Certified Bitcoin Professional Practice Exam

What is the primary purpose of a multi-sig wallet?

1. To speed up transaction times

2. To add an extra layer of security

3. To allow for unlimited fund access

4. To track transaction history

The correct answer is: To add an extra layer of security

A multi-signature (multi-sig) wallet is primarily designed to enhance security in cryptocurrency transactions. In this type of wallet, multiple private keys are required to authorize a transaction, rather than relying on just a single key. This means that a certain number of parties must sign off on a transaction before it can be executed, effectively adding a layer of security against unauthorized access and fraud. For example, in a business setting, multiple executives might need to approve a significant transaction, ensuring that no single person can unilaterally make decisions that could affect the company’s funds. This collaborative approach to signing transactions protects against theft or loss of funds, as it makes it much harder for an attacker to compromise the wallet. The other options inadequately describe the function of a multi-sig wallet. While speed is essential for transactions, multi-sig wallets may actually slow down the process because of the need for multiple signatures. They do not allow for unlimited access; instead, they restrict access based on the rules set for signatures. Additionally, while multi-sig wallets can have transaction history, this is not their primary purpose; transaction tracking is a basic feature of all wallets, not unique to multi-sig solutions. Thus, the most accurate representation of the