Proof Of Keys in Crypto

Cryptography is actually the art of transmitting secret messages that are secure and only understood by the recipient. This is more applicable when talking about encryption and its keys. Encrypted keys are more like coded messages that can only be understood by the recipient to avoid leakage of information.

This cryptography is the backbone of cryptocurrencies and can be grouped into public and private key cryptography. Public key cryptograph also known as asymmetric cryptography is a cryptographic method that in involves pairs of keys. The first I'd public which is made public band encrypts coins or assets sent to a wallet.

The key can be used by anyone to lock or secure his or her assets in a wallet but they cannot unlock those coins. The second pair is private key which is a key unique to its public key and can be used to unlock locked coins in a wallet or decrypt it compared to the first key which encrypts the coins.

So this is to say that the private key is the most important key than the public as anyone that gets his hands on the private key can do away with it. That's why our private keys should be kept secure and safe. Same applies on steemit where we have both public and private keys. We use these private keys to log in, post, transfer tokens and power up.

Custodial walletscan be defined as a kind of wallet that works on the basis of who holds the private key of a wallet. In Custodial wallets, someone owns it but the private key and funds are in the custody of a third-party and not the owner of the wallet. It's just like a child who got money From his uncle and told his mom to keep the money for him. He is the owner of the money but his mom keeps the money in her custody. Or better still, let's look at it in a bank setting.

You have some money and you can choose to save it in the bank. The money you saved is yours but the bank keeps it in its custody. So the third party which holds the most important key or private key of your wallet is in custody can do actually do anything they wish to do with your funds without you being aware.

Just as you save your money in banks, it can be used for trades without your knowledge or even invest it on something else but the money is legally yours. This is what a Custodial wallet mean. The third party can choose to do what they want with your funds and Is mostly found in centralized exchanges.

Centralized exchanges as the name implies is an exchange owned by someone and it's control by that central user, so don't be surprised if the exchange choose to do whatever they please do with their customers funds and they have keys to their wallets. They can even take their customers assets and keep the user in the dark by displaying false crypto balances unknown to the user.

Centralized exchanges like this can be subjected to hacking as this is one of the most common issue with centralization. The fact that there is a central authority that holds your private key is very risky. Little wonder most people don't put their money in anyhow exchanges. Over the years, some popular exchanges like polonex and binance got hacked.

MT.Gox was hacked too in the year 2014 and about 800,000 BTC with stolen allegedly from this wallet of users in the exchange which made the exchange for and was filed for bankruptcy. This affected the price of Bitcoin and even threatened the future of crypto.

Non-custodial wallet is more like the opposite of custodial. The actual owner of the wallet owns his private key and is in his custody. There is no third party that keeps the funds in his custody all controls it. Cash in this wallet can be used anytime we please without the bank intermediaries.

This is actually a situation whereby customers withdraw the funds from the bank simultaneously with fear that the bank might not be functional in the future. The proof of keys is just like a crypto bank run with a purpose. The proof of keys is an event that occurs on the 3rd of January with the purpose of reminded people on the purpose of a decentralized blockchain system.

On this day, investors withdraw their crypto Holdings from centralized exchanges to decentralized exchanges to control their funds. Importance of proof of keys are; to celebrate the Bitcoin genesis block, to teach people to use private keys and proof of funds.

Disclaimer :Any financial and crypto market information provided in this post was written for informational purposes only and does not constitute 100% investment advice. It's just basic knowledge every crypto trader or investor should have