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FCIBT practice questions

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Question 1Blockchain and Cryptocurrency Fundamentals

In a blockchain, what is the primary role of a cryptographic hash function such as SHA-256?

  1. It encrypts each transaction so only the recipient can decrypt it
  2. It produces a fixed-length fingerprint that changes if any input data changes Correct answer.
  3. It compresses the entire ledger into a smaller file for storage
  4. It converts private keys into public keys for signing

Explanation

A hash function maps any input to a fixed-length output that is deterministic and effectively collision-resistant, so any change to the block data alters the hash. This is what links blocks and makes tampering detectable. Hashing is one-way and is not used for reversible encryption of transaction contents.

Question 2Blockchain and Cryptocurrency Fundamentals

Which property best distinguishes a public permissionless blockchain from a permissioned one?

  1. It relies on a single administrator to approve each block
  2. Any party can join and validate without prior approval from a central authority Correct answer.
  3. It always uses proof of work as its consensus mechanism
  4. It stores data off-chain to improve throughput

Explanation

Permissionless networks allow open participation in reading, submitting transactions, and often validating, with no gatekeeper identity check. Permissioned networks restrict who may join or validate. Consensus mechanism and data storage choices vary independently of this permission model.

Question 3Blockchain and Cryptocurrency Fundamentals

A user holds 0.5 BTC in a wallet and wants to send 0.1 BTC. What does the wallet typically do with the remaining 0.4 BTC?

  1. Splits it equally among miners
  2. Burns it as a network fee
  3. Returns it to the sender as change in a new output Correct answer.
  4. Locks it until the next block reward

Explanation

UTXO-based systems spend whole outputs, so a transaction creates a change output back to an address the sender controls. Only the difference between inputs and outputs is paid as a fee. The remainder is not destroyed or redistributed.

Question 4Blockchain and Cryptocurrency Fundamentals

What does a private key allow its holder to do in a typical cryptocurrency wallet?

  1. Authorize spending by producing valid digital signatures Correct answer.
  2. Decrypt the balances of other users on the network
  3. Mint new coins without network agreement
  4. Change the consensus rules of the protocol

Explanation

The private key is the secret used to sign transactions that spend funds associated with the corresponding public key or address. Ownership in practice means control of signing authority. It does not grant protocol governance or the ability to create coins unilaterally.

Question 5Blockchain and Cryptocurrency Fundamentals

Which statement accurately describes the mempool?

  1. It is the consensus algorithm used to select the next validator
  2. It is the holding area where unconfirmed transactions wait to be included in a block Correct answer.
  3. It is the smart contract registry maintained by full nodes
  4. It is the permanent archive of all confirmed blocks

Explanation

Nodes keep a pool of valid but not-yet-mined transactions, and miners or validators choose from it, often prioritizing higher fees. Once included in a block, a transaction leaves the pool. The mempool is transient and differs between nodes.

Question 6Blockchain and Cryptocurrency Fundamentals

What is a smart contract on a blockchain platform such as Ethereum?

  1. A hardware device that stores private keys offline
  2. Program code deployed to an address that executes automatically when called Correct answer.
  3. A node that validates transactions in exchange for fees
  4. A legally binding paper agreement notarized by a bank

Explanation

A smart contract is executable code with persistent storage at a blockchain address; its functions run deterministically when invoked by transactions. It enforces rules automatically rather than relying on a third party. It is not a legal document, a hardware wallet, or a validator.

Question 7Blockchain and Cryptocurrency Fundamentals

Which feature of a blockchain makes historical records difficult to alter after confirmation?

  1. Nodes store data in encrypted form that only miners can read
  2. The network deletes old blocks after a fixed number of confirmations
  3. Each block commits to the hash of its predecessor, so changing old data breaks every later block Correct answer.
  4. Transaction amounts are hidden from all participants

Explanation

Because each block header contains the previous block's hash, altering an earlier block changes all subsequent hashes and invalidates the chain that honest nodes follow. Rewriting history therefore requires redoing enormous work or stake. This chaining is the core of tamper resistance.

Question 8Blockchain and Cryptocurrency Fundamentals

What does a blockchain explorer primarily let a user do?

  1. Execute smart contract functions without paying gas
  2. Mine new blocks using a browser plugin
  3. Generate private keys without a wallet
  4. Look up transactions, addresses, and blocks on a public ledger Correct answer.

Explanation

Block explorers are web interfaces over indexed chain data that let anyone search by transaction ID, address, or block height. They provide transparency and auditability. They do not mine, create keys, or bypass gas costs.

Question 9Blockchain and Cryptocurrency Fundamentals

A transaction offers a very low fee during a period of heavy network congestion. What is the most likely outcome?

  1. Confirmation is delayed because miners or validators prioritize higher-fee transactions Correct answer.
  2. The transaction is rejected permanently and the funds are lost
  3. The transaction is confirmed faster because it uses fewer resources
  4. The fee is automatically raised by the protocol to the current average

Explanation

Block space is scarce, so block producers typically select transactions by fee rate. A low-fee transaction can sit in the mempool for a long time until space frees up or it is replaced or dropped. The protocol does not auto-adjust an already submitted fee.

Question 10Blockchain and Cryptocurrency Fundamentals

In proof of work, what does the difficulty target control?

  1. How much computational effort is expected, on average, to find a valid block hash Correct answer.
  2. How long private keys must be to remain secure
  3. How much reward each miner receives per transaction
  4. How many transactions can fit in a single block

Explanation

The difficulty target sets the threshold a block hash must fall below, which determines the expected number of hash attempts per block. Protocols periodically adjust it to keep block intervals stable as total hash power changes. Block size, key length, and reward amounts are governed by other parameters.

Question 11Blockchain and Cryptocurrency Fundamentals

A validator in a proof-of-stake network is found to have signed two conflicting blocks at the same height. What is the typical protocol response?

  1. The validator's entire transaction history is deleted
  2. A portion of the validator's staked tokens is slashed Correct answer.
  3. The conflicting blocks are merged into one
  4. The network switches permanently to proof of work

Explanation

Proof-of-stake systems usually penalize provable misbehavior by burning or confiscating part of the offender's stake, a mechanism called slashing. This makes attacks economically costly. Conflicting blocks cannot be merged, and consensus does not switch automatically.

Question 12Blockchain and Cryptocurrency Fundamentals

Why can a 51% attack on a proof-of-work chain allow double spending?

  1. The attacker can decrypt any user's private key once in control
  2. The attacker can build a longer private chain that reorganizes recent confirmed transactions Correct answer.
  3. The attacker can force all nodes to accept invalid signatures
  4. The attacker can change the total supply cap encoded in the software

Explanation

With majority hash power an attacker can secretly extend a competing chain faster than the honest network and broadcast it to replace recent history, reversing their own payments. It does not break cryptography or change supply rules, because other nodes still enforce validity. Only recent transactions are realistically reversible.

Question 13Blockchain and Cryptocurrency Fundamentals

What distinguishes a hot wallet from a cold wallet?

  1. A hot wallet stores only altcoins, while a cold wallet stores only bitcoin
  2. A hot wallet is custodial, while a cold wallet is always non-custodial
  3. A hot wallet uses proof of stake, while a cold wallet uses proof of work
  4. A hot wallet's keys are held on an internet-connected device, while a cold wallet keeps keys offline Correct answer.

Explanation

The hot versus cold distinction concerns whether signing keys are exposed to an internet-connected environment. Cold storage keeps keys offline to reduce remote compromise risk. Asset type, custody model, and consensus mechanism are separate dimensions.

Question 14Blockchain and Cryptocurrency Fundamentals

A company wants a shared ledger among known business partners where each participant's identity is verified and read access is restricted. Which design fits best?

  1. A single spreadsheet emailed among partners
  2. A public permissionless blockchain with anonymous validators
  3. A public chain with no access restrictions
  4. A permissioned blockchain with identity controls Correct answer.

Explanation

Verified participants and restricted read access are the defining traits of a permissioned ledger, which suits consortium settings. Public permissionless chains deliberately allow open, often pseudonymous participation. A shared spreadsheet lacks distributed consensus and tamper evidence.

Question 15Blockchain and Cryptocurrency Fundamentals

What is a Merkle tree used for in a block header?

  1. Ordering transactions by fee before execution
  2. Summarizing all transactions into a single root hash that allows efficient inclusion proofs Correct answer.
  3. Encrypting each transaction with the miner's public key
  4. Storing account balances in a separate database

Explanation

Transactions are hashed pairwise up to a Merkle root, which is committed in the block header. A verifier can then check that a transaction is included using only a short path of hashes, without downloading the whole block. This provides compact and efficient proofs of inclusion.

Question 16Blockchain and Cryptocurrency Fundamentals

How does a nonce contribute to proof-of-work mining?

  1. It sets the number of confirmations required for finality
  2. It is varied so that the block header hash meets the difficulty target Correct answer.
  3. It records the identity of the miner for governance voting
  4. It encrypts the coinbase transaction reward

Explanation

Miners repeatedly change the nonce, and if it is exhausted other header fields, to search for a hash below the target. Finding a valid nonce proves expended work. The nonce has no encryption, identity, or confirmation-count role.

Question 17Blockchain and Cryptocurrency Fundamentals

A user receives an email asking them to enter their seed phrase on a website to 'restore wallet access'. What is the correct assessment?

  1. It is safe if the website uses HTTPS and shows a padlock
  2. It is required whenever a wallet shows a synchronization error
  3. It is safe because the seed phrase is encrypted in transit
  4. It is a phishing attempt, because a legitimate service never needs the seed phrase Correct answer.

Explanation

The seed phrase is the master secret that can regenerate all wallet keys, so anyone who obtains it controls the funds. No legitimate support process needs it, and TLS does not protect against a fraudulent site. Sharing it is never an appropriate troubleshooting step.

Question 18Blockchain and Cryptocurrency Fundamentals

What is the effect of a transaction being included in a block that is later orphaned by a longer competing chain?

  1. It is permanently removed and its inputs can never be spent again
  2. It is duplicated so the recipient is paid twice by protocol
  3. It is converted into a smart contract automatically
  4. It returns to unconfirmed status and may be re-included in the winning chain Correct answer.

Explanation

An orphaned or stale block is not part of the canonical chain, so its transactions are not considered confirmed and typically re-enter the mempool. The protocol does not double-pay or destroy inputs. Waiting for more confirmations reduces this risk.

Question 19Blockchain and Cryptocurrency Fundamentals

Which statement correctly compares on-chain and off-chain transactions?

  1. On-chain transactions are recorded on the distributed ledger, while off-chain transactions settle outside it and rely on trust or later settlement Correct answer.
  2. Off-chain transactions cannot involve bitcoin or ether
  3. On-chain transactions are always free, while off-chain transactions always cost gas
  4. On-chain transactions do not require consensus

Explanation

On-chain transactions are broadcast, validated, and permanently recorded by the network. Off-chain transfers, such as those in payment channels or exchange databases, occur outside the ledger and depend on counterparties or eventual on-chain settlement. Cost, asset type, and consensus requirements do not define the distinction.

Question 20Blockchain and Cryptocurrency Fundamentals

Why do many exchanges require several confirmations before crediting a deposit?

  1. To convert the deposit into a different cryptocurrency
  2. To reduce the risk that the funding transaction is reversed by a chain reorganization Correct answer.
  3. To verify that the depositor's private key is valid
  4. To pay the exchange's operating expenses from the deposit

Explanation

More confirmations mean more accumulated work or stake behind a transaction, making a reorg that excludes it increasingly impractical. This protects the exchange from deposit reversal fraud. Private key validity, conversion, and expense funding are unrelated to confirmation depth.

Question 21Blockchain and Cryptocurrency Fundamentals

Which statement about public and private keys in a typical asymmetric scheme is correct?

  1. Both keys must be kept secret to preserve security
  2. The private key is derived from the public key by hashing
  3. The public key can be shared freely, while the private key must remain secret Correct answer.
  4. The public key signs transactions and the private key verifies them

Explanation

Asymmetric cryptography separates a shareable public key from a secret private key. Signatures are produced with the private key and verified with the public key. Deriving the private key from the public key is computationally infeasible in a secure scheme.

Question 22Blockchain and Cryptocurrency Fundamentals

A decentralized application needs to read a price feed on-chain without operating its own oracle infrastructure. Which component is designed for this?

  1. A block explorer API that returns historical blocks
  2. An oracle network that delivers external data to smart contracts Correct answer.
  3. A mempool monitor that lists pending transactions
  4. A hardware wallet that signs price updates

Explanation

Smart contracts cannot natively access off-chain data, so oracle networks feed external information such as prices on-chain. Explorers, mempool monitors, and signing devices serve other purposes. Oracles are the standard bridge between blockchains and the outside world.

Question 23Blockchain and Cryptocurrency Fundamentals

An attacker controls a large share of a proof-of-stake network's total stake and uses it to finalize two conflicting checkpoints. Which statement best characterizes this attack?

  1. It is impossible because proof of stake prevents any validator from voting twice
  2. It permanently destroys all staked tokens across the network
  3. It is an equivocation attack that slashing conditions are designed to punish economically Correct answer.
  4. It is harmless because finality has no security assumptions

Explanation

Validators can technically sign conflicting votes, but protocols define slashing conditions that confiscate stake when such equivocation is proven. Security therefore rests on economic deterrence rather than physical impossibility. Penalties target offenders, not the whole network, and finality does carry assumptions.

Question 24Blockchain and Cryptocurrency Fundamentals

A smart contract uses block.timestamp to pay out a jackpot to whoever calls at exactly a designated second. Why is this design risky?

  1. Timestamps are stored as strings and cannot be compared
  2. Block producers can influence the timestamp within allowed bounds to favor their own call Correct answer.
  3. Timestamps always equal the previous block's hash
  4. The EVM forbids reading block.timestamp in any contract

Explanation

Block timestamps are set by the block producer and only loosely constrained by protocol rules, so a miner or validator can nudge them within tolerance to trigger a favorable outcome. Contracts needing randomness or precise timing should avoid relying solely on block.timestamp. The value is a readable integer, not a hash or string.

Question 25Blockchain and Cryptocurrency Fundamentals

Why does a reentrancy vulnerability in a smart contract allow an attacker to drain funds?

  1. The attacker guesses the contract's private key
  2. The compiler silently deletes balance checks when gas is low
  3. An external call re-enters the contract before its balance state is updated, so the check of available funds passes repeatedly Correct answer.
  4. Transactions in the same block are executed in random order

Explanation

If a contract sends ether before reducing the sender's recorded balance, the recipient's fallback can call back into the withdrawal function and pass the balance check again. The classic mitigation is to update state before external calls, following checks-effects-interactions, or to use a reentrancy guard. It is a logic flaw, not key theft or random ordering.

Question 26Blockchain and Cryptocurrency Fundamentals

In a typical blockchain transaction, what does the digital signature primarily provide?

  1. It guarantees the transaction will be included in the next block.
  2. It proves the sender authorized the transaction and that the data has not been altered. Correct answer.
  3. It encrypts the transaction amount so only the recipient can read it.
  4. It permanently locks the sender's funds until the transaction is mined.

Explanation

A digital signature is created with the sender's private key over the transaction data. Anyone can verify it with the sender's public key, which proves authorization and integrity. It does not control block inclusion, encrypt the amount, or lock funds.

Question 27Blockchain and Cryptocurrency Fundamentals

Which statement best describes a permissionless public blockchain?

  1. Any participant can read the ledger and submit transactions without identity approval. Correct answer.
  2. Only pre-approved organizations can operate nodes and validate blocks.
  3. Consensus is always achieved through proof of work.
  4. All transaction data is encrypted and visible only to the network operator.

Explanation

A permissionless public blockchain is open for anyone to read, transact, and often validate without gatekeeping. It does not require identity approval for basic participation. Consensus can be proof of work or proof of stake, and data is typically transparent.

Question 28Blockchain and Cryptocurrency Fundamentals

A user wants to receive funds to a wallet address for the first time. Which action is safe and correct?

  1. Share the private key so the sender can construct the transaction.
  2. Reuse an address from a different blockchain network to avoid generating a new one.
  3. Send the seed phrase to the sender to confirm ownership.
  4. Provide the public receiving address and verify it on the intended network. Correct answer.

Explanation

Receiving funds requires only the public address. The user should confirm the address is for the correct network to avoid loss. Private keys and seed phrases must never be shared, and addresses from another chain are not valid for the intended network.

Question 29Blockchain and Cryptocurrency Fundamentals

Which factor is the primary reason a blockchain can achieve consensus without a central authority?

  1. Transactions are reversible by the sender after confirmation.
  2. The network relies on legal contracts enforced by governments.
  3. All nodes trust a designated coordinator to order transactions.
  4. Nodes follow deterministic rules and independently validate blocks using a consensus mechanism. Correct answer.

Explanation

Blockchain nodes run the same protocol rules and independently verify blocks and transactions. A consensus mechanism such as proof of work or proof of stake coordinates which valid chain is accepted. This removes the need for a central coordinator and does not rely on reversibility or legal enforcement.

Question 30Blockchain and Cryptocurrency Fundamentals

A transaction is broadcast with a gas limit lower than the gas required to execute its smart contract call. What is the most likely outcome?

  1. The transaction is rejected by the network before any gas is consumed.
  2. The transaction succeeds and the unused gas is refunded to the sender.
  3. The transaction remains pending indefinitely until the gas limit is increased.
  4. The transaction reverts, but the sender still pays gas for the computation performed. Correct answer.

Explanation

If execution runs out of gas before completion, the transaction reverts. The state changes are rolled back, but the gas consumed is still charged to the sender. The transaction is not simply rejected upfront because the gas limit is a cap, not a prediction of required gas.

Question 31Cryptoasset Typologies and Illicit Finance Risks

A customer asks to buy bitcoin through an exchange but insists on paying with cash delivered by courier to an unregistered address. Which cryptoasset typology does this behavior most directly illustrate?

  1. Use of cash-to-crypto channels to obscure the audit trail Correct answer.
  2. Cross-chain bridge arbitrage
  3. Mining pool payout consolidation
  4. Structuring of fiat deposits to avoid reporting thresholds

Explanation

Cash-to-crypto methods break the link between a bank account identity and the purchased cryptoassets, which is the core laundering concern. The physical cash handoff leaves no fiat rail record tying the buyer to the wallet. Arbitrage and mining payouts are legitimate operational activities rather than concealment typologies.

Question 32Cryptoasset Typologies and Illicit Finance Risks

What is a 'mixer' or 'tumbler' in the context of cryptoasset illicit finance?

  1. A tool that converts private keys into recovery phrases
  2. A service that pools and redistributes coins to break the on-chain link between source and destination Correct answer.
  3. A smart contract that automatically rebalances a portfolio
  4. A consensus mechanism used by proof-of-stake networks

Explanation

Mixers accept deposits from many users and pay out funds from a pooled reserve, so the blockchain record no longer shows a direct transfer path from the original wallet. This obfuscation is why mixers are a recognized laundering typology and subject to enhanced scrutiny. Portfolio rebalancing and key recovery are unrelated functions.

Question 33Cryptoasset Typologies and Illicit Finance Risks

An investigator sees a wallet receive many small deposits from hundreds of distinct addresses, then send a single large transfer to a newly created address. Which on-chain pattern is this most consistent with?

  1. Round-trip wash trading
  2. Peel chain layering
  3. Consolidation followed by a lump-sum transfer Correct answer.
  4. Dusting attack

Explanation

Collecting value from many source addresses into one wallet and then moving it onward as a single amount is consolidation, a common layering step that aggregates funds before placement elsewhere. Peel chains instead send repeated smaller amounts back to change addresses. Wash trading is self-dealing to fake volume, and dusting sends tiny amounts to many victims.

Question 34Cryptoasset Typologies and Illicit Finance Risks

Which feature of privacy coins creates the greatest challenge for blockchain analytics?

  1. They cannot be converted into fiat currency
  2. They obscure sender, receiver, or amount data by design Correct answer.
  3. They require mining hardware that is unavailable to the public
  4. They are always traded on unregulated exchanges

Explanation

Privacy coins use cryptographic techniques such as ring signatures, stealth addresses, or shielded pools that hide transaction details, limiting the visibility analytics tools rely on. The core investigative difficulty is the concealment of transaction metadata, not exchange listing or mining access. Convertibility varies and is not the defining obstacle.

Question 35Cryptoasset Typologies and Illicit Finance Risks

A ransomware operator demands payment in a specific cryptoasset and provides a per-victim address generated by the same wallet cluster. What is the primary investigative value of this setup?

  1. It allows clustering of victim payments to a common controlling entity Correct answer.
  2. It guarantees the funds cannot be moved
  3. It removes the need for subpoenas to off-ramp providers
  4. It proves the operator is a licensed exchange

Explanation

When multiple victim payments flow to addresses controlled by one wallet cluster, investigators can attribute the payments to a single operator and estimate total proceeds. Address reuse and common-input heuristics support clustering. This does not eliminate the need for off-ramp records or freeze the funds.

Question 36Cryptoasset Typologies and Illicit Finance Risks

Which practice is characteristic of a 'rug pull' in decentralized finance?

  1. Users split withdrawals to stay below reporting thresholds
  2. Developers lock liquidity for years and publish an audit
  3. Validators reject blocks that contain sanctioned addresses
  4. Developers drain pooled liquidity and abandon the project after attracting deposits Correct answer.

Explanation

A rug pull occurs when project creators attract user deposits, then remove the pooled liquidity or mint and sell tokens before disappearing. The defining element is the abrupt extraction of value by insiders. Locked liquidity, audits, and block filtering describe legitimate or unrelated controls.

Question 37Cryptoasset Typologies and Illicit Finance Risks

A criminal network wants to move value between blockchains without using a centralized exchange. Which typology does a cross-chain bridge most directly enable?

  1. Layering across chains to complicate tracing Correct answer.
  2. Insider trading of token listings
  3. Structuring of cash deposits
  4. Invoice fraud against a vendor

Explanation

Bridges move assets between chains, so value can hop ecosystems and shed the proximity to its origin, which is a layering technique. Investigators must correlate bridge deposits and withdrawals across two ledgers. The other options involve fiat reporting, trade finance, or securities conduct rather than chain-hopping.

Question 38Cryptoasset Typologies and Illicit Finance Risks

What distinguishes a 'chain hop' from a simple transfer within the same blockchain?

  1. The transfer uses a different consensus algorithm
  2. The transfer is reversed by the sender
  3. The transfer requires a notarized paper record
  4. The value moves to a different distributed ledger, often via a bridge or swap service Correct answer.

Explanation

A chain hop moves value from one blockchain to another, so the destination ledger shows a new asset and a different transaction history. A same-chain transfer stays on one ledger and remains directly traceable in that ledger's graph. Consensus algorithm and reversibility are not the distinguishing factors.

Question 39Cryptoasset Typologies and Illicit Finance Risks

An exchange receives a deposit from a wallet flagged as a darknet market vendor payout. Under a risk-based approach, which immediate action is most appropriate?

  1. Publicly disclose the customer's identity on social media
  2. File a suspicious transaction report and apply enhanced due diligence to the customer Correct answer.
  3. Return the funds without any record
  4. Ignore the flag because the deposit is small

Explanation

A direct link to suspected illicit proceeds is a red flag that warrants escalation, including a suspicious transaction report and enhanced scrutiny of the customer relationship. The obligation is to document and report, not to publicize or silently return funds. Size alone does not neutralize the risk.

Question 40Cryptoasset Typologies and Illicit Finance Risks

Which indicator most strongly suggests use of a cryptocurrency ATM for money laundering?

  1. A customer checks the current exchange rate before transacting
  2. Repeated cash purchases just below the ATM operator's identification threshold by the same person Correct answer.
  3. A customer buys a small amount once with verified identification
  4. An operator posts its fee schedule at the machine

Explanation

Repeated cash purchases kept just under the identification or reporting threshold fit the structuring typology and are a classic crypto ATM red flag. The pattern of deliberate avoidance is the signal. Rate checks, fee disclosure, and a single verified small purchase are ordinary behavior.

Question 41Cryptoasset Typologies and Illicit Finance Risks

What is a 'peel chain' designed to achieve?

  1. To convert tokens into fiat at a regulated bank
  2. To split funds into a series of decreasing transfers to fresh addresses, obscuring the total Correct answer.
  3. To stake tokens for network rewards
  4. To consolidate many small wallets into one treasury wallet

Explanation

A peel chain repeatedly spends an input and returns most of the value to a new change address while peeling off smaller amounts, creating a long trail of decreasing transfers. The aim is to distance funds from their origin and frustrate tracing. Consolidation, staking, and fiat conversion are distinct activities.

Question 42Cryptoasset Typologies and Illicit Finance Risks

A threat actor sends tiny amounts of cryptoasset to thousands of wallets to link addresses to their owners. What is this technique called?

  1. Burning
  2. Yield farming
  3. Dusting Correct answer.
  4. Slashing

Explanation

Dusting distributes negligible amounts to many addresses so that recipients who later move or combine those funds may reveal ownership links through common-input analysis. It is an attribution technique, not a yield or consensus process. Slashing and burning destroy or penalize value rather than tag wallets.

Question 43Cryptoasset Typologies and Illicit Finance Risks

An investigator observes that a wallet's outgoing transaction combines inputs from three addresses previously treated as unrelated. What analytic heuristic does this support?

  1. Common-input ownership heuristic Correct answer.
  2. Token standard compliance check
  3. Gas price optimization
  4. Proof-of-work difficulty adjustment

Explanation

When a transaction spends from several addresses, the signing entity must control the private keys for all of them, which supports clustering those addresses under one owner. This is the common-input ownership heuristic. Difficulty, token standards, and gas pricing do not address attribution.

Question 44Cryptoasset Typologies and Illicit Finance Risks

Which scenario best describes 'placement' in the laundering of cryptoasset proceeds?

  1. Exchanging tainted coins for privacy coins on a decentralized exchange
  2. Withdrawing funds to a bank account after months of dormancy
  3. Splitting a wallet balance across ten new addresses
  4. Converting illicit cash into cryptoassets through an unregistered peer-to-peer broker Correct answer.

Explanation

Placement is the first stage, where illicit cash enters the cryptoasset ecosystem, for example through an unregistered broker. Splitting and swapping are layering steps that further obscure the trail, while a later bank withdrawal is integration. Distinguishing the stages guides where investigators look for records.

Question 45Cryptoasset Typologies and Illicit Finance Risks

A casino-like gambling site accepts cryptoasset deposits and returns payouts to different addresses chosen by the user. Why is this attractive for laundering?

  1. It can commingle illicit funds with legitimate gambling flows and break the deposit-withdrawal link Correct answer.
  2. It prevents the operator from seeing transaction data
  3. It guarantees a profit for the depositor
  4. It reports all users to tax authorities automatically

Explanation

Online gambling can blend illicit deposits with legitimate wagering volume, and payouts to unrelated addresses sever the direct link to the original deposit. This commingling and redirection is the laundering appeal. Profit is not guaranteed, and such sites are not inherently transparent.

Question 46Cryptoasset Typologies and Illicit Finance Risks

What is the primary risk posed by an unregistered peer-to-peer cryptoasset broker?

  1. It moves value between fiat and crypto without customer due diligence or reporting Correct answer.
  2. It guarantees settlement finality
  3. It reduces network transaction fees
  4. It increases block sizes on the network

Explanation

Unregistered P2P brokers can exchange cash or bank transfers for cryptoassets while bypassing identity verification and reporting obligations, creating an anonymity gap. That gap is the core illicit finance risk. Fees, block sizes, and settlement are technical network properties unrelated to broker registration.

Question 47Cryptoasset Typologies and Illicit Finance Risks

A customer's wallet interacts with a smart contract that was flagged for automatically diverting a percentage of every transfer to an address controlled by the deployer. Which risk does this most closely resemble?

  1. A standard multisignature treasury wallet
  2. A honeypot or malicious token contract designed to siphon user funds Correct answer.
  3. A time-locked vesting schedule
  4. A decentralized identity registry

Explanation

Hidden transfer taxes or diversion logic in a token contract are hallmarks of malicious contracts that capture user funds, often used in honeypot or rug-pull schemes. Legitimate treasury, identity, and vesting contracts disclose their logic and do not silently redirect user transfers.

Question 48Cryptoasset Typologies and Illicit Finance Risks

Which characteristic makes non-fungible tokens a distinct illicit finance concern compared with fungible cryptoassets?

  1. They have no associated blockchain record
  2. Each token is unique, allowing high-value transfers to be disguised as art or collectible trades Correct answer.
  3. They are always priced in fiat currency
  4. They cannot be transferred between wallets

Explanation

NFT uniqueness allows value to be shifted through a single high-priced sale, so self-dealing or wash trades can move funds while appearing as legitimate collectible transactions. The uniqueness and subjective pricing are the concern. NFTs are transferable and recorded on-chain.

Question 49Cryptoasset Typologies and Illicit Finance Risks

A group uses stolen identity documents to open accounts at multiple exchanges and then moves funds between them. Which typology does this best illustrate?

  1. Validator collusion
  2. Yield farming optimization
  3. Liquidity mining incentive abuse
  4. Sybil account creation to distribute and layer proceeds Correct answer.

Explanation

Using false identities to open many accounts lets launderers spread activity across venues and layer funds while frustrating attribution. This is a form of identity fraud and account proliferation. Yield farming, liquidity mining, and validator collusion concern protocol economics or consensus, not identity abuse.

Question 50Cryptoasset Typologies and Illicit Finance Risks

What is a 'money mule' in the cryptoasset context?

  1. A validator that signs conflicting blocks
  2. An auditor who reviews smart contracts
  3. A software tool that mines blocks faster
  4. A person who receives and transfers illicit funds, often for a small commission Correct answer.

Explanation

Money mules are individuals, sometimes unwitting, who receive illicit cryptoassets or fiat and pass them on, adding a layer between the criminal and the cash-out. Their accounts often absorb the compliance scrutiny. Mining tools, validators, and auditors play different roles.