Private Key Proof Is Coming, How Will Major Exchanges Respond?
The vast cryptocurrency community and long-term Bitcoin holders (HODLers) will participate in the second-ever Proof of Keys (PoK) event on January 3rd, where users will withdraw their cryptocurrency assets from exchanges to stress-test their reserves. For Bitcoin supporters, this event is a declaration that individuals should have sovereignty over their currency. Exchanges will face significant withdrawal pressure, testing whether they hold sufficient reserves.
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Not your keys, not your coins
Protecting the private keys to your cryptocurrency assets is crucial. However, many people trust exchanges to store their cryptocurrency assets, disregarding the fact that exchanges have full control over user assets.
"Not your keys, not your coins" is a popular phrase in the crypto community. Whenever news of exchanges being hacked or compromised surfaces, this mantra is often repeated to remind the public of the importance of private keys.
Since its inception, Bitcoin has been seen as an adversary to central banks. Supporters believe that it breaks free from government control and paves the way for monetary sovereignty.
Trace Mayer, the founder of Bitcoin educational platform Bitcoin.kn, initiated the Proof of Keys (PoK) revolution on January 3, 2018. The concept of Proof of Keys pays homage to the spirit of Bitcoin and ensures that cryptocurrency assets are not controlled by any third party or centralized institution.
First Proof of Keys Event
As the idea of Proof of Keys began to take root in the crypto community, Trace Mayer's call to action resonated. Prominent figures in the community, including renowned cryptographer Nick Szabo and long-time Bitcoin advocate Caitlin Long, responded by adding "Jan /3➞₿🔑∎" to their Twitter handles.
The first Proof of Keys event also highlighted some potential issues. Exchanges began suspending withdrawals and deposits under the guise of "temporary system maintenance." Previous reports indicated that the exchange HitBTC struggled during the Proof of Keys event and preemptively froze user assets. In response, HitBTC stated:
These are individual cases stemming from compliance with anti-money laundering regulations.
Furthermore, since exchanges hold a significant amount of user assets, they become prime targets for hackers, shifting the risk to users' assets. In 2019 alone, attacks on exchanges resulted in the loss of $170 million worth of cryptocurrency. This is a key reason why Proof of Keys gained attention.
Trace Mayer mentioned:
Through Proof of Keys, users are required to take actual possession of their cryptocurrency assets, allowing individuals to quickly learn the skills necessary, regardless of whether they are knowledgeable HODLers of crypto wallets.
Second Proof of Keys Event
The second edition of Proof of Keys took place on January 3, 2020. Will exchanges issue "maintenance notices" again or fully support the event, demonstrating the concept of monetary sovereignty with the community?
(Trace Mayer advocating for monetary sovereignty. / Source: https://www.proofofkeys.com/)
Reports suggest that exchanges may increase fees but still allow withdrawals, although they might not be able to handle Bitcoin withdrawals for all users. However, exchanges that restrict withdrawals will be closely monitored.
In any case, this year's Proof of Keys event has garnered support from many blockchain companies and HODLers, including exchanges. The Proof of Keys website lists past incidents of exchanges' misconduct, reminding people of the significance of this day.
Overall, with the continuous growth of the crypto community over the past year, exchanges may face higher pressure this time. This event will help expose problematic exchanges and contribute to a healthier overall crypto ecosystem.
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