keys controlling certain Bitcoin.
• A custodian mines new Bitcoin for users.
• A custodian creates Bitcoin wallet software for clients.
• A custodian is responsible for trading Bitcoin on exchanges.

27. Is there always counterparty risk with a custodian?

• Yes, there is always counterparty risk with a custodian.
• Counterparty risk only exists when assets are transferred.
• Only large custodians have counterparty risk.
• No, there is never counterparty risk with a custodian.

28. How can counterparty risk be mitigated in Bitcoin custody?

• Use of multisig arrangements
• Storing keys in a single location
• Relying solely on password protection
• Utilizing only software wallets

29. What is the benefit of using multisig in Bitcoin custody?

• It allows multiple parties to hold joint custody and avoids single points of failure or trust.
• It prevents all types of hacks and attacks indefinitely.
• It simplifies the recovery process for lost passwords.
• It guarantees complete anonymity for transactions.

30. What is the difference between multisig and MPC (Multi-Party Computation)?

• Multisig requires creating a new wallet and moving funds, while MPC allows for growth and change without needing a new wallet.
• Multisig is solely focused on encryption, while MPC is based on private key generation.
• Both require the same number of signatures from different parties to execute a transaction.
• Multisig operates without collaboration between parties, while MPC mandates cooperation.