Start 2020 with Proof of Keys Day
The annual event tests the potential of exchanges to serve withdrawals, as users send funds to their private key wallets to prove ownership.
The crypto sector is preparing for the second Proof-of-Keys day - January 3, 2020. The idea of this day is to withdraw funds from exchanges to a wallet where the private key is fully controlled. Created by crypto proponent Trace Myer, the day is a voluntary effort to secure one’s funds.
Following the failure of Mt. Gox, as well as other exchange hacks, the need to store the bulk of funds in a wallet became widely known. The Mt. Gox exchange took away more than 65,000 BTC, and other schemes have escaped with user funds.
The Proof-of-Keys day in 2019 did not lead to higher safety for the likes of QuadrigaCX and Cryptopia, which closed soon after. But it is a good reminder to decide on storing the funds.
Most BTC are currently kept in custody and are protected with the best safety there is for crypto assets. But altcoins are often kept on exchanges, as they await to be traded fast. This has led to deep losses as smaller market operators close and the coins are lost.
Some exchanges also block withdrawals, and this is seen as an ominous sign and a potential theft. One of the most criticized markets, HitBTC, has often delayed or refused BTC or other withdrawals.
The second Proof-of-Keys day may signal discrepancies and potential problems for the currently active exchanges. In 2019, multiple new markets cropped up, and there is no knowing how good those exchanges are at the task of safe custody.
In 2019, thousands of ETH has been locked in DeFi schemes and lending mechanisms. Other coins are also in custody, either with DeFi startups, or with exchanges. It is unknown who will join the next Proof-of-Keys, as withdrawing all the assets may disrupt the lending and interest mechanisms.
In 2019, there was an increased number of exchange hacks, with a total of 23 events taking away coins.
In some cases, altcoins and tokens were more severely affected, while BTC theft was more limited.