Proof of Keys is a new movement that encourages all crypto users to withdraw their funds from centralized exchanges like Coinbase, Gemini, and others.
Initiated by investor Trace Mayer, the first ever Proof of Keys event will take place on 3rd January 2019 – the anniversary of the bitcoin genesis block – with a view to establishing an annual tradition.
To participate in the Proof of Keys movement, you simply need to withdraw any crypto you hold on an exchange and store it safely in a personal crypto wallet where you control the private keys instead.
Let's start a new #Bitcoin cultural tradition.
An annual Proof of Keys Celebration on Jan 3rd to declare monetary sovereignty by withdrawing all $BTC held w/ trusted 3rd parties to software we control private keys & do network consensus.
— Trace Mayer [Jan/3➞₿🔑∎] (@TraceMayer) December 9, 2018
Why Does Proof of Keys matter?
There are two main reasons for removing your crypto from exchanges on Proof of Keys day:
- To ensure cryptocurrency exchanges actually have the funds they claim. If everyone withdraws their crypto funds on the same day, crypto exchanges will be forced to pay out. If they fail to do so, it’s a huge red flag for exchanges that claim to store your money safely.
- To take control of your own crypto. As Andreas Antonopoulos said: not your keys, not your bitcoin. If all your bitcoin is stored on a crypto exchange, you don’t actually own the private keys; the exchange does. That means you’re not in control of your bitcoin or other cryptocurrencies.
Protect Against Hacks and Centralization
If you leave your funds on a cryptocurrency exchange, it’s much more vulnerable to hacks. $1 billion in crypto was stolen in 2018; the vast majority from crypto exchanges.
Exchanges are huge targets for hackers because they store vast amounts of crypto in one place. Instead, move your crypto to a personal wallet where it is much less vulnerable.
As Block Explorer previously reported, at least 25% of all litecoin in circulation is held by Coinbase. That’s a dangerously large amount of litecoin stored in one place. Not only that, but Coinbase technically owns all that litecoin; not you the depositor.
Proof of Keys is a, therefore, a practical and philosophical movement.
How to move your funds off an exchange
To withdraw funds, you’ll first need a wallet and a corresponding address.
The safest option is a hardware wallet from Ledger, Trezor or KeepKey. These are similar to external hard drives designed specifically for crypto storage. Since they’re offline most of the time, they’re difficult to hack (known as “cold storage”).
There are other wallet options that give you full control of your private keys including software desktop wallets and simple paper wallets.
Want more information? 12 best bitcoin wallets for safe and secure crypto storage
Once you have your wallet address, simply withdraw funds from the exchange to the wallet address.
Be aware that there may be high transaction volume on January 3rd which may cause congestion. You should also test the wallet address by sending small amounts of crypto to the wallet first.