Hello crypto world, glad to be part of this week’s class by professor @awesononso on Proof of Keys. Below is my task post. Thank you.
Explain private and public Keys in relation to custodial and non-custodial wallets.
Public and private keys are public-key cryptography(PKC), made of strings of bits of numerical numbers combined with data to form ciphertext. The public-key cryptography is a means of validating the authenticity of something or transactions when related to cryptocurrencies, this is done by use of asymmetric encryption. PKC is used in crypto space to primarily encrypt and decrypt transactions.
Public keys are keys used for encrypting a message and to check the originality of a digital signature, they are generated from software programs and issued to an individual by a trusted and approved authority. Public keys are more like usernames in terms of crypto and bank account numbers in terms of conventional finance systems. This keys gives us access to our wallet with our assets but not full control of it in terms of deposit or withdrawal of our assets, as a third-party authority is required. Public keys are digital certificates issued by a certified authority to a person as a sign of ownership to the digital assets. A public key works in accord with a corresponding private key which is recognized by only to authorized owner.
Private keys are keys used for decrypting and unlocking transactions, these keys gives an individual full access to their digital assets in their wallets. Its a key that proves ownership of an account or wallet, for one to withdraw or deposit at anytime without a third-party authorization. Both public and private keys are used to either access a custodial wallet or a non-custodial wallets.
Custodial Wallets:
Custodial Wallets simply means "wallets with custody", which is to say that although an individual have access to see their assets or funds deposited in the wallet, they do not have the will to freely withdraw or deposit into the wallet without the constent of an authorized third-party who serves as the custodian of the wallet. The public key is used to access a custodial wallet, it grants you access to viewing your assets or funds status, but the third-party authority(custodain) is given the responsibility of safeguarding the assets and funds due to the trust placed on the authorized custodian. Custodial Wallets provides customer service backups, which can help in a case of loss of public key.
Non-custodial wallets
Non-custodial wallets gives it users full control and access to their funds or crypto assets, with full access to withdraw or deposit at anytime as it soothes the individual, without any custodial or third-party interference. The private key is used to operate or access the non-custodial wallets, the private key grants the owner of a non-custodial wallets permission to use the funds in their wallets and gives the user full responsibility of whatever happens to the wallet. Bearing in mind that, if your private key is lost or kept carelessly, a user of non-custodial wallets may lose their funds or can be exposed to hackers, as the responsibility of safeguarding the wallets its in your hands. Non-custodial wallets doesn't provide customer service backups to its users, as it's believed that the user trusts their selves.
What do you think about the Proof of Keys Day? What precautions would you take when participating?
Proof of Keys Day is an annual event that holds on the 3rd of January, the first recorded proof of Keys day was on the 3rd of January 2019, intitated by Trace Mayer, held in conmenseration of 10th anniversary of Bitcoin Genesis Block. Proof of Keys day, is a day to celebrate the financial liberty of every user of a centralized exchange, and also authenticate the true ownership of funds in a wallet. This day aims to encourage crypto users to exercise their power and control over their assets by moving their funds from various exchanges were it has been stored to their own private wallet.
The Proof of Keys day was created to improve the consciousness of crypto user not to be completely dependent on their exchanges. It is a day set aside to test the capacity and trust level of centralized exchanges, and for its users to show their authenticity and execrise full control of their wallet, all in the course to show that their funds stored on their platform is well secured and managed by the exchange platform, this also demonstrate that one's assets haven't been misused or mismanaged by the exchange platform, as this is commonly observed with our conventional banks, where most atimes the bank authorities use their customers funds without their knowledge, but the user can only see the account status but not access it when he deems fit. On this day, crypto users are required to withdraw all their assets to their personal wallets to excerise their full control and ownership of the assets. This exercise serves as message to their exchange platform, and also charge them to provide better, efficient and trustworthy services to their users.
The invention of the this day, is a great way to not only remind all centralized exchange platform that these assets were stored to provide financial freedom to their owners, and also to seve as a verification check, that the exchange platforms are doing a great job in managing and ensuring transparent management of their client's crypto assets. Proof of Keys Day event is also an opportunity for newbies of crypto ecosystem to know more about how different crypto wallets operate and how to use the wallets in transferring and deposting their funds. In a nutshell, it shows how transfer of value is done on decentralized platforms. As the proof of keys day is a day to show and remind crypto investors who actually owns the funds in their wallets stored on an exchange platform and gives every investor full control of their funds, crypto investors must be very cautious on how they carry out this excerise by following some safety and secured process to ensure the proper management of your private and public keys in doing so. Below are some of the precautions to be taken while exercising your proof of Keys day right;
•First and most importantly, ensure the wallets to be used for the process is safe with a reputable standard in crypto space that is scalable and secured to avoid any issue of mix up or mistakes.
•The use of temporary wallet addresses should be considered if one intends to move their back to the exchange where they were stored at some point, to avoid issue of scams or hacking as exchanges can trace addresses linked with an account. Also ensure to enter the correct wallets addresses to as any mistake can lead to loss of funds.
•Ensure your public and private keys are not compromised and is well secured and away from a third-party. Any exposure of your keys to a third-party will give the individual full control over your assets.
Do you prefer Centralized exchanges or Decentralized wallets for storing your cryptocurrencies? Why?
It is important to first understand what a centralized exchange and decentralized wallet is to know which is better.
A centralized exchange is a crypto marketplace that has a third-party authority that foresees and controls the assets of a client, and is in full control of the assets, taking full responsibility for the security of the wallet. It is user friendly, easy to use even for newbies, fast and reliable. Although, it is at a high risk to hackers and has high transaction fee.
Decentralized wallets gives it's users full and absolute ownership of their funds and assets without any third-party interference, giving it's users free license on how to control their assets with the possession of their private keys.
For me, I prefer the use of ** a decentralized wallets for storing my cryptocurrencies**, my reasons been that;
•I have absolute and full control and ownership of my funds in my wallet, being the only one in possession of my public and private keys, giving me the liberty to deposit, withdraw or invest in any cryptocurrency anytime i choose.
•Decentralized wallets guarantees the security of my assets and ignites my trust level as it provides a high level of security for its users as compared to centralized exchanges in time past.
As some case of hacking has been recorded with some centralized exchange like Binance exchange.
•The use of my decentralized wallets, gives me the privilege of showing true ownership of my keys, and I don't need to annually execrise the proof of keys day(smiles), this is because I have access to my private and public keys and can withdraw or deposit my funds at all times.
•Transactions with decentralized Wallets are very fast, reliable and with low transaction fees or charges, as compared to centralized exchanges.
•Most importantly, it supports peer to peer trading making it easy for me, provides liquidity and one can also stake in some coins to make extra income. And of all there's no third-party interference or authority over my assets in my wallet.
Let us assume it is Proof of Keys Day:
a.)Transfer at least 20 Steem from your Binance wallet to your Steemit wallet.
b.) Transfer at least 50 TRX from your Binance wallet to your TronLink wallet.
(Provide Screenshots and make sure you have your Keys).
Transferring 20 Steem from my Binance account to my Steemit Wallet.
•First, I login to my Binance account. I click on wallets and search for Steem. I click on my Steem coin, then click on withdraw.
•I fill in my details, the amount of Steem to be withdrawn and I click on withdrawal.
•Next, I confirm my order by clicking on confirm.
Screenshots from my Binance account
•I go to my Steemit Wallet to confirm the successful transaction.
Source
Transferring 50 TRX from my Binance to my TronLink Wallet.
•Again from my Binance wallet, I click on TRX coin.
•On the next page I click on withdrawal, then i fill in the receiving address of my wallet, the amount of tron I want to withdraw. Then I click on withdrawal
•Next, I confirm my order and wait for the transaction to be completed
Screenshots from my Binance account
•I go to my TronLink Wallet to confirm my transaction. The transaction was complete within a minute.
Screenshot from my TronLink Wallet
Screenshot from my TronLink Wallet
In one statement, what is the major significance of the transfers in question 4.
The major significance of my transfer in the previous question, is that I'm in full possession and control of my funds on Binance platform. As the owner of the assets I was able to withdraw my assets at will(if observed closely, I did the withdrawal of 20steem on Monday to my Steemit Wallet and 51TRX to my TronLink Wallet on Thursday).
Cc: @awesononso