Certified Bitcoin Professional Practice Exam

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Do deterministic wallets require a specific passphrase for encryption?

Yes, it is mandatory
No, they do not require a passphrase
Only if the user wants extra security
Yes, but it can be any set of characters

The correct answer is: No, they do not require a passphrase

Deterministic wallets, often referred to as hierarchical deterministic (HD) wallets, generate addresses and private keys from a single seed phrase. This seed phrase, usually made up of 12 to 24 words, is the foundation for creating all subsequent keys in the wallet. The key aspect here is that while deterministic wallets can indeed enhance security by implementing encryption and passphrases, they do not inherently require a specific passphrase for their core functionality. Users can operate such wallets without additional encryption; the seed phrase itself is enough to access their coins. In this scenario, if the user chooses not to add an extra layer of security via a passphrase, they can still recover and use their wallet reliably. While opting for a passphrase can provide additional security—making it harder for unauthorized users to access the wallet—it remains an optional measure. This flexibility allows users to determine their level of desired security based on their preferences and needs. Thus, asserting that deterministic wallets do not require a passphrase accurately reflects this essential characteristic of their design.