Proof of Keys- Steemit Crypto Academy- S4W7- Homework Post for @awesononso

Hello everyone, it's another opportunity to learn new things. I am happy to learn about Custodial and Non-Custodial Wallets as well as Proof-of-Keys-Day. It was an interesting class. This is the expression of my understanding after going through the lecture.

Homework

QUESTION 1

Explain private and public Keys in relation to custodial and non-custodial wallets.

Keys are integral part of cryptocurrency. When you sign up with any cryptocurrency blockchain network like Steemit, you will be given a set of keys comprising of Public keys and Private Keys. These keys are meant to enable us lock and unlock our cryptocurrency wallets. They are vital as far as cryptocurrency business is concerned.

Now, let me explain what Private and Public Keys means before going to their relation with custodial and non-custodial wallets.

To enable me flow well in my explanation, I will like to explain Public Key first.

Public Key:

Public key as the name suggests is the type of key that can be made open to public. It is a cryptographic code designed to enable us to receive cryptocurrencies in our accounts. Public key is just like our bank account number that we can share with everyone to transfer or pay money into our bank account. So, Public key can be used by anyone to send crypto asset into our wallet, but it can not be used to open or access our wallet.

Private Key:

A private key is a sophisticated kind of cryptography usually programmed in form of a string of letters and numbers which allows us to access and manage our crypto funds. Private key is a special key designed to help us protect contents of our wallet (crypto funds) from unauthorized access and theft. Private key is like a password or our ATM pin. It is a secret code that should not be shared or revealed to anyone.

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Private key in relation to Custodial and Non-Custodial Wallets

Private key in relation to custodial and non-custodial wallets has to do with the issue of who is in the custody of our private key. As we learnt from the explanation and image above, private key is meant to be a private, secret and should always be kept safe in the custody of the owner alone and should not be exposed to someone else for security purpose, but the idea of Custodial Wallets turned it the other way round.

With custodial wallet concept, our private key and funds are handled and controlled by another party. What this means is that, we entrust our private key to a third party to responsibly manage our cryto assets and return them back to us whenever we need them.

This concept is like what we have in the conventional banking system, where our banks have access to our account and they are the custodian of our money in their bank. Therefore, they are in full charge of our money. They can use them any way they like. For example, they can give out our money for loan, they can use them for any investment and so on, but any time we need the money we would request for it to be given back to us. This is exactly what custodial wallet is all about.

Some good examples of custodial wallets third-parties companies are: Binance, Free Wallet, BitMex, Bitgo, Gemini, Coinbase and Blockchain.com.

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On the other hand, Non-Custodial Wallets also known as DeFi wallet is a type of blockchain wallet where the wallet owners are in full control of their private keys and funds. In Non-Custodial Wallets, there is no room for third party interference. Users are allowed to be their own bank. Non-Custodial Wallets is a direct opposite of Custodial Wallets.

Non-Custodial Wallets have two types of private keys which includes:

1. Raw Private Key which is the real-form private key that is generated and is stored inside our computer.
2. Mnemonic Seed: a 12–24 word phrase key which is stored on our device and enables us to have access many accounts at the same time.

Some examples of Non-custodial wallet include: Electrum, Exodus, Ledger Nano X, Trezor One, Zengo, Wasabi, etc.

With ever growing modern blockchain technology, we have the following non-custodial wallets: Web Wallet, Mobile Wallets, Desktop Wallet, Hardware Wallets and Paper Wallet.

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QUESTION 2

What do you think about the Proof of Keys Day?

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Proof of Keys Day is an interesting concept and very important annual celebration. I think I should give kudos to Trace Mayer who created this idea.

The aim Proof of Keys Day celebration is to remind cryptocurrency investors to reclaim their monetary autonomy. This is awesome. The reason is because many people relaxed and left their cryptocurrencies private keys fully under the control of third party exchange companies, which is very very dangerous.

The slogan of the day "not your keys; not your Bitcoin" is really a nice one. It reminds every cryptocurrency investor that if they are not in possession and control of their keys, that their crypto assets do not really belong to them, because Leaving them in the hand of an exchanges or other third party services means that they are losing possession over their funds. This discourages investors depending on exchanges or other third party services to be in possession of their cryptocurrencies and encourages investor to take possession and own their private keys.

The Proof of Keys annual event which holds on 3rd of January is meant to celebrate financial sovereignty with the purpose of encouraging cryptocurrency investors to move all their funds from exchanges or other third party services to their private wallets. This is to ensure that investors should be the only custodian of their private keys and the only one who should have access to their assets.

What precautions would you take when participating?

The precautions I should take when participating in the Proof of Keys annual celebration are:

• To move all my funds from exchanges or other third party services to my private wallets
• To be in possession and control of my private key
• Not to depend on exchanges to be in possession of my cryptocurrencies
• That I should be the only one who should have access to my private wallet

QUESTION 3

Do you prefer Centralized exchanges or Decentralized wallets for storing your cryptocurrencies?

Without thinking twice, I prefer Decentralized wallets to Centralized exchanges for storing my cryptocurrencies.

Why?

The reason is because,

• Decentralized wallets enable us to access and have full control of our own assets without having to rely any third-party institutions. Unlike in the custodial wallets where users do not have full control over their crypto wallets.
• In decentralized wallets, our funds are more secured because we are the only custodian of our private keys and we control our wallets by ourselves. So the risk of data breach is very low. Unlike in the custodial exchanges where users funds are stored in a hot wallet and they are vulnerable to be hacked.
• Decentralized wallets make withdrawals easy and instant, because it does not require approval from any third party to perform transaction.

QUESTION 4a

Let us assume it is Proof of Keys Day:

Transfer at least 20 Steem from your Binance wallet to your Steemit wallet.

These are the steps I took to transfer 20 Steem from Binance wallet to my Steemit wallet.

Step 1: I Logged in to my Binance account and clicked on "Wallets"

Step 2: Clicked on "Spot"

Step 3: Clicked "Withdrawal"

Step 4: Selected "Steem"

Step 5: Filled in my "Address", "Network", "Memo", "Amount" and clicked "Withdrawal"

Step 6: Clicked "Confirm"

My request was submitted

Step 8: Then I clicked on "verify" to verify the transaction.

QUESTION 4b

Transfer at least 50 TRX from your Binance wallet to your TronLink wallet.
(Provide Screenshots and make sure you have your Keys).

These are the steps I took to transfer 55 TRX from Binance wallet to my TronLink wallet.

Step 1: I followed Steps 1, 2, and 3 as in above

Step 2: I selected TRX

Step 3: I Filled in my "Address" (To fill my address, I went to my Tronlink to copy the address of my wallet), selected "Tron (TRC 20)" as my"Network" and 55 as my "Amount", then clicked Withdrawal.

Step 4: I Clicked on "Confirm"

My request was submitted

Step 7 : Then, I clicked on "verify" to verify the transaction.

QUESTION 5

In one statement, what is the major significance of the transfers in question 4.

The major significance is to help me learn how to move my funds from exchanges or other third party services to my private wallets so that all my funds will be in my custody.

CONCLUSION

With the ever growing modern blockchain technology, DeFi wallet has been proved to be much better than custodial wallet, in the sense that our funds are more secured because we are the only custodian of our private keys and we control our wallets by ourselves. So the risk of data breach is very low. Unlike in the custodial exchanges where users funds are stored in a hot wallet and they are vulnerable to be hacked.

However, I enjoyed the discussion on Proof of Keys Day celebration, it was very interesting and I learnt so much during the practical section on how to withdraw funds from Binance wallet.

A very big thank you to our lecturer, Prof. @awesononso for exposing us to this knowledge. God bless you.