Cryptocurrencies are one of the few ways for a person to gain real financial independence, which is absolutely inaccessible when you work with traditional financial systems. However, this cannot be achieved without securely storing your own private keys. Alas, even experienced investors and traders forget about this important point, shifting the concern for security to third-party resources - different cryptocurrency exchanges. And they can even be understood - the habit of working with traditional financial institutions and the inclination to follow the path of least resistance and the greatest convenience affect them. However, this should not become a widespread phenomenon, since in this way the real financial independence is lost, which is one of the tasks of the cryptocurrency as a phenomenon.
This is exactly why the idea of Proof of Keys Day was invented - the easiest way to remind users who really should be responsible for the safety of private keys. But first things first.
What is Proof of Keys?
The idea was proposed on December 9, 2018 by a someone Trace Mayer, an investor, journalist, financial analyst and author of a number of thematic podcasts on the topic of cryptocurrencies. In one of his videos, he suggested organizing a special event, the purpose of which was to remind users that only they should be responsible for the safety of their keys, and not any other, even extremely reliable, third parties.
He suggested that all cryptocurrency enthusiasts abandon the services of exchanges for at least one day and transfer all their funds to independent and most reliable wallets - both software and hardware. What for? To remind everybody once again that only the one who owns the private key to the wallet owns the cryptocurrency stored on it.
When you work with traditional financial institutions, this would not be possible - if you brought your money to the bank, after it, this bank is the one who manages it. And all attempts to withdraw funds earlier will be suppressed, based on numerous rules and user agreements. In which users don't have too many real rights.
The idea was admired by many active cryptocurrency users, so an official event soon took place - Proof of Keys Day, timed to coincide with the anniversary of the first block in the Bitcoin blockchain - January 3, 2019.
However, it soon became clear that the event had another practical purpose - exposing stock exchange fraud through fractional reserve banking.
Storage problems on exchanges
Perhaps one of the main problems of modern exchanges is the active abuse of clients' money. And we are not talking about banal thefts and break-ins, although the famous hacking of the Mt.Gox exchange which took place in 2014 is still can be mentioned in news and forums. Large cryptocurrency exchanges are actively using the scheme familiar to traditional financial institutions - the use of clients' assets without their knowledge for active lending and other means of personal "relatively honest" enrichment. And they can actually do this, since private keys are stored on the data servers of the exchanges. And users will never know if their funds are being used without their knowledge or not.
But if a large percentage of users simultaneously request the issuance of their assets, then the exchanges will find themselves in an awkward position - the required amount of real funds may not be on hand. We'll have to delay the issue, referring to "problems with the server." However, for every active cryptocurrency user, it will be obvious what these problems are. But because of the imperfection of the legislation, the only way to punish such figures is to refuse to cooperate with them and disseminate information on the network about the breach of user agreements by exchanges.
The second problem, also common to many exchanges, is a high degree of centralization, which greatly facilitates the work of hackers and fraudsters. When there is a single server, everything depends solely on its protection. But any protection can be hacked - if only the profit from this compensates for the expended efforts and funds. In a situation with centralized servers that store hundreds and thousands of private keys, this is excused. And hacking every personal cryptocurrency wallet is not. In addition, the central server may be blocked by order of the government of the country where it is located. Or a country that is capable of dictating its terms to other countries. Allegedly - within the framework of the fight against money laundering and violation of KYC / AML procedures, but in fact, the future of blocked funds cannot be predicted.
The third problem associated with exchanges is the declining level of users technical knowledge. If all technical issues related to security can be assigned to a supposedly reliable intermediary, then there is no further point in improving your skills and deepening your knowledge. It comes to the point that some seemingly experienced investors practically do not understand what cryptocurrency wallets are in total.
Keep your cryptocurrency under control
The classic phrase "Who owns the information owns the world" can be easily changed as: "Who owns the private keys owns cryptocurrency assets." Yes, this requires more personal responsibility. Yes, this requires special technical knowledge and is worth spending some time on. However, only this guarantees the safety of your finances. And full-fledged financial independence so necessary in our time.
Proof of Keys Day
Anyone can join the Proof of Keys Day. To do this, you just need to take - and withdraw all your cryptocurrency assets to a well-protected wallet from exchange. This must be done on January 3, since only the mass scale of the event guarantees its success. Or May 22, since this is also a memorable date for the world of cryptocurrencies - it was on this day in 2010 that the first real purchase for bitcoins was made - a pizza for 10,000 BTC. Now it is difficult to imagine what you can buy for that kind of money, but in those days it was a real breakthrough.
This procedure is useful for ordinary users also because it allows you to take an inventory of your own funds. After all, given the huge number of actively used cryptocurrencies, it is very easy to get lost in them.
In addition, Proof of Keys Day allows you to refresh your memory about cryptocurrency wallets in general and the procedures to ensure their protection. This knowledge will definitely not be superfluous.
This idea is especially relevant for those who are engaged in long-term investment - for the so-called "HODLers". It is better to store their funds in independent and secure cryptocurrency wallets. As for those who are forced to cooperate with exchanges by the nature of their activities, they will have to strain a little. The fact is that most exchanges in every possible way motivate users to keep their assets with them - a lower commission, a shorter response time, additional bonuses. So you should be prepared for some inconvenience. But it's okay - it's only for 1 day, but the opportunity to show cryptocurrency exchanges who actually owns cryptocurrencies is priceless.
SecurityAuthor: EXBASE.IO | Oct 30, 2020
SecurityAuthor: EXBASE.IO | Oct 30, 2020
NewsAuthor: EXBASE.IO | Dec 20, 2020