Topic: Annual January 3rd Proof of Keys Celebration of the Genesis Block (Read 300 times)

I don't think some exchanges went on scheduled maintenance this year as some have always done in the previous years. I hope people don't leave much of their funds on exchanges to avoid been retked in a worst case scenario.

This is not a problem with the protocol, but rather a problem with centralized exchanges. I can send you bitcoin for <200 sats, and you can send it back to me for the same price, for a combined total fee at current prices of around 20 cents. When exchanges like Binance are charging you >50,000 sats, which is around $25, for a single withdrawal, 99% of that money is going straight in to Binance's pocket. I am amazed that centralized exchanges have continued to charge such ridiculous fees for so long and so few people seem to care about just how much they are being ripped off.

There was a thread about this just a few days ago. I'll quote my response here:

Incredible. And if people are happy to continue using such a scammy exchange, then what hope is there that proof of keys will ever be successful. You cannot rely on exchanges or other people. The only safe option is to hold your own keys and own coins at all times.

a regulated exchange will not freeze an account and refuse withdrawals on a whim. they cant. its illegal.

if they suspect something they have to allow, the transaction to continue, and report it in secret. and if an authority then sends a court order to freeze assets. then they can hold funds hostage.(by court order only)

an exchange under its own terms and conditions cannot steal users funds. they can only decline to offer features/services to users they suspect of breaking their own business rules, but must always offer a withdrawal/exit/refund of the value to take out of the service to then never be able to use the service again,

any exchange that is freezing funds and not allowing withdrawal, without stating a court order. is breaking the law themselves.

HitBTC is one of the biggest fraudulent companies out there that has been scamming its customers for years and will likely continue its shady activities until  regulators, police, FBI, or whoever else, come, shut them down, and send the team behind this exchange to jail, which I doubt will ever happen though because their team is anonymous for "security reasons." If you have time, look through this excellent article that thoroughly explains why users should avoid HitBTC at all costs. The short version is:

1) According to Bitwise: "It is also easy to show that HitBTC volume is almost entirely fake. <...> hourly volumes are <...> completely detached from the reference set of exchanges, with most of the week’s volume happening between 4/29 and 4/30, suggesting that volume on HitBTC was not influenced by the same events that influenced every other real volume exchange. We believe HitBTC’s volume is predominantly wash trading, done in small trade sizes."
2) They don't conduct due diligence on assets they are listing, they delisted Bitconnect scam only when it exploded and thousands of people lost their money.
3) As I already mentioned above, their team is anonymous which makes it problematic to hold them accountable.
4) They don't require KYC but use it as an excuse to freeze accounts.
5) They are likely insolvent.
6) They are selectively scamming their clients, the process of how they usually conduct their crime is described in the article.

We wouldn't have fractional reserve banking if people were a bit smarter or, at least, less lazy when it comes to their own money.

 It also seems that there's people that like to send gifts to the genesis block on this day  


No mode seriously, I can that there's transactions on other dates..  so whats the purpose behind sending coins to a place they can't move from?  looks more like burning !!

I respect this day as it has taught us what is our's and how you own it! (With the keys here).

However, I find it little off the track that how I will have to pay enormous fees to withdraw my hard earned BTC's (satoshi's basically), into my wallet and whenever I will need to sell them I will have to put them back on an exchanger with even more fees. Then they will have maker and taker fees thus messing up with my hard earn money.

I just wish it would have been very affordable on that side. Somehow they have given us the freedom in many sense for banking sector but the few steps are becoming the huddles these days.

Im not sure if Satoshi ever thought about this problem while he was working on it?
What if he just thought that it may not be used by at such great extent so there is no need to add that congestion block program to relieve the traffic and make it fee free. 

Just a thought over coffee. What he did is out of the box obviously.

Great reminder of bitcoiners. This is one of the core value created by bitcoin other than transaction mechanism that is simply revolutionary. This is to remind that you can save your money in your own safest place. No need bank or any institution to save your money with their rules. Not your keys; not your coins

I never said anything about borrowing 500,000 BTC. It is completely reasonable to expect an exchange to be able to borrow 5 or 10,000 BTC to cover this proof of keys day, though. And again, I never said about this loan being "minted" from anywhere.

You as an exchange owner and you as an individual are two entirely separate entities, just as your exchange's wallets and your own personal wallets should be two entirely separate entities. Getting the two things intertwined are how scams happen - see, for example, the Quadriga exchange.

I am very aware of how fiat loans create money, and you can search for and read my previous posts on the topic if you wish. That has nothing to do with a bitcoin exchange borrowing bitcoin to cover their withdrawals for a day.

i understand that "proof of keys" campaign will never get popular enough to have a 90% bank run..
that was not my or your debate..

we both agree that PoK is an uneventful insignificant impact. i showed a chart and you bracketted a 'will never happen' so that is not in contest/debate..

the debate was your mention of "if every person withdrew, the exchange can just loan for one day"

here ill quote myself quoting you saying this as YOUR!! scenario..


an exchange cannot just "borrow" bitcoin .. there is no magic mint that can raise 500k coins in one night.
only altcoins can.. again something you admitted to also
again ill quote myself quoting you


..
if you were a scammy exchange owner with 100k btc deposits of customers. and you STOLE 90k. leaving only 10k for possible daily withdrawals.
if PoK event exceeded the 10k withdrawal amount.. you as a shady scammer are NOT LOANING ("borrowing") extra coins FROM YOURSELF!!(facepalm).. because you are you.
loans in the fiat world like credit cards and mortgages are not taking value from one source. they are MAKING value.
research how fiat 'money creation' works

edit to answer below:
seems oeleo is on a personal defence "i never said" ramble. totally missing the point of the scenario he did mention and my response to the scenario, he seems more interested in 'he never said' rather than discussing the scenario

so one last time the scenario was if EVERYONE did do a bank run on an exchange.. where value is not some small XXk  but massive XXXk request, the exchange cant get hold of massive amount of coin. especially because unlike real banks, that can just magic money into existence, you cant magic up value in bitcoin.

the fiat banking sector got bailed out through loans which were government backed printing of new money.
this money printing bail out loan is not a thing that happens in bitcoin.

a thief returning the funds he stole is not a 'loan' its a return of stolen assets, with a possibility to steal again a day later.
there is a difference

(im not going to continue his silly side track of 'i never said 500k'.. so lets just say "massive value of 100% bank run" to void debates about questing silly who said what amount debates)

point being if an exchange only left 10% and stole 90% (note avoidance of actual unit numbers) if a 100% bank run occured. an exchange wont 'just'(making it seem easy) loan itself 90% to fulfil withdrawals and then take back its loan a day later.

..
as for the silly argument about separeting the businesss entity from the human entity.. (facepalm)
if someone crashes a car into you and you are injured. you dont care about diagnosing the two physical bodies of the car vs its driver, as to who is responsible. its common sense to treat the owner of the car as the perpetrator and the emphasis is on the car owner being responsible.

a business brand name is not an AI robot that steals and spends money on its wife and kids.. its a business entity. not a human. the human steals and spends the money on personal lifestyle. the human has the brains and arms and legs. a brand name has no brain or arms or legs.. as a doctor you should know this..

take this weeks 'theranos medical blood test' scam, .. the 'theranos' logo(brand) is not on trial, you wil never see a logo act as a defendant.. however, the CEO is on trial. and SHE(human) just got slapped by the courts

in car accidents. you will never see the car drive into the defendant seat. nor its licence plate say an oath to speak the truth in court.. the driver will

Fiat loans, yes. Bitcoin loans, no. There is an entire ecosystem of bitcoin loans. We have a lending board on this very forum. Bitcoin loans obviously exist. If I am running an exchange and have skimmed off half of all deposits for myself, there is nothing stopping me "loaning" those deposits back to the exchange to cover this proof of keys nonsense, and then taking back control of them the next day.

Which, I'll say again, will only work if everyone (or at least the vast majority of users) withdraw their coins, which will never happen.

For example, I run a scam exchange. My exchange has 100,000 BTC on the books, but is actually only keeping 10,000 BTC in reserve because the other 90,000 BTC is tied up in investments and my own personal wallet. Proof of keys day comes along - I have a full year of advance knowledge in which to prepare. I can withdraw some coins from various investments or use my own personal stash to "loan" money to my exchange to cover this day, and then take them straight back out again the next day. I know full well that only a tiny minority of users will actually test this system. My 10,000 BTC reserve will probably be enough, but I'll give my exchange another 10,000 BTC loan for a day just in case.

At no point did I ever say bitcoin is being created out of thin air or any other such nonsense you are claiming as you yet again derail this thread to talk about Lightning. Try to stay on topic.

LOANS are where the loan giver creates new units of account. (learn how bank loans and mortgages 'create money')
bitcoin as a network accounts for all of the ~19mill coins in circulation.. there is no other mechanism to magic up new coins on the blockchain. its not like altnets/exchange mysql databases that can magic up 'credit'.

an exchange cant 'loan' real bitcoin to withdraw to users in a bank run. if the exchange no longer has control of 500k of coin. they cant hand 500k of coin to users.

thats the whole point of proof of keys. to make an exchange insolvent if it cant honour real bitcoin withdrawals.

exchanges internal balance and its altnet fake token credit is not part of proof of keys. but could be an exchanges escape tactic to pretend solvency if they dictate to only allow altnet withdrawal.. [fake token credit]

but again the point of proof of keys is to have users withdraw their actual bitcoin on bitcoin, not altnets.. because having funds on exchanges and in some wallets of altnets does not prove solvency of the parties involved in these 'agreements of custody'.

as you have already mentioned. altnets can loan. but the bitcoin blockchain cannot.
bitcoins blockchain rules for 'minting' is secure and audited by the network peers. an exchange cannot just mint new bitcoins on the bitcoin blockchain outside of the coin reward rules

also i only mention altnets, when someone before me has mentioned altnets(them derailing first using their silly confusion of features rhetoric)

bitcoin has no loan system.. offchain does(exchange balance and altnet tokens). hence avoid offchain to avoid fractional reserve risk. hence why proof of keys became a campaign(although many dont listen/try to do it/think its a risk)

Wishful thinking. Remember when HitBTC froze their customer's accounts and suspended all withdrawals a couple of days before this day back in 2019? https://www.ccn.com/bitcoin-exchange-hitbtc-freezes-customers-accounts-ahead-of-proof-of-keys-event/
What happened afterwards? Everyone realized they were being scammed, withdrew all the coins that they could, and then HitBTC went bankrupt? Lol no, they are the 3rd biggest exchange in the world in terms of volume.

So you could tell me if Coinbase are holding fewer than the 1 million or so bitcoin they claim to be holding? And you could tell me if they are moving coins in and out of somebody's personal wallet? Impressive, given that their storage is split across thousands of addresses and no one knows which addresses those are.

In the event that everyone withdraws, sure. But in my scenario, they only need just enough funds to cover everyone who participates in this useless day, which is only going to be a couple of percent of their users at the absolute most.

Lol. You just can't help yourself. Let's not derail yet another thread with your repeated ramblings.

if a exchange was fractional reserving its users exchange balance by spending 90% of the real coin deposits on the exchange owners personal endeavours. and users ran a 500k coin "bank run" of their balance. ofcourse the CEO of an exchange would have to try and claw back 450k the ceo spent/stored elsewhere to make the users whole at their withdrawal request.
this is not a 'loan'. this is to undo a theft of coins..

if the CEO cant make good on the customers bank run because he spent 450k coins and no longer in his control. . the CEO cant do a 1 day 'loan' to find 450k from other sources. there is no special reserve of insured/premined coins set aside for such loans.
all bitcoin on the blockchain are audited and noted. thats the point of blockchains.

what actually happens is a MTGox event. where customers simply get informed that the exchange has lost their coins and customers cant withdraw.


oh. but it was good that you mention the tokenised/wrapped 'btc' of altnets.. hint hint to other topics.
yes CEO's of exchanges can make multiple 'channels' with users and credit them all with millisats, and pretend the channels funding lock 'peg' is one customers when the same pegged funding lock BITCOIN transaction is used as 'proof of peg' over multiple channels.
the CEO setting up the channels can just make many many temporary_channel_id and because there is no network wide audit system in altnets/offchains. they can abuse this

but again. this is not "loan" of real BTC this is theft/fraud of BTC by handing counterfeit/fake tokens

(a few wallets hide the funding lock info of channels, outside of the channel partners whereby user in channel X234 does not talk to user in channel y745 to compare pegs) because some altnet wallets have privacy to not reveal the funding lock(peg) outside of their channel partner.(use of temp channel id instead of funding lock derived ID)
yep even altnets like LN can fractional reserve.

now do you see why altnets without a blockchain. and why exchange balance are a risk.

Were I a dishonest owner of a cryptocurrency exchange that operates as a fractional reserve bank, I would employ the same methods as the bankers all over the world have used for centuries to avoid bankruptcy during the "harsh times" like this proof of keys day.

᠌First of all, I wouldn't try to persuade my customers not to withdraw their funds because it would only raise more suspicion and cause unnecessary panic. Instead, I would do exactly the opposite: I would make a special announcement to my clients that would encourage them to check my honesty and withdraw their funds. I am sure that more than half of the clients would not withdraw funds, simply because they would believe in my good intentions to prove my honesty.

Secondly, I would suspend withdrawals temporarily explaining my decision by the need for maintenance on the website, for example, but it is not an ideal solution because it would negatively affect my reputation and would result in an even higher number of withdrawals and, consequently, bankruptcy after a temporary suspension is finished. Instead, I would come up with something that would incentivize my clients to keep their funds untouched. For example, I would offer them higher interest rates on their deposits. After all, if I make money by lending out their money, why not give them some part of my profit to save my dishonest business?

Thirdly, I would collude with other dishonest cryptocurrency exchange owners and persuade them it is in their personal interests to bail out me so that I could bail out them in the future. Perhaps, we would establish some entity like Central centralized exchange the only function of which would be to bail out other centralized exchanges in case of bank runs on exchanges.

The fact that exchanges don't do all that and even don't seem to care about the celebration of proof of keys day proves that it simply doesn't work and proves nothing.

I move regularly all my coins end of every period according to my "threshold" amount, never on a fixed date, more like it depends on the price of Bitcoin, the amount in BTC I have at a certain time. I know coins in exchange or service or whatever is not safe,,, but it is much easier for me to receive certain BTC repeatedly in a small account and then withdraw it for one fixed fee to my wallet.

Rather than get 10x input and then force to pay big fee to send it all out.

Proof of key good idea but anybody who does this probably will not follow this funny time.

I think it's mostly due to the date itself, most people are just recovering from a new years eve party.

It would probably be more efficient if it's done in a more neutral date.

If the exchanges are running fractional reserve or similar,* then the coins that were once deposited on their exchange have been given out in loans or investments or are sitting in the CEO's personal wallet. It is not unreasonable to assume they would be able to recover a proportion of them for a day to cover this "proof of keys" nonsense, before sending them all back the next day. Obviously they are not creating them out of thin air, although in the case of exchanges like Binance, they can always just mint more of their fake wrapped/tokenized BTC, since apparently lots of people don't understand the difference.

*I mean, it's not really a case of "if". We know this is happening. https://cointelegraph.com/news/two-chinese-exchanges-help-themselves-to-user-funds

so in your theory. for the main exchanges that have 500,000 coins associated with their cold wallets EACH.
if every user withdrew their coin from exchanges (lets say 1.5million btc(conservative random number)) came out of large coldwallets.. it would be a simple thing for exchanges to "borrow" 1.5mill of bitcoin..

um no.
bitcoin has no debt/loan feature. there is no bitcoin creation/hidden premine waiting to be borrowed.
every coin is accounted for on the blockchain.
its plain and easy to see where the coins are

what actually happens is the market orders flatten to small amount of orders. draining the 'supply' side of market orders for bitcoin (near zero 'sellers')

exchanges would just 'circuit break' (close trades) for the day to 'lock the price' and prevent massive price spikes.
yep less coins on a market =price rise.

..
with all that said. it appears that "proof of keys' has been an initiative/campaign that has not really been adopted
out of the 79.1million utxo's on average for the last 4 days. january 3rd only seen a small 'blip' increase of 50,000 utxo's
meaning less people moved coin on the 3rd. (not all 50,000 are proved to be lined to coin withdrawals from exchanges for the reason of 'proof of keys')

yet on christmas eve 250,000 utxo were created. which shows more decisions to move coins happened due to christmas than to 'proof of keys'

This is like quitting smoking for a day and then going back to smoking 2 packs every day. I understand the initiative of trying to check the solvency of services, but it's unrealistic that a critical mass of users necessary to achieve this is going to participate. A lot of users probably don't even know about such event, because they don't check the crypto news daily, and out of those who do only a tiny percent would be motivated enough to inconvenience themselves with doing some transactions.

If we take a closer look at the companies participating in this event, then there are the two biggest ones on the list - and it is more than obvious that any event that gives legitimacy to their business suits them. The greater the awareness of the importance of using non-custodial crypto wallets, the greater their (crypto exchanges) activities in the opposite direction will be, so we can expect some of the next Proof of Keys to last two or three days maybe.

Yet even then it means nothing, except when everyone would make a withdraw, and then many crypto exchanges would be in real trouble.