A top cryptocurrency investor is planning to use the anniversary of the Bitcoin genesis block on Jan. 3 to campaign for crypto holders to remove their Bitcoin from any platform where they have no access to their private keys.
Trace Mayer seeks to encourage users to boycott giving the custody of their crypto funds to third parties unless where and when necessary. Dubbed the Proof of Keys, Mayer notes in a video presentation that it is time for holders to have their money under their control instead of being with exchanges.
He expressed doubts in top crypto platforms like payment processor BitPay and U.S. exchange Coinbase which recently moved more than 800,000 bitcoins.
It is of general knowledge that crypto exchanges are prone to being hacked or scammed since they are centralised platforms with a point of attack. One of such historic cases is the case of Mt. Gox whose CEO, Mark Karpeles, was indicted for embezzling approximately $3 mln in 2013 – prosecutors in Tokyo this week sought a 10-year jail term for Karpeles.
While the call to withdraw from affected exchanges could be a valuable test of the ecosystem to figure out how to handle multi-day long delays in confirmations, it was reportedly meant to prevent the exchanges from lending out Bitcoin to big players to short the market despite its bearish state.
What could possibly go wrong with this community-led and date-bound initiative? The call has since raised debates on why users may need to own hardware wallets. Questions can also arise on whether removing funds at the same time won’t generate a lot of movements. When such happens, it could cause Bitcoin to hit its limits and increase transaction fees unlike when done organically with low fees.
Since most exchanges keep a larger chunk of their funds in cold storage, there are concerns they could become easy targets of hacks as they move these funds to hot wallets to meet users’ withdrawal demands. It should be noted that withdrawals on exchanges are sometimes not automatic. It could take days for exchanges to clear withdrawal requests depending on each platform’s user base.