What Can We Learn From Bitcoin’s Birthday Bank Run?

As most of you will probably know, yesterday marked the 10th anniversary of the mining of Bitcoin’s genesis block. Many Bitcoin proponents mark this as the birthday of the digital asset itself.

To celebrate the occasion, long-time Bitcoin advocate and successful investor Trace Mayer proposed that the community start an annual tradition of a crypto bank run on exchanges – to be known as Proof-of-Keys. The idea was to get as many cryptocurrency users and investors to withdraw all funds from wallets that they did not hold the private key to.

What is Proof-of-Keys?

For many of its earliest advocates, drawn by the promise of sovereign control over wealth, the idea of storing coins on an cryptocurrency exchange is the absolute antithesis of Bitcoin. These original community members have weathered every bear and bull market, every regulatory rumble, and most importantly, every exchange hack.

Trace Mayer forms part of this crowd, having advocated buying and holding BTC since the price was less than a dollar. Part educational mission, part show of force to the exchanges, Trace has spent the last few weeks encouraging his Twitter followers, his podcast listeners, and the audiences of countless crypto-focused YouTube channels he has appeared as a guest on to withdraw all their cryptocurrency from exchanges.

The tradition, according to Trace, would serve two main purposes. Firstly, it would encourage Bitcoin users to exercise the monetary sovereignty made possible by the protocol – the hope being that those not knowing how to securely store Bitcoin would learn. Meanwhile, those that do know could teach.

The second part of Proof-of-Keys supposedly serves to test the trustworthiness of the exchanges. If every single user requested every single coin on the same day, would the exchange be able to pay them all? If it turned out they could not then the platform in question would be not only guilty of deceiving its users but also guilty of artificially inflated the total supply of the currency.

Was Proof-of-Keys a Success?

One of the metrics Trace has used to measure the success of Bitcoin’s first annual Proof-of-Keys event is transaction fees. The billionaire early-Bitcoiner Tweeted yesterday that the mempool was slightly busier than usual, highlighting increased transaction activity on the network:

Happy birthday #Bitcoin! 10 years & crazy magic Internet money experiment still going stronger than ever.#ProofOfKeys is slightly impacting the network. But fees have not gone crazy. No CTO heart attacks. No CFO suicides. World has not ended. Next year will be even bigger! 👍 pic.twitter.com/AkUsCV22al

— Trace Mayer (@TraceMayer) January 3, 2019

Today, Trace posted a survey for his followers, asking what they had done as part of the Proof-of-Keys event. Although still to conclude, at the time of writing 64% of the 2,707 respondents stated that they already had their coins secure.

This comes as little surprise since Trace’s long-time followers will have been bombarded by the importance of monetary sovereignty on numerous previous occasions. Meanwhile, the figures for “withdrew all crypto”, “withdrew most crypto”, and “was stupid and reckless” currently stand at 9, 14, and 13 percent respectively.

Although not hugely impressive, several of Trace’s followers replied that they had indeed managed to use the event to spread awareness about the importance of holding your own private keys. Somewhat disturbingly, one even Tweeted that many who he had tried to pass the message on to had no idea what a private key even was:

I learnt a scary number of crypto holders have never heard of private keys

— Alex Saunders 🇦🇺👨‍🔬 (@AlexSaundersAU) January 4, 2019

Issues with Proof-of-Keys?

Throughout yesterday, a few reports on Twitter did emerge of users struggling to make withdrawals from their chosen platforms:

Added a Failures section to https://t.co/7i8F58PS38#failures

So far, reported failures at: @hitBTC, @PurseIO, @bitfinex, @Poloniex & @coinbase.

Anyone else encountered any unusual issues or problems with #ProofOfKeys withdrawals?

Please post screenshot proof. Thanks! 👍 🧐 pic.twitter.com/npSaV3C1A2

— Trace Mayer (@TraceMayer) January 3, 2019

Bitfinex openly admitted that they were having difficulties. However, as the Twitter user who reported the below Tweet to Trace facetiously speculated, this could have actually been a coincidence.

We are aware of some issues on our platform and are working quickly to resolve. Please be assured all funds are safe. We appreciate your patience.

— Bitfinex (@bitfinex) January 3, 2019

However, many refuted Trace’s list of suspicious exchanges in the comments. Some argued that they themselves had used the exchanges in question to make withdrawals. Meanwhile, in response to the immense negative press surrounding HitBTC’s Proof-of-Keys accusations, the platform Tweeted:

Got it. We believe it's worth to publish an article, which will explain how these presses actually confirm that it's safe to use our platform. Stay tuned for updates in our blog. 🙂

— HitBTC (@hitbtc) January 2, 2019

It is quite possible that many of the incidents with exchanges made public on January 3 are indeed coincidental since the reports of issues seem to be the exception, not the rule. However, if anecdotal tales of sudden withdrawal limits imposed and suspicious downtime from the likes of Bitfinex are indeed backed by malice towards the event, this should indeed be cause for concern.

All told, the Proof-of-Keys event is a great way to check the power of exchanges, expose bad ones, and to spread awareness about some of the all-too-often overlooked qualities of Bitcoin. Here’s hoping next year’s is even bigger!

Related Reading: Happy Tenth Birthday, Bitcoin: BitMEX, Crypto Community Celebrate

Featured Image from Shutterstock.