What is Proof-of-Keys and what does it have to do with Bitcoin?

The date of January 3, 2009 is very prominent within the world of cryptocurrencies, since it was when the genesis block (Genesis Block) of Bitcoin was generated. An outstanding date that begins a new decentralized economic system without intermediaries. Seeking to revive the essence of decentralization, the 'Proof-of-Keys' movement was born, which reminds us that our keys, our bitcoins.

And is that many users have given control of their portfolios or wallets to the Exchange. Which, on the other hand, have begun to act as custodian of cryptocurrencies, sometimes with a fatal end. We only have to see the looting of Mt. Gox, the liquidation process of Cryptopia or the hack of Binance.

What is Proof-of-Keys?

Proof-of-Keys is a movement that wants to remind us that if we don't have our private key, we don't have our cryptocurrencies. The Exchange only give us an address, they do not provide us with its private and public keys. These are supposedly managed by the creators of the exchange, with the aforementioned dire results.

When we download the Bitcoin wallet, for example, a unique private key is generated for us. A key that is important for us to keep safely, because if we lose it, we will lose all the bitcoins.

Based on this private key, a public key is generated, which we can use to send or receive bitcoins. The public key is quite long and it is not recommended to use it, it is recommended to use a Bitcoin address above all.

A Bitcoin address is nothing more than an identifier of between 27 and 34 characters that represents a payment destination. These can be generated extremely easily and as many as we want. It is recommended, for security and privacy, to generate a Bitcoin address for each transaction we make. And the good thing about the addresses is that they are practically infinite.

What is the essence of Proof-of-Keys?

What is sought is that users who have bitcoins in a trading or purchase exchange send their coins to a wallet of which they have private keys. We can have a bitcoin address in an exchange, but we do not have the private keys. It basically breaks with the premise of not needing a trusted third party. Here we are relying on an exchange that may or may not be secure, and for example Mt. Gox.

In addition to reminding us that if we do not have the private key of the Bitcoin address, we do not have the bitcoins, it seeks to verify the strength of the exchanges. It seeks to carry out a process similar to that of banking, which occasionally undergoes stress tests to verify its strength. Here we simply seek to know if the Exchange really have the users' bitcoins, checking their liquidity and solvency.

We could even summarize it in four points:

• Encourage users to learn or become familiar with creating and using a Bitcoin wallet. Either in software, hardware or paper format. You want the user to use and learn to use their private and public key, as well as the creation and management of addresses.
• Teach and remind cryptocurrency investors that you only own their bitcoins if you control the private keys.
• “Declare and re-declare our monetary sovereignty”, as Mayer, promoter of the idea, correctly indicates.
• Celebrate the creation of the Bitcoin genesis block

Who promotes the idea?

This Proof-of-Keys event has been proposed by Trace Mayer. According to the biography on his website: “He is an entrepreneurial investor, journalist, monetary scientist and ardent defender of freedom of expression. He has a degree in law and in finance.”

The proposal has caught on among Bitcoin lovers and on Twitter all those who support the measure have put the emoji of the key symbolizing this event in their nickname. Regarding the event, Mayer highlights: "by demanding and / or taking possession of your assets, users will learn very quickly with the blockchain test, whether they are elite hodlers or not."

Stress test to the Bitcoin network?

It is not only a stress test for the exchanges, it is also a stress for the network. A complex situation could arise and that is that the massive withdrawal of bitcoins on January 3 could saturate the network and generate a delay in the validation of transactions or an increase in the fee. Mayer and other Bitcoin friends since the event got underway have asked not to wait until the last day.

A 2018 full of price manipulations

2018 was a complex year in which we witnessed many manipulations of the price of Bitcoin. Especially from the hand of the stablecoin Tether (USDT) that is so harshly criticized. This currency should always have a ratio of 1USDT = 1USD. Supposedly the amount of USDT is backed by the same amount of US dollars.

We saw how the auditors of Tether abandoned the audit due to the opacity of the company responsible for this cryptocurrency. This is in contrast to the ever-increasing amount of Tether available. In addition, it has been said countless times and there are even studies that link the 'impression' of new Tether with strong drops in the price of Bitcoin.

Binance has also been in the eye of controversy for movements between strange and unexplained wallets. We had to put up with the schoolyard fight between Roger Ver and Craig Wright. And the list goes on.

Cost of this test

For the user, the cost is only the commission charged by the exchange in question. In return, the solvency of the exchange is verified, it is proven that the bitcoins are ours and the consensus on the network is also strengthened. Then we must also deduct the commission back to the exchange, when we decide. It can be a few euros if done correctly, what's more, there are transactions of 500 million dollars and a fee of 0.5 dollars.

How can I join?

To join the Proof-of-Keys movement you only have to have a software Bitcoin client. It can be a PC software such as the Bitcoin Core wallet or a smartphone wallet. Have bitcoins in any exchange and that's it. Therefore anyone can join this movement of verification to the exchanges. It is not complicated at all.