Cryptoasset Anti-Financial Crime Specialist (CCAS) Certification Practice Test

Addresses connected to the internet for cryptocurrency exchanges are known as:

1. Cold wallets

2. Paper wallets

3. Hot wallets

4. Custody wallets

The correct answer is: Hot wallets

The term used to describe addresses connected to the internet for cryptocurrency exchanges is "hot wallets." Hot wallets are designed for convenience, allowing for quick transactions and easy access to funds because they are online and connected to the internet. This enables users to interact with exchanges and make trades efficiently. However, the connectivity that defines hot wallets also comes with risks, as these wallets are more susceptible to hacking and cyberattacks due to their online nature. In contrast, cold wallets are offline storage methods that provide enhanced security against such risks, but they are not suitable for immediate access or frequent transactions. Paper wallets, which involve printing out private keys and addresses, also do not connect to the internet, making them a form of cold storage. Custody wallets refer to third-party services that hold cryptocurrency on behalf of users and can incorporate both hot and cold storage solutions, but they do not specifically designate the online nature of the addresses used by exchanges. Understanding the characteristics of hot wallets is crucial for comprehending how users can manage their cryptocurrency in a way that balances accessibility and security.