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

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

Cryptograph simply means hidden or complex encryption of alphanumeric characters. It is the backbone of the crypto eco-system, Blockchain and other Decentralized networks.

Keys were made to help curb fraudulent hackers and also protect the integrity of the Blockchain/Decentralized Eco-system.

• What is the Private Key

A private key is a sophisticated form of a cryptograph that entails a combination of alphanumeric characters, they are used to sign and validate transactions and also access the crypto asset in a users wallet.

Think of it this way, if you are using a Bank application for a transaction need a special transaction code to transfer your funds, and a user who does not know this code cannot have access to ur funds. This Private key serves a purpose just like that because no other user can have access to your crypto assets, not even the platform on which it is built unless you are using a custodial wallet.

• What is the Private Key

A public key is a form of cryptography that allows wallet users to receive funds to their wallets, it can also be used by other users to view or check the details concerning your wallet, but it cannot be used to access your funds.

This means that it can be made public just as the name implies. The Public key can also be compared to a Bank account number which users can use to receive funds to their accounts, it can be made public, but it cannot be used to access the funds in the Bank account.

• What is the Custodial Wallet

Custodial in this context simply means having responsibility or control over one's possession. This means that a custodial wallet involves a third party having control over your crypto assets. This means that they have control over your Private Key and crypto-assets.

This could be likened to CEX or centralized exchanges and Banks. This means that these corporations or companies will have access to your funds or crypto assets which could be detrimental when they face setbacks such as Hacking and misuse of customer funds by a worker.

For example, the Bank as a custodial entity over your asset means your funds could be used for trading, or the Bank could face a malware attack, which could lead to loss of user funds, another example is the Binance CEX, which has even before faced Malware attacks from Hacker, with them Facing over Millions in losses of User funds, although they were able to refund users, this could be very detrimental for upcoming CEXs who still have low scalability.

• What is the Non-Custodial Wallet

A Non-Custodial wallet is a direct contrast to a custodial wallet. In this case, the user has full control and autonomous power over his/her assets, because the individual is in full control of the Private Key, which grants the user access to their assets.

An example of a Non-Custodial wallet is the DEXs or Decentralized exchanges. This is a regular wallet that is used by a user who has autonomous control over their private key, but if the user losses this Key it means they have lost control over that wallet, the popular saying in the crypto world goes 'Not Your Keys Not Your Coins'.

• Private and Public Keys relation to custodial and non-custodial wallets

A custodial wallet ensures that a third party take responsibility and control over a users wallet or assets by having access to their Private Key because without the private key the third party cannot access their funds.

A Non-Custodial Wallet entails that the owner of the wallet will only have the private key without a third party interference. this means that the user has full control and access to his/her funds or assets.

What do you think about the Proof of Keys Day? What precautions would you take when participating?

The Proof of key day which could also be called a Bank Run is an event where individual asset holders tend to simultaneously pull out all their holdings from centralized exchanges to a wallet or a better secure holding where they have full autonomy over their assets, the aim is to prove if the CEXs claim of having enough liquidity on their own is true or do they just simply use other peoples funds as a boost to their liquidity pool.

The proof of key day which was held on January 3rd 2019 was marked as an anniversary day for when the first Bitcoin was mined, the idea was first coined up by Trace Mayer to celebrate the dominance of Bitcoin. Centralized exchanges obviously would not like this idea because it will reduce the volume of assets traded on their various platforms and in turn generate low transaction fees, which is one of the major ways they make a profit.

• I Make sure not to use compromised Private Keys

Make sure that the private key which you are using has not been made public to anyone, or they have not been attacked by virus if saved in a Google cloud, during this event Hackers are on high alert to evade various user account, therefore to ensure that your private key is safe, secure it in a hard drive which should be temporal, and keep it away from prying eyes.

• I Make sure to use the Correct Blockchain Address

There are different Blockchains which means sending a crypto coin to a wrong Blockchain address that is used on another Blockchain could be very detrimental and lead will lead to a loss of the asset. For example, the Vechain and Etherum Classic use a similar Blockchain address because they were Hard forks of the Ethereum Blockchain if a user were to send Ethereum to the Vechain or Ethereum Classic address then the user should forget about that coin.

• I Don’t Move What I Can’t Afford to Lose

During these events, so many scalability issues could arise such as congestion of network due to request for multiple withdrawals, or limitation to a certain amount of withdrawals, these issues could lead to deals on the network, also Hackers could try to attack these exchanges because of the overwhelming activities they would be engaged with which would distract them for these hackers. All these situations could lead to loss of funds, criteria mentioned above could also be involved, therefore to avoid losing what one cannot afford, I try to limit the funds I transfer to a safe minimum that I can afford to lose.

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

• What is a Centralized Exchange

A Centralized Exchange or CEXs are centralized platforms where users buy, sell and store their digital assets. Being centralized means that they have a central authority which is in charge of the exchange platform, also they have full responsibility for your digital assets, this could be detrimental for users because these exchanges are prone to cyber attacks, also they are not very scalable because they are not supported in some nation due to financial or selfish reasons.

• What is a Decentralized Wallet

A Decentralized wallet is a platform where users can store and have access to their digital assets, by using their private key with they have full autonomy. This means that there is no interference or control from a third party. Also, they are built to adopt Decentralized Applications for example DEXs, which is a decentralized platform where users buy and sell coins without interference from a third party.

• Why I Prefer Decentralized Wallets

As I stated above that Decentralized wallets is a storage platform where users store and have access to their digital assets, by using the Private Key. I prefer The Decentralized Wallet because hackers cannot be able to hack into my wallet, also no third party will have control or access to my funds without permission.

Decentralized wallets are built to adopt Decentralized apps, which means that I can also purchase other coins of my choice without having to transfer back my assets to CEXs to purchase funds. Also recently I noticed that some startup crypto project now organize their Crowdfunding programs using these DEXs which makes it even more conducive to access them before the price of the crypto startup projects start to rise.

Why I also prefer the Decentralized wallet is because I do not need to feed them my information before I can use the platform. After all, all I need is a Private and Public key, the Private Key is what I use to verify and access funds, while Public Key is what I use to receive funds and view details of my wallet. Unlike centralized exchanges which will need your identity cards and passports before you can use them.

Decentralized wallets do not also place limitations on the number of coins which you want to receive or withdraw, unlike Centralized exchanges that place limitations on the number of coins to withdraw, some even base them on the level of personal information or data you can provide about yourself.

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. (Provide Screenshots and make sure you have your Keys).

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

To Transfer the Steem to my STEEM wallet I used the crypto assets in my Binance exchange app. To do this I first clicked on the spot account on my Binance which will give you a list of your digital asset holdings. Then I clicked on STEEM asset, which gave me an option to Deposit or to Withdraw, so I clicked on Withdraw.

The next step was to fill in the required information which includes choosing a Blockchain network, an address of a Blockchain wallet and the amount I wish to send of which the maximum in my holdings where 19.9 STEEM. After filling in the information required I then clicked on withdraw. After I clicked on withdrawing a pop up that includes details of my transaction came up with a Confirmation tab below. I clicked the confirmation tab.

After I clicked on the confirmation Tab I was required to verify the transaction with some authentication steps, after this, the transfer was verified and executed, When I checked my STEEM wallet I saw it had reflected on my transfer history.

• Transfer at least 50 TRX from your Binance wallet to your TronLink wallet

To Transfer the Tron, I used the digital asset holdings in my Binance application. I clicked on my Tron assets, the next step was to click on withdraw of which I did.

After I clicked on withdraw I was required to provide the necessary information concerning the transaction which included, choosing a Blockchain network, providing a Blockchain Address and choosing the required amount of which I want to transfer or withdraw of which was over 115 TRX. After I chose the Blockchain network and copied the Address from a Tronlink wallet, I then clicked on withdraw.

A pop-up that contain information about my transaction came up of which I was required to confirm its details, after I did, I clicked on the confirmation Tab. The next step was to verify the transaction by going through an authentication test of which I did. After the authentication process, the transaction was verified and executed, I then checked the notification list of the Trolink wallet to ensure the transaction was successful.

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

The transaction executed in question 4 is proof of the relevance of the Private Key autonomy concerning the Proof of Day event, which emphasizes the need for users to have full control and autonomy of their funds. It also serves as Training in preparation for the Proof of Day event.

Conclusion

The Private and Public Keys are the two most important cryptographic inventions which have helped shape the world of Blockchain technology. Decentralized Finance will trump over centralized finance because of the delegation of power across to the users. The importance of Decentralized wallets and Applications can not be overemphasized because of their ability to solve the most complex issues in the finance and Blockchain ecosystem.

Thank you professor @awesononso for this amazing lecture.

Thanks for Reading,