ELI5 Proof of Keys

Proof of Keys is a movement started in late 2018 by investor Trace Mayer.

Every January 3rd, the cryptocurrency community, led mainly by Bitcoiners, celebrates Bitcon’s anniversary by withdrawing their crypto from exchanges. The first Proof of Keys celebration happened in 2019.

This movement aims to educate users about true decentralization and sovereignty over crypto funds.

Many users don’t know that they can store cryptocurrency in their own storage safely and permanently. Thus, a lot of newbies trust online, centralized, banking services that defeat the purpose of cryptocurrencies.

Proof of Keys then aims to educate users about the benefits of crypto, about how exchanges really work and how risky it really is to keep funds in centralized solutions.

Proof of Existence

When large amounts of customers withdraw their Bitcoin (and other crypto) they are, in practice, stress-testing the exchanges.

This forces the exchanges and other crypto service providers to keep proper amounts of reserves at all times.

Fractional banking is legal and most exchanges probably do leverage their holdings somehow, maintaining some minimal fraction.

Custodial Solutions

Banks are custodians of values we entrust to them. Notice the emphasis on “trust“?

Bitcoin is a trustless technology.

When you deposit your Bitcoin on a custodial service, such as an exchange or online wallet, you are going back to the trust model.

You trust that the custodian will take good care of your keys.

This is the opposite of the original Bitcoin vision where every user keeps their own keys in safe storage.

Every custodial solution requires trust because the custodian must have the private key in order to move the funds on your behalf.

Even if you share the private key with the online wallet, such that you keep a backup of it on your own storage solution, the custodian still has full control of your Bitcoins for as long as they possess the private key.

Video Explanation

About Trace Mayer

Trace Mayer is an early investor in Bitcoin.

He describes himself as a “HODLer of last resort”, which means he’ll never sell his BTC unless it becomes vital.

Mayer publishes the Bitcoin Knowledge Podcast.

Net Worth

Tracer Mayer’s net worth is likely in the billions of U$ range, especially since he bought large amounts of Bitcoin very early on when whole coins cost pennies.

A so called permabull, Mayer tweets often and interacts with his followers on a daily basis.

Links

Proof of Keys Website

Trace Mayer Twitter

Meta