Cryptocurrency advocate Trace Mayer is urging Bitcoin holders to declare monetary sovereignty on the upcoming anniversary of Bitcoin’s Genesis block by withdrawing their BTC from any third party wallet into their own possession.
A “Proof of Keys” celebration will thus take place on 3rd January 2019 designed to encourage the Bitcoin community to remove all of their BTC holdings from exchanges and other third party wallets, no matter how well-regarded, and into device or wallets where they themselves exercise control over the private keys.
“Proof of Trust”
Meyer believes this move will represent “the ultimate stress test” for organisations trading in BTC and would generate the kind of transaction volume which would force companies and exchanges to “prove their trustworthiness.”
Meyer’s motivation derives from his observation that BTC trading on the exchanges is much, much higher compared to the available circulating supply of BTC, as intra-exchange trading is generally performed off-chain, arousing suspicion of fractional reserve practices. In other words, it appears to some observers that exchanges are increasingly behaving like traditional banks by playing with Bitcoin that they may not necessarily have.
It is not until a user withdraws his or her BTC from the exchange that a transaction is registered on the blockchain. This system works as long as the fractional reserve is sufficient to meet current demand, but should a reckoning event occur, such as in the last global financial crisis, then that limited pool becomes an issue.
One of the first to rally to Meyer’s call for action was Max Keiser who devoted the second half of his most recent broadcast with analyst Caitlin Long to emphasise the core principles of this Proof of keys approach.
“Bitcoin is hard money, sound money” Keiser states, but “Rehypothecation [where] you can have infinite number of holders” of the same asset allows for manipulation as it presents opportunities to “to control price and price discovery.”
“If the majority of folks owning Bitcoin delivery of their private keys,” he concludes, it “…would diminish, if not eradicate or get rid of, the risk of rehypothecation… so it is a way to fightback.”
