Proof-of-Keys Day Saw Exchanges Fail to Deliver

Even with a limited event, attempts to withdraw funds led to problems with exchanges, including suspended accounts or site downtime.

This January 3, Proof-of-Keys Day, created a wave of trouble. The call to withdraw funds from exchanges to a wallet where the owner holds the private keys was met with glitches on the side of exchanges and exchange services. HitBTC and even Coinbase were reported as failing to assist with the withdrawals.

But on the day of the event, exchanges kept experiencing trouble. Bitfinex, one of the leading exchanges that exerts an extreme amount of influence on the price of Bitcoin (BTC), stopped services for a short time, although it is difficult to say whether this was due to Proof-of-Keys Day. Bitfinex claimed the issues were related to trading, not withdrawal attempts:

OKEx also had a temporary outage:

The call by Bitcoin investor Trace Meyers only raised slightly daily transaction rates, showing that withdrawals for Bitcoin occurred, but may have been limited:

Storing funds on exchanges, especially for coins with difficult to use wallets, is seen as one possible solution. However, exchange hacks and thefts happen often, and affect markets both large and small.

NANO (NANO), formerly known as RAI Blocks, is a case in point. In its early days, the coin did not have a proprietary wallet, and many coins were stored on the BitGrail exchange. Later, the coins were stolen from the exchange’s wallet.

Another prominent case of difficult withdrawals was the now-defunct WEX exchange, the heir to BTC-e, which ran for just a year. Traders struggled to withdraw funds, which created local trading anomalies. Other small exchanges may also make it impossible to withdraw coins, and even larger exchanges have limitations or periods with locked wallets.

But the fear of loss was sparked by the 2013 crash of Mt. Gox, where many early adopters kept their BTC assets. Since moving coins to a wallet where the user controls the private key may be challenging, coins remain on exchanges, including some amount of BTC. Traders may also keep funds on exchanges just for trading, while storing the rest more safely.

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