Proof of keys day is an annual event that Trace Mayer started on January 3rd 2019 on the 10th anniversary of Bitcoin. It was started in an effort to remind everyone that if you don’t control the keys to your Bitcoin, it’s not really yours.
January 3rd is the Proof of Keys day
This year we look to continue in this tradition by withdrawing our funds from exchanges and 3rd parties on the 3rd of January to claim ownership of our property, as well as to keep exchanges or 3rd party services in check, by ensuring that they have the money that they say they do.
We trust exchanges much like we do banks, believing that they are safeguarding our money and that we can withdraw it at any time if we need to.
Crypto holders, investors and traders make use of exchanges to store and secure their funds, just like you might use a bank to store your fiat. We trust that the exchange will safeguard your money, and that at any given time, they’ll give it back to you on request.
Proof of Keys day aims to encourage crypto users to move their funds from exchanges to their own private wallet that they control.
Side note: I would recommend using a fresh address for a touch of added privacy — unless your exchange required you to KYC, in which case you should use a fresh address anyway for practice.
Why is Proof of Keys Day important?
The most important thing that any participant gets from this day is the fact that they have (even symbolically) taken control of their own money. It reminds us that Satoshi created Bitcoin for this very purpose, to be able to transfer value between two parties without having to ask permission or rely on anyone else.
Proof of Keys day also coincides on the anniversary of Bitcoins genesis block.
The Genesis Block contains the first Bitcoin transaction that was ever sent. Satoshi Nakamoto sent 10 bitcoins to Hal Finney, a developer, and early Bitcoin adopter.
Proof of Keys keeps exchanges accountable
Right now, financial institutions practice something that is called fractional reserve banking.
When you make a deposit into your bank account, you expect that you can withdraw it at any time and they’ll have your money, already allocated to you and to nobody else, right?
Wrong.
When money is deposited into a bank, it is generally now considered theirs — and they can do pretty much anything with it besides (perhaps) outright steal it.
This means that the bank can lend your money out, and only keep a fraction of your deposit, thereby creating imaginary money out of thin air. The percentage that the bank is made to keep depends on your jurisdiction,
This is how banks make their money, they use your money to loan to others, and the same kind of — hustle, scam, call it what you will — behaviour could, and has been found in some exchanges in the past.
Bank runs are large scale coordinated withdrawals by citizens and/or businesses from a specific or all banks — usually because there is the general suspicion that the bank or entity is not entirely solvent.
Bank runs first came about in the 16th century and have also been used as a mechanism for the blackmail of individuals and governments.
Proof of Keys day, a modern-type bank run, encourages people to withdraw all their assets from crypto exchanges and force exchanges, much like a bank run, to prove their solvency and trustworthiness in a system where trust is not a requirement to transact. You can read more about trustless transactions in an article by Preethi Kasireddy.
If all the customers, or even just the greater majority of customers of exchanges all withdraw their funds, exchanges who intentionally only hold a fraction of their customers’ assets or those who may have been hacked would be exposed for their insolvency.
There were 7 (major) crypto hacks in 2019, totalling at least $150m in losses.
More famous than any hack would be Mt. Gox which saw around 850,000 Bitcoins stolen in 2014.
Exposing insolvency and flexing our keys is our way of holding 3rd parties accountable and ensuring that they earn the trust that we give them.
How do I participate in Proof of Keys day?
This part is kinda fun and pretty easy. If you’re withdrawing bitcoins you can use Green Wallet from Blockstream, and if you’re into Ethereum and its tokens, you can use Trust Wallet from Viktor Radchenko. Side note: You can send your tether to Trust Wallet.
Just be sure that you have a little bit of Ethereum in the wallet if you send any tokens to it, or you won’t be able to move your tokens until you do).
Set up your wallet if you don’t have one, log into your account on your exchange(s) and withdraw all of your funds to your wallet(s).
Thanks for reading this and doing your part in ensuring that those we trust are truly trustworthy.
Info on Blockstream Green can be found here
Info on Trust Wallet can be found here
I am in no way assosciated with Blockstream, Trust Wallet or any other company or person mentioned in this post.
Info on Trust Wallet can be found here
I am in no way assosciated with Blockstream, Trust Wallet or any other company or person mentioned in this post.