Within 10 days, on January 3rd, 2022, the “ Proof-of-Keys Day ” is officially celebrated, where holders, enthusiasts and traders from all over the world are encouraged to withdraw their funds from exchanges for non-custodial portfolios , he said. sovereignty over its assets and ensuring that exchanges remain honest.
Today we are going to explain what PoK Day is , its importance and how to participate.
Proof of Keys Day and sovereignty
Proof of Keys Day – Day of the trial of the Keys, in a literal translation – it was designed by Trace Mayer, a podcaster and criptomoedas investor. He created the concept as an annual celebration aimed at encouraging cryptocurrency investors to regain their monetary autonomy and putting the honesty of exchanges and other custodial services to the test.
The Proof of Keys Day is celebrated on the same day as the first Bitcoin genesis block , January 3, and has been held every year since 2019.
The event already has support and engagement from several other crypto communities besides Bitcoin (BTC) such as: Bitcoin Cash (BCH) , Monero (XMR) and Nano (XNO) .
To participate, simply join the HODLER movement and withdraw all your cryptocurrencies to a private, self-sovereign, non-custodial wallet on January 3, 2022.
Many traders who need the funds on exchanges make a withdrawal followed by a deposit the next day, just to test the liquidity and honesty of the exchange they trade, which can also be recommended.
Risks when using custodial services
When investors keep their cryptocurrencies on exchanges or custodial services, they do not have ownership and sovereignty over the funds. Those who hold them are the institutions that hold the private key (seed), which gives access to funds on the network.
By choosing to outsource custody, investors are obliged to trust the third party and are exposed to some risks such as:
- Lack of liquidity if many investors want to withdraw funds at the same time; and if the service is lying about its reservations and using customers' money for other purposes;
- Robberies, invasions and hacks in exchanges that are very attractive targets in terms of equity volume. As good as the security of companies is, cases of theft are frequent; since it is more profitable to try to steal a single trust fund from multiple clients than to attack multiple independent clients;
- Exit scam, scams, fake hacks on exchanges and other third party services, where they themselves steal customer funds and use the position of victim against an alleged attack to get rid of accusations and run away with the money;
- Technical hardware, connection, software configuration problems in third-party services that affect the network and usability of funds.
The proofofkeys.com website lists several cases of “problems” that occurred just before, the day before or during the PoK-Day, demonstrating their importance.
There are many cases of "hacks", freezing of operations, server overload, etc.
The phrase “Not your keys, not your coins” – “If it's not your private key, it's not your coins” explains the idea behind it.
Self-sovereignty is innovative in the financial system
Before the emergence of Bitcoin , if investors did not want to trust the custody of their funds to third parties, they were unable to use digital services, having to physically keep their financial assets in vaults. Gold, cash notes, promissory notes and corporate shares/shares in paper contracts.
As a result, they were subject to theft, fire and logistical difficulties for transport and storage.
When a person keeps his money in the bank, his gold in custody or his bonds and stocks with a broker, he depends on the “good will” and honesty of the service providers in making these funds available.
Sometimes facing a lack of liquidity, regulatory and bureaucratic barriers, prolonged waiting times, among other problems.
Blockchain technology , with cryptographic protection, now allows the total sovereignty of funds by their owners.
Of course, this also involves risks and, in this case, the owner of the funds is solely responsible for the security of their assets.
Currency protocols such as BTC, BCH, XMR and XNO work with transaction and ownership records distributed in a decentralized manner in a network protected by encryption and the way to access this network is through a private key (key or seed) that “ unlocks” the information and allows control over the coins.
If the user loses registration of the key, it is mathematically impossible to recover the funds. They are lost forever and that is exactly what ensures that no one else can move these values, keeping them safe.
Therefore, it is recommended that, if the investor decides to use non-custodial sovereign portfolios, a backup of the key (key or seed) is carried out in one or more secure locations, preferably offline and even better if in fireproof material .
On the eve of proof of keys day we are going to make a new article listing some portfolios that you can use to withdraw your funds safely and guarantee absolute sovereignty over your investments!
If you already have non-custodial portfolios with guaranteed sovereignty, you don't need to wait for the 3rd to arrive. Get your money out of exchanges whenever possible, protect your assets, assert your ownership and keep services honest.
For protocols with consensus on Proof-of-Stake , Open Representative Voting or similar, this attitude also helps with network decentralization and security.
The content How important is it to have the sovereignty of your investments? first appeared in Cointimes .