Proof of Keys Day: Not your keys, Not your Bitcoin

Proof of Keys Day: Not your keys, Not your Bitcoin

WHAT IS PROOF OF KEYS DAY???

Another consensus? Yes. But not on the blockchain. In our minds and heads started by Trace Mayer. Secure your funds by not leaving them on exchanges or Custodial Wallets.

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.

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.

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.

You might be wondering, how much of an impact will this day have?

One confusing aspect is that while today is the official “Proof of Keys” day, not everyone is participating on the same day. Some users have been taking control of their keys leading up to today, posting their results on social media.

Some users talk — calling Proof of Keys “bitcoin’s independence day” and a “monetary sovereignty war-cry” — it sounds as if the end goal is for all cryptocurrency users to suddenly move their keys to a device they control and spin up full nodes on fancy hardware device, making bitcoin exchanges all but obsolete.

But Mayer is expecting the result to be less subversive – and more of a bonding experience.

“I think most companies and individuals will operate normally with no significant interruptions, the bitcoin network will be strengthened in its decentralization properties, and many individuals and the community will have a sense of accomplishment and camaraderie,” Mayer told.

And other Proof of Keys advocates admit that many users cherish convenience, not necessarily having the time or enthusiasm to store their bitcoins securely and spin up a full node.

If it helps even a handful of newcomers or veterans set up their own wallet and start to understand how their assets are stored, this is also great. 

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Don't forget your keys anywhere. Even the smallest.

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.

 

In Argentina the banks are required to keep 44% and in Europe, the ECB is only required to hold 1%.

 
 
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.

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