Do you own bitcoin? Today is Proof of Keys

Last Updated: 3 January 2023

It’s that time again! On 3 January, the annual “bitcoin bank run” will take place. The aim is to take bitcoin off exchanges. Why? Today is known as “Proof of Keys day”.

3 January 2009

The Genesis Block was hardcoded by Satoshi Nakamoto on 3 January. It featured a headline from British daily The Times.

In the newspaper article, Nakamoto referred to central financial parties: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks”. A reference to the 2008 banking crisis.

You could think of stock exchanges as a cryptobank. And those can fail and we don’t necessarily need them. Bitcoin you can own and that is exactly the idea of Proof of Keys.

Last years we didn’t see a massive outflow of bitcoin from exchanges, but it’s a good day to see if you can still access your bitcoin yourself. Things can go wrong with both exchanges and self-storage, for example.

The idea behind this day is simple: it should motivate people to store their bitcoin themselves.

The creator of the Proof of Keys is Trace Mayer. Mayer is an early bitcoiner/trader who has since slowed down.

You can think of exchanges and brokers as a kind of banks in the world of bitcoin. Indeed, many users leave their money there.

Strategy for bitcoin storage

Bitcoiners will often advise you to store your bitcoin yourself, for instance on a hardware wallet. The site StoringBitcoin.info, among others, helps you playfully find a strategy for your bitcoin storage.

In 5 minutes or so, a few questions will get you to a strategy for your bitcoin storage. That could be a wallet on your phone (simple), or a Multisig solution. Where you end up depends on how you answer the questions.

Exchanges are not always happy with this phenomenon. For example, in 2019, exchange HitBTC stopped bitcoin withdrawals, and Bitfinex had problems in the same year.

Presumably, there were problems with cold wallets. Exchanges hold a small portion of bitcoin in “hot wallets”. These hot wallets contain the readily available bitcoin. Exchanges keep the rest of bitcoin safely in cold wallets. These cold wallets are kept in a vault, for example.

If there are massive withdrawals, manual actions will often be needed to make money available from the cold wallets.

This year, Dutch company BL3P is coming up with a campaign to encourage self-custody precisely. They now have a low priority withdrawal feature.

 

Author

  • Ivan came across the topic of cryptocurrencies in early 2016 and, as an author and enthusiast, has been intensively involved with the topics of cryptocurrencies, blockchain and STOs ever since.

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