What is the Bitcoin ‘Proof of Keys’ Event and Why It’s Important

On January 3rd, 2019 crypto traders will take part in the Proof of Keys day. Thanks, HitBTC, for showing why we should care.

What is Proof of Keys anyway?

Proof of Keys is a movement started by well-known crypto investor Trace Mayer through Twitter. On Thursday, January 3rd, 2019 investors are being urged to move their cryptocurrency off of exchanges (Coinbase, Binance, etc.) and into a Bitcoin wallet where they have control over the private keys.

Why January 3rd?

January 3rd, 2019, is the 10-year anniversary of the Bitcoin genesis block being mined. Proof of Keys is intended to become an annual tradition so a date that’s easy to remember, as it celebrates the creation of the Bitcoin blockchain, was chosen.

So what’s the point of Proof of Keys?

As Trace Mayer stated in his tweet, “Not your keys; not your bitcoin.” Most crypto veterans, but far too few nocoiners (er… newcomers), understand that cryptocurrency stored on an exchange is, technically, owned by that exchange. Since the exchange has full control over the private keys (users have no access to them) they have the ability to do whatever they choose with the wallets and the crypto stored in them.

This poses a huge risk to investors that Proof of Keys is attempting to remedy. By convincing users to move their crypto it accomplishes a few things;

  • Urge users to learn, or re-familiarize themselves with, how to create and use Bitcoin wallets (regardless of whether they’re paper, hardware or software wallets… as long as the user controls the private keys)
  • Teach or remind cryptocurrency investors the critical lesson that you only truly own the asset if you solely control the private keys
  • “Declare and re-declare our monetary sovereignty”, as stated by Mayer, which was one of the primary purposes of Bitcoin to begin with
  • Celebrate the creation of the Bitcoin blockchain

Why Should You Care?

The Proof of Keys ideology epitomizes the actual purpose of Bitcoin… to replace a ‘trusted 3rd-party’, which is prone to errors and vulnerabilities, with machines and math. Exchanges play an important role in the cryptocurrency ecosystem but that limited role is in the name itself… to exchange one asset for another.

Bitcoins short history has already proven, at quite a cost, why exchanges should never be treated as a storage facility. The 2014 (alleged) hack of Mt. Gox cost investors $473 million worth of cryptocurrency. While that may be the most well-known example of exchanges losing assets (be it via hack, exit-scam or just flat-out disappearing) it’s far from the only one. If you need a refresher I recommend;

Ironically, while writing this, the 11th largest cryptocurrency exchange (based on 24 hour volume per coinmarketcap.com) HitBTC seems to have frozen withdrawals just prior to Proof of Keys;

That’s not to say that the withdrawal function won’t be unfrozen, or that HitBTCs clients just lost all their crypto holdings, but it certainly proves the point that Trace Mayer and Proof of Keys are trying to make. If yesterday you had 1 bitcoin on the HitBTC exchange, today you saw that you couldn’t withdraw it, and tomorrow HitBTC just vanished… how would you access that 1 bitcoin? Correct… you wouldn’t.

Should I Participate in Proof of Keys?

Yes. It’s a short, simple answer. It costs you nothing but the minor withdrawal fee to participate. What you gain in knowledge or practice of controlling your bitcoin, not to mention the declaration of your monetary sovereignty, is worth much more than that.

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