Disabled Bitcoin Withdrawals on Proof of Keys Day: What Gives?
Some users reported disabled bitcoin withdrawals on January 3rd, a community-proclaimed Proof of Keys Day wherein users withdrew funds to personal, non-exchange wallets. Is this a triumph of the proof-of-keys movement or a troubling side effect of centralized crypto custodians?
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Are You Messing With Me?
Proof of Keys Day, in case you weren’t aware, is a push to celebrate the genesis day of Bitcoin by putting your cryptoassets on a wallet you control.
Proponents argue that custodial services like Coinbase and Bitcoin.com take away all the advantages cryptocurrencies offer because those advantages — like censorship resistance and security — depend on the individual that controls the keys.
The celebration didn’t go off without a few wrinkles, though: since the early hours of Jan. 2nd, there have been scattered reports of disabled withdrawals on platforms ranging from Purse.io to large exchanges like HitBTC.
So, while some regarded Jan. 3rd as a rousing success for private ownership of bitcoin, the day seemed to show the darker side of key control as well.
Not Really Your Money If You Don’t Control It
The thesis of every pro-wallet argument is that if you do not control the keys to your funds, then they aren’t guaranteed to stay yours because of the immutable nature of distributed ledgers and the lack of regulation and oversight in in crypto-finance.
This core line of reasoning is hard to argue with, and the apparent withdrawal halts this inaugural Keys Day thoroughly demonstrates the extent that custodial bitcoin services can flex their power.
Like banks, these custodial services can withold or confiscate funds at their discretion. Unlike banks, in many cases there’s no federal or fiduciary recourse if they do.
Many of these services saw a potential run on their reserves and seemingly reacted by shutting the entire thing down. They can do this at any time, and you can’t do anything about it.
This is a dangerous reality because so much cryptocurrency marketing is predicated on the qualities that evaporate with custodial services, and many of these services make no effort to educate their customers on that fact.
Happy Keys Day to everyone, but maybe next year think more about what it means not to own your bitcoin. Then consolidate on your wallet before these platforms have a chance to stop you.
What’s your take? Do you think Proof of Keys Day made exchanges nervous? Let us know in the comments section below.
Images via Pixabay