Cryptocurrency Security and Regulatory Compliance 2 — Questions and Answers
Question 1: What is a '51% attack' in cryptocurrency networks?
- A phishing attack targeting 51% of exchange users
- When a single entity controls more than half of the network's mining hash rate (Correct answer)
- A smart contract exploit affecting 51% of token holders
- A regulatory action freezing 51% of an exchange's assets
Correct answer: When a single entity controls more than half of the network's mining hash rate
A 51% attack occurs when one entity controls the majority of mining power, allowing them to double-spend coins or reverse transactions.
Question 2: Which U.S. agency primarily regulates cryptocurrency exchanges as money services businesses?
- SEC
- CFTC
- FinCEN (Correct answer)
- OCC
Correct answer: FinCEN
FinCEN (Financial Crimes Enforcement Network) requires cryptocurrency exchanges to register as money services businesses and comply with AML rules.
Question 3: What does 'cold storage' mean in the context of cryptocurrency security?
- Storing crypto in a refrigerated server environment
- Keeping private keys on devices not connected to the internet (Correct answer)
- Using a frozen account that cannot transact
- Archiving old blockchain data offline
Correct answer: Keeping private keys on devices not connected to the internet
Cold storage refers to keeping private keys in hardware wallets or air-gapped computers that are never connected to the internet, protecting them from remote hacks.
Question 4: Under the Travel Rule, what information must U.S. crypto businesses transmit when transferring funds over $3,000?
- Only the sender's name
- Sender and receiver identifying information (Correct answer)
- The transaction hash only
- The wallet's IP address
Correct answer: Sender and receiver identifying information
The Travel Rule requires Virtual Asset Service Providers to collect and transmit both originator and beneficiary information for transfers above the threshold.
Question 5: What type of attack involves an adversary secretly relaying communications between two parties who believe they are communicating directly?
- Sybil attack
- Man-in-the-middle attack (Correct answer)
- Replay attack
- Eclipse attack
Correct answer: Man-in-the-middle attack
A man-in-the-middle attack intercepts and potentially alters communications between two parties without their knowledge.
Question 6: What is 'address poisoning' in cryptocurrency security?
- Injecting malware into a wallet address generator
- Sending tiny transactions from an address similar to a user's contact to trick them into copying it (Correct answer)
- Corrupting the blockchain ledger at a specific address
- A DNS attack that redirects wallet addresses
Correct answer: Sending tiny transactions from an address similar to a user's contact to trick them into copying it
Address poisoning sends dust transactions from lookalike addresses so victims copy the fraudulent address from their transaction history instead of the real one.
Question 7: Which of the following best describes a Sybil attack on a blockchain network?
- Flooding a network with transaction spam to cause congestion
- An attacker creates many fake identities to gain disproportionate influence in a peer-to-peer network (Correct answer)
- Stealing validator keys to sign fraudulent blocks
- Exploiting a smart contract reentrancy vulnerability
Correct answer: An attacker creates many fake identities to gain disproportionate influence in a peer-to-peer network
In a Sybil attack, an adversary creates numerous fake node identities to subvert the reputation system or consensus mechanism of a decentralized network.
Cryptocurrency Security and Regulatory Compliance 2
What is a '51% attack' in cryptocurrency networks?