Have you ever participated in an event called “Proof of Keys”?
I came to know about “Proof of Keys” one month ago, while searching some videos on youtube. “Proof of Keys” is an event which generally happens on 3rd January every year. In this event all crypto investors throughout the world withdraw all of their digital coins altogether from centralized exchanges to their private wallet to ensure that their funds are safe and available there. People think that their cryptocurrencies are safe on exchanges and can be withdrawn anytime. But think, a financial crisis hits the market and all the investors give withdrawal requests at the same time to the exchanges. What will happen in that scenario? Will they be able to meet all the requests made by investors? If they pay all crypto coins to their respective owners at the same time, coins are available in the wallet and if not, then they are using your fund somewhere else and it should be revealed sooner than later.
Just read this article https://www.ccn.com/bitcoin-exchange-hitbtc-freezes-customers-accounts-ahead-of-proof-of-keys-event/ to know what happened when hitbtc, a popular crypto exchange, came to know about “Proof of Keys” event in 2019.
Cryptocurrency exchange HitBTC has frozen its customers’ accounts ahead of an annual proof of keys event, according to multiple sources.
On December 31, 2o18, the company responded to an open complaint on Reddit after the user accused them of suspending his withdrawal requests. Redditor PEDXS said that he had dutifully passed the know-your-customer test after waiting six months to access his HitBTC trading account. He confirmed that while he had withdrawn a large portion of his money already, he had still left some of it back in his public address for day trading.
If you have your fund on decentralized exchanges, you need not to worry as they don’t have the private keys that you need to access your wallet. But centralized exchanges don’t provide private keys, they offer you user Id and password which anytime can be hacked or blocked.
Why 3rd January every year is chosen for “Proof of Keys” event?
On 3rd January, 2009, the first Bitcoin Block was mined and so the date was fixed to celebrate “Proof of Keys” event as well as the anniversary of the first Bitcoin Block.
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