Cryptocurrency Hodler Reality Check – Proof of KeysDecember 30, 2018
Cryptocurrency that one buys from an exchange is in many cases left with the exchange. This leaves the exchange with the power to manipulate the market.
True ownership of coins or tokens is where one buys them from the exchange for fiat or other crypto, and then they get to safeguard and store the cryptocurrency by themselves. However, many people who HOLD buy the coins and leave it there. This means that the buyers do not own any of these.
Having or owning the coins happens only when one has access to the private keys. Anyone who do not have access to the private keys do not own the coins.
The buyer of the cryptocurrency who is willing to HODL can buy a hardware wallet and move their funds to their wallet. When it is in your hardware wallet, you will still have your funds even when hacks or scams take place in the exchange.
Owning a hardware wallet and keeping your coins in your wallet is like withdrawing money from the bank’s wallet and keeping it in your wallet. Also, if every Bitcoin owner or cryptocurrency owner would have the string of private keys with them to store it in their wallets, the cryptocurrency ecosystem will be far healthier from manipulation.
Companies who are trustworthy would provide for such trustworthy transactions. This is a simple process to ensure ownership and trust. It will cost a bit in transaction fees which is negligibly low when compared to the degree of security it offers.
While it has been Proof of Work and Proof of Stakes, it is about Proof of keys that is important when discussing, buying or holding cryptocurrencies.
The private keys that provide for the access to Bitcoin or any cryptocurrency that one buys are secret codes or string of letters. They work like passwords that permit one to authorize transactions. They signify the true ownership of digital assets.
Several cryptocurrency owners do not own their private keys, and they depend on third-party entities like holdings or custodial services to hold their coins safely. While this seems like a normal thing to do, as it sounds a lot like storing money in the bank, financial intelligence principle suggests that we perform a reality check once in a while with the private key to ensure the coins have not been manipulated and that ownership continues to be sustained.
An awareness about this concept has already spread wide after the idea of “not your keys – not your Bitcoin spread” virally.