Topic: Tomorrow is "Proof of Keys Day". (Read 299 times)

It hasn't affected the price much, but I think it was a useful and effective initiative. I hope it will become an annual event.  It serves as a warning to the exchanges, and I hope that it will reduce the possibility of fractional reserve exchange accounts. I understand that several people have sent Bitcoin to the wrong addresses, and this will serve as a warning to others. If you are transferring a large sum, then send a couple of dollars first to check that the transfer details are correct. If the event does become popular, then people should start to move their coins over the days leading up to the event.

Volume doesn't seem to have been as high as expected, but the "non-event" does indicate the resilience and strength of the Bitcoin system.

Jet cash can you sum it up, was proof of key a success or failure. Report has it that only Hitbtc was mostly affected. But it's no news personally as I don't see them as a trustworthy exchange considering their way of operation.

Well so far it doesn't seem to have had much of an effect on the price. I haven't checked volume or transaction fees yet, maybe I should have a look later when the US market has become a bit more active.

Then if people withdraw all their coin, we will see a "busy time" for every exchange and some exchange cannot handle every transaction because people make a withdraw at the same time. They will busy in all day long, and I don't know what will happen in the market, maybe it will be chaos for a while because the trader will think that the exchange will close, but it's not.

I heard about HitBTC freezing customers accounts, and I am worried if it's happening to with the other exchange especially the small exchanges which we know they don't have a large transaction in every day.

I might be considering to move some of my balance to the other wallet, and maybe it could be an offline wallet just in case to preventing if somehow the exchange will close their services. I don't want to be more worried if I know that I cannot withdraw all of my assets because I have a bad experience in the past with one exchange that holds my assets for more than 3 weeks.

Proof of key day might make many exchange mostly the smaller ones to follow what HitBTC did by freezing customer account  or maybe taking the easiest way out, "putting exchange on maintenance" causing the pause in withdrawal of fund.  No matter how the events turns out I believe it'll shape the way we see crypto exchange.

BTY, I thought we aren't might to store our fund on Exchange unless we're planning on engaging in day-to-day trading which isn't good for our health. Maybe  this event has a lesson to teach those that store fund on exchange,  let's see how it plays out.  That's all I can say.

The concept is good, but the problems will come from having a proof of keys day. It could well overload the transaction queues, and push up fees. I think it would have been better to have had a proof of keys week. I wonder how many people will think that moving their coins from one exchange to another will be just as good as withdrawing them.Not everybody will have created a node, and they will need to look for other solutions. The alternatives may appear to be safer, but they may still contain similar vulnerabilities.

This reminds me of the infamous Cryptsy collapse that I lived through.. An example of what happens when fractional reserve meets crypto..

Cryptsy ran fine for a long time on fractional reserve. Everything was just fine until it wasn't.. What was it? About a year?
The "cold wallet" coins were lost/stolen on 2014-07-29 and things didn't start going to shit until around September 07, 2015 or about the time I registered here to keep up with the news of what the hell was happening on October 22, 2015 after one of my chat buddies was banned for questioning Cryptsy..

To make a long story short everything was fine until they started running out of Bitcoin for withdrawals but then they said their BTC wallet was "just in maintenance" and that the "hot wallets just needed to be refilled"..
Around the time some great blockchain sleuths (thunderjet) traced these BTC wallets that I just linked but we thought that Cryptsy still had control of them as their cold wallets but the hot wallets just weren't getting refilled for some reason.

The more people got concerned the more people tried to withdrawal and their was basically a bank run. We started noticing that the only time that withdrawals came out was when deposits came in to the hot wallet..

Since we couldn't get BTC WDs out many started WDing whatever they could get out like DOGE and ETH.. We soon noticed that we couldn't get many others out either such as DRK/DASH which turned out to also be on fractional reserve.

The coins that we could get out, people were buying like crazy to WD, especially DOGE and DGB.. This pushed the price of DOGE about 2X higher on cryptsy than Polo as people were buying it in mass to flee the exchange..

The worse it got the worse it got..
I myself had no idea yet what was really going on so I was taking advantage of the situation by WDing lesser known coins to polo and topia like UNO and GLD and then sending DOGE back to cryptsy for the massive arbatrage opportunity..
It worked for me because I would only send in a value what I already lined up to get back out. Found something that the wallet still worked and had enough liquidity to buy to WD..

In the end when Cryptsy shut its doors for good I only lost a few hundred goldcoin that I was trying to WD after an ARB..


I guess the moral of the story is that everything seems fine under fractional reserve utill it isn't, and then it gets bad fast..
Once people get scared and start the run on the bank then the problem gets worse and people get more scared and more people run and it quickly ends in catastrophy..


I feel very sorry for a few of my chat friends that trusted Cryptsy. They just held on waiting for their WDs to process (never did) and one friend was even sending BTC in to help others WD (because WDs only worked = to incoming deposits). They trusted and held and lost a lot..

Thank god I was suspicious enough to join this forum to figure out what was happening and didn't just trust Cryptsy and lose everything..
I didn't speak out here much at first in fear of being banned from Cryptsy but once it got really bad it didn't matter much anymore..


These days I keep most of my coin on a ledger nano and in physical coins and only send what I want to trade to exchanges.

It's a very good idea and I support it. (even if the unlikely case could happen that it will result in the first "exchange run")
I don't have any coins or tokens on exchanges, but I can imagine this will encourage people to think about the relation between Bitcoin and (centralized) exchanges (where you don't know your private keys). Bitcoin is "be your own bank" and if BTC is stored on exchanges, the exchange is your bank and owns the coins. Even if many users think: "hey I can access my coins whenever I want, they are mine." In the case if the exchange is shut down (like it happened already to various exchanges, even big ones like Mt.Gox) no user can access his BTC anymore. They are lost because the private key is not known to you, you can't recover the wallet anywhere. Only the person who owns the private key is the king.

A centralized exchange is like a bank, they store your coins, you have to trust them and they have the possibility to scam you at any time. Briefly: they can do almost everything like a real bank. This was and is not like Bitcoin should be used. I know it might last a few minutes to withdraw your BTC to a wallet where you own the private keys, but if they get lost on the exchange, you'll be very sad of not taking the time to do it. I can really recommend it, Electrum and Exodus are easy to use and much safer than an exchange.

For everyone being new here this could be a good New Year's resolution to withdraw your BTC and Alts from exchanges to a wallet where you own the private keys.

I believe that running a node is only important if you need to know if transactions are confirmed or not. Important for people who run business and don´t want to rely on third parties, such as blockchain.com blockexplorer.

If you hold your private keys in a lightweight wallet, that´s just fine.

I agree with you, it´s possible that the fractional reserves may already happening in most exchanges (not all, ofc, I believe there are honest exchanges out there).

The outcome may be unpredictable.
If lots of people get their accounts frozen, it may mine bitcoin and exchanges credibility (crashing the price even further). Or will the market react as "bitcoin is more scarce than it looks like"? However, where will they buy bitcoin, if exchanges are not reliable?

Tomorrow ( January 3rd ) marks the 10th anniversary of the laying of the Bitcoin foundation block. This year it could become the start of a new annual trend. Trace Mayer is suggesting that everybody who has coins deposited with an exchange should withdraw them to prove that the exchange actually own coins to cover the deposits. Some people are concerned that the banking concept of fractional reserves has been introduced into the Bitcoin system. The suggestion is already having some ramifications, with HitBTC reported to be freezing customers' accounts. The implication being that they don't have sufficient coins to cover the balances. What affect could this have on prices? It is difficult to guess if exchanges will be forced to buy coins, or if depositors will "move" their coins by selling them.

I run a node, so it doesn't affect me directly. If you have deposits with exchanges, will you be moving them to avoid being the "last man standing" with the exchange? Alternatively, will the initiative push you into running your own node with full wallet control?