Proof of Keys- Steemit Crypto Academy- S4W7- Homework Post for @awesononso
Explain private and public Keys in relation to custodial and non-custodial wallets.
Well, these keys are not keys. Just kidding these keys are a string of randomly generated alphabets & digits or a simple username that are used to access a particular data & in our case used to send/receive assets. Each & every blockchain uses different encryption methods & so does the keys. Every key is unique & a private key & public key of the same account are mathematically linked to each other. Public keys can be recovered using private keys, but private keys are non-recoverable & once lost you loose your assets as well.
Two types of keys are THE PRIVATE KEY & THE PUBLIC KEY. These two serve different purposes & as the name suggests one is private & the other is public. Let's understand the functions of each of these.
- PUBLIC KEYS
Well! This type of key is generally public which means that this key needs not be secured privately. This key is your address in other words this is asset receiving address. In steemit transaction that you will see late in this question I used the name @zeewanee as the receiving address. In the case of steemit zeewanee is my public key. This means that any amount of Steem or SBD sent to zeewanee will reflect in my account. This username(receiving address) is unique & no other account on steemit can use this name as it is unique.
This public key can be a simple username or a long string of alphabets & digits based on the blockchain you are using, just in the case of steemit we have a username as our public key & this key is used to receive assets. This public key is just like an account number in the bank. Anyone can have your account number & in case if anyone wants to send you funds he/she can send it to your account number.
- PRIVATE KEY
As the name suggests private. This key is used to sign transactions that mean this key is used to send assets. The public key was used to receive assets while the private key is used to send assets from your wallet to someone else. This key is not simple. This key is very complex & is mathematically linked to the public key. You can see any steemit private key to get an idea how the private key looks like. This key is to be stored very securely because anyone having this key, shows ownership of the wallet. One should also change the keys from time to time in order to reduce the risk.
ASSUMPTION:-
Let's understand the public & private keys using a real-life example. Suppose you have a bank account, what suppose you already have one. So the account number of the bank is your public key & you share it with anyone who wants to send you the money this is what is function of a public key in cryptography. Now you want to withdraw the money, what you do is you visit the bank. You fill in the details on the cheque & you sign on the cheque. You pass the cheque to the cashier. Now the cashier verifies the signature & if it matches he hands you over the cash or else he returns you the cheque saying the signature doesn't match. This is what is a private key. A signature in a bank plays the same role as a private key in cryptography.
Let's move on to the next topic which is custodial & non-custodial wallets
- CUSTODIAL WALLETS
Well these are simply exchange wallets. Whenever you buy an asset from an exchange it is stored in an exchange wallet. And the thing is that you do not possess the private key so technically we can say that you do not possess the assets. As I earlier said anyone having private key can claim ownership of the assets. If you don't possess the assets then who does. It's a little complex here it's the exchange that holds the assets. They hold it on your behalf & every time you do a trade, it's not you who does the trade instead you direct the exchange to do the particular trade on your behalf. Although it may not seem so, this is the truth. Examples of this type of wallet are BINANCE, WAZIRX, e.t.c
- NON-CUSTODIAL WALLET
This is simply the opposite of the custodial wallet. These wallets are not linked to a exchange & no one does a trade on your behalf. It's you who holds the private key & you do whatever you want to do with your assets. You got to choose the exchange where you want to trade. In simple terms a non-custodial wallet is a wallet that belongs to you. You own the private key & you own the ownership. Wallets like this are more secure than custodial wallets as it is unhackable unless you play dumb. Examples of this wallet are TRUST WALLET, METAMASK e.t.c.
WHAT DO YOU THINK ABOUT PROOF OF KEYS DAY? AND WHAT PRECAUTIONS, WILL I TAKE WHILE PARTICIPATING IN IT?
Well, don't worry this is not a consensus method as you might think it is. This is a simple day made so that the newcomers become aware of the custodial & non-custodial wallet systems. This day also promotes the use of non-custodial wallet. This day is celebrated on 3-JAN of every year. On this day most of the traders transfer their assets from a custodial wallet to a non-custodial wallet. This thing has benefits that include it shows the true volumes & this also makes sure that the exchange is working with transparency or not.
The things to consider before transferring the assets from a custodial wallet to a non-custodial wallet are
- MAKING SURE YOU HAVE THE PRIVATE JEY OF THE WALLET. in case you don't have one please don't transfer your assets because they will be trapped forever.
- MAKE SURE YOU HAVE SELECTED THE VERSION. Inability to do so will result in asset loss. This asset loss is permanently & can not be recovered. e.g use TRC 20 when transferring to a TRC 20 wallet & so on another blockchain.
- MAKE SURE THAT THE PRICATE KEY OF THE WALLET YOU USE IS NOT COMPROMISED. As I earlier said anyone with the private key can claim ownership.
Do you prefer Centralized exchanges or Decentralized wallets for storing your cryptocurrencies? Why?
Well! To be honest I use a centralized exchange for storing cryptocurrencies. I know that is risky but there are benefits as well. Let's talk of some benefits.
- The buying, selling & transfer of assets in very simple on these exchanges.
- There is no need to store that long alphabetical & digit string.
- The password that is used to secure the funds can easily be reset, incase you forget that.
- You also have a look at the current prices & you can also set limit orders as well.
- YOU NEVER TRULY OWN THE ASSET. That means its the exchange who has the assets. They have the key & they can do anythinh with it.
- A RISK OF HACKING IS ALWAYS THERE. That means if the exchange is hacked you can loose all your assets.
4.) Let us assume it is Proof of Keys Day:
a.)Transfer at least 20 Steem from your Binance wallet to your Steemit wallet.
b.) Transfer at least 50 TRX from your Binance wallet to your TronLink wallet.
The first & foremost important thing is that you should have steem in your exchange account. I wasn't having any steel, so I firstly transferred steem from my steemit wallet. So I will show you the steps to transfer steel from Binance to steemit wallet because I use Binance.
The first screenshot shows us that we have steem in our Binance account.
- Click on steem & you will be redirected to a page that shows two options withdraw & deposit & also shows price of steem in different markets. Click on withdraw option.
- Once you click on this option you will be redirected to another page where you have to put all the details of the account to which you want to send the steem. Once you have written all the necessary details click on withdraw
- You will be redirected to a confirmation page which shows all the details. Click confirm.
- Once confirmation is done, verification needs to be done I know it's lame but for security purposes what can we do. Enter all the OTP’s & click submit.
- A transaction screen appears that shows all the details & the current status of the transaction.
- A confirmation from my steemit wallet.
Transfer at least 50 TRX from your Binance wallet to your TronLink wallet.
- The first step is to open from the tron link. Click on the recieve option.
- A page with your receiving address will open. Copy the address.
- Open binance & click on wallet section. Lookout for TRX in the wallet
- Click on the TRX option & the page will appear. On this page click withdraw
- On this page paste the address that we earlier copied. Select the network type & the amount. Than click on the withdraw option
- Wait for a few seconds & the transaction will be completed & the TRX will reflect in your TRON LINK wallet.
- A confirmation of the transaction
In one statement, what is the major significance of the transfers in the question above.
The practice that I did earlier in question 4 was just to check if I still own the steel & trx. I was successfully able to transfer my steem & trx to non-custodial wallets. That means I am indirectly the owner of the assets & which also shows us that Binance is working transparently. If there would be a flaw in the transfer that means the binance is not working transparently.
Post credits
Post by @zeewanee
Post for @awesononso
Hope you are well 😊
Hey dear friend i am completely well & am wishing the same for you