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

Hello everyone, I welcome us again to the 7th week of season 4 crypto Academy. It is indeed a privilege for me to be taking part in this week's lecture by Professor @awesononso. Without wasting much of our time, let me quickly proceed with the given tasks.

QUESTION 1

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

• PRIVATE

The word private means something being confidential, secret or belonging to an individual without public access.

• KEY

A cryptocurrency, a key can be regarded as values without a fixed pattern that is applied to a block of uncoded text using an algorithm in other for it to produce coded text or to read coded text.

PRIVATE AND PUBLIC KEYS

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Before I move into explaining what a private key is, I would like to make us understand what cryptography is all about.
Cyptography is a method of keeping data and information secure and secret in other for it to be revealed to only those it is meant for. This security is achieved by encrypting the information ie converting it to codes in other for it to be decrypted and read only by those it is meant for. This decryption is done with the use of their private keys.

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The Private key is a type of cryptographic key that limits the public access of ones assets in a wallet. It does this by uniquely being able to decrypt and unlock coins locked in a wallet by the public key.

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The public key just as the name implies is a key used majorly in encrypting data sent from one user to another. When this data that have been encoded and sent to a particular wallet by the public key can only be decoded by the private key which is unique to that particular public key. The public key is what we commonly know as wallet address.

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IN RELATION TO CUSTODIAL AND NON-CUSTODIAL WALLETS

The fact that we have looked at public and private keys, that's what that have brought us to into the different types of wallets as regards to these keys.
Private key being the key that decrpyts encrypted data stored in a wallet by the public key makes it a key that identifies ownership. Just like every other wallets we know serving the basic purpose of storage, cryptocurrency wallets are digital wallets used in safe storage of cryptocurrencies.

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CUSTODIAL WALLETS

Custodial wallets are centralized wallet which are basically used in asset storage but here the private key of the wallet is managed by a third party usually the wallet creator. Storage on this type of wallet has everything to do with trust as the third party managing the private key has total control over the ower's assets to point that the owner will have to request from the third party before being given the go ahead to perform trasactions. Let's take our local banks for instance. We all have money in our bank accounts which we can withdwal anything because we believe that the bank who we entrust our money with will always grant our request anyever we ask. The fact that we can withraw at anytime we want doesn't make us the ones in control of our funds it's just that the trust we have on the third party (banks) managing our funds have not been bridged. The exchange takes full responsibility of whatever happens to the assets.

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NON-CUSTODIAL WALLET

Non-custodial wallets are decentralized wallets which allows the asset ower a full ownership of his/her assets by keeping him/her in full charge of their private keys. Just like crypto assets itself, this type of wallet has nothing to do with a third party. Asset management and transactions are fully managed by the real asset owner who is in control of the private key. Risk bearing in such wallet is 100% on the asset owner.

QUESTION 2

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

Proof of keys day is an annual event which happens on the third of January every year. I believe that this event was set up to remind cryptocurrency holders and traders on the aim behind decentralized finance. The global economic crisis which happened in 2008 led to the development of the first digital currency (Bitcoin) by Satochi Nakamoto with the aim of eliminating the third party on finance. The first block transaction which occurred on the 3rd of January 2009 after the creation of bitcoin served as the first prove of privacy, security, decentralization and other features of which the decentralized digital currency have promised and that in turn gave it the name cryptocurrency with crypto meaning secret, hidden or concealed.

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WHAT DO YOU THINK ABOUT THE PROOF OF KEY DAYS

Personally, I believe that the prove of key days was turned into an annual event in remembrance of the aim behind the creation of digital currency which is to give total control of finance evenly to everyone without the need of intermidiaries. This also reminds them of the risk involved in not having full control of their private keys and as its commonly said"not your keys, not your coins". This in turn make majority of holders to move their assets from a centralized exchange to a more decentralized one in other to exercise full sovereignty of it. This event being held on the same day the Bitcoin genesis block was mined, also serve as a remembrace of the first ever transaction occured on cryptocurrency space. Holding crypto assets on centralized exchanges limits the aim behind cryptocurrency invention because the privacy is no longer there and the risk of a centralized exchange getting hacked is very much higher compared to a decentralized one and this low security level also hit hard on the sole aim of cryptocurrency invention which is to provide maximum security on assets with the asset owner being the only one that has excess to his/her private key. All these and more are what we are being reminded of.

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WHAT PRECAUTIONS WOULD YOU TAKE WHEN PARTICIPATING

• Before transfering asset from one exchange to another, I would make sure that the network that I'm selecting matches the one on the receiving address. This is to avoid losing my coins by using TRC20 address in receiving a coin on ERC20 network.

• I would make sure that I am in full control of the private key of the recieving wallet (non-custodial wallet) because that is what would be used in decrypting or unlocking the asset when recieved in the non-custodial wallet.

• I would also make sure that the wallet that I intend moving my assests to is legit and trusted and not a custodial wallet but a fully decentralized one.

• I would also make sure that all details such as memo key, wallet address, etc are correctly entered to avoid sending to a wrong address as there is no way of retrieving it if such mistake should happen.
  

QUESTION 3

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

I would prefer to store my cryptocurrencies in a decentralized wallet.

REASONS

• HIGH LEVEL OF SECURITY

A centralized exchange is prone to hackers just like in the cases of Altsbit exchange which lost $70,000 worth of cryptocurrency in 2019, upbit which lost about 342,000 ETH, VinDax which lost $500,000 worth of cryptocurrencies and many more cases of hacks as regards to centralized exchange but there haven't been any single case of a decentralized wallet being hacked and that makes it apparently more secured.

• PRIVACY

A decentralized wallet is totally private when it comes to the owners activities unlike a centralized one that has a lot of the owners private informations.

• ABSENCE OF A THIRD-PARTY

A decentralized exchange has nothing to do with a third-party is management and transactions which makes activities on a decentralized wallet easy and without restrictions unlike in a centralized exchange where the owner's private key is controlled by a third-party which also has access to the owner's assets and can restrict transactions at anytime.

• LOW COST OF TRANSACTIONS

The transaction cost in a decentralized wallet is much lower when compared to that of a centralized exchange because there are no exchange fee to pay due to the absence of a third-party.

• PEACE OF MIND

Storing cryptocurrencies in a decentralized wallet actually keeps the mind at rest. This is becuase there is actually nothing to fear or worry about aside safe keeping of private key but in the case of a centralized wallet, there are series of "what if" like "what if the exchange get hacked?", "what if the exchange decide to shutdown?", " What if the third-party in control of my private key decides to move my assets?" all these tends to create a lot of tension in the mind of an investor.

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

TRANSFER OF 20 STEEM FROM MY BINANCE WALLET TO MY STEEMIT WALLET

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TRANSFER OF TRX FROM BINANCE TO TRONLINK PRO WALLET

QUESTION 5

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

To prove ownership of the private key.

CONCLUSION

The annual proof of key day done on the 3rd of January is an event that shows reminds us the very day the first Bitcoin transaction block know as the "Bitcoin genesis block" was mined. This celebration also reminds us of the need for decentraliztion in the world of finance. This lecture by our noble professor @awesononso have really widened my knowledge on public and private keys, its functions and importance and also on the different types of wallets and I'm really glad to have taken part in it.