Certified Bitcoin Professional Practice Exam

What is a consequence of using hardware wallets for Bitcoin storage?

1. Increased vulnerability to online attacks

2. Higher risk of losing access if the device is misplaced

3. They are only compatible with certain applications

4. They require constant internet access

The correct answer is: Higher risk of losing access if the device is misplaced

Using hardware wallets for Bitcoin storage indeed presents a consequence related to the risk of losing access if the device is misplaced. Hardware wallets are physical devices designed to securely store private keys offline, making them significantly less susceptible to online threats compared to software wallets. However, their physical nature means that if a user misplaces the device, or if it is stolen without appropriate security measures (like a PIN or recovery seed), access to the Bitcoin stored on that wallet can be permanently lost. Losing the device means that the user would not have access to their private keys, which are necessary to sign transactions and move the funds. Unlike online wallets that might have account recovery options, hardware wallets usually do not provide such mechanisms because they are intended to enhance security by keeping private keys offline. Thus, it's crucial for users to implement safe storage practices to protect their hardware wallets and remember their recovery phrases. In contrast, the other options do not align with the characteristics of hardware wallets. They are less vulnerable to online attacks due to their offline storage, compatible with a wide range of applications, and do not require constant internet access for storing Bitcoin, which further emphasizes their security advantage.