Proof of Keys- Steemit Crypto Academy- S4W7- Homework Post for @awesononso
Hello Cryptonians, I believe you are all doing great. This my assignment submission, I hope you enjoy and learn something new from it.
Question 1. Explain private and public Keys in relation to custodial and non-custodial wallets.
Private keys are keys that unveil information (decrypt) of cryptocurrency tokens stored in a wallet. In other words, it is a string of numbers and letters (a very complicated mathematical algorithm) that is uniquely given to cryptocurrency users to enable them to manage or securely withdraw funds from their wallets and should be kept from the eyes of intruders. You can think of a private key as a password that grants you access to your email account.
Public keys are used to receive or deposit crypto funds into wallets and can be shared with any individual with whom you want to receive assets/coins from, unlike the private key. Public keys can be taught of like an email address that you share with your friends and family to receive pictures, documents, etc.
Since we now know what private and public keys are, let's continue further to enlighten ourselves on how it relates with custodial and non-custodial wallets.
With custodial wallets, your private keys are kept/held by a third-party partner who in turn provides security for your tokens and also a more convenient way to store them. Meaning, they have absolute control of all your assets or funds while you only have to give permission to either send or receive payments with just a click of a button. Examples of a custodial wallet are Abra, Kraken, Binance, and Coinbase.
Non-custodial wallets, on the other hand, is a decentralized form of wallet, where users/customer are allowed to keep their own private keys ( sometimes in a PDF format) and also write down mnemonic phrases which would be required to restore their account if anything goes south. This literally means that users have total control of their funds and wouldn't have anyone to blame if any fraudulent activity occur in their wallets.
Question 2.) What do you think about the Proof of Keys Day? What precautions would you take when participating?
Proof of keys day is an event that occurs annually. It was initiated by Trace Mayer (a publicly known crypto investor) on the 3rd of January 2019 when Bitcoin was celebrating its 10th anniversary to remind cryptocurrency holders that, if they don't have absolute control of their assets, then their assets are not really theirs. On the aforementioned day, investors simultaneously withdraw/move their assets from centralized exchanges (custodial wallets) into a non-custodial wallet where they have full control of their assets. The main objectives of the proof of keys day are;
To keep centralized exchanges in check, by ensuring that they possess the money they claim to have.
To educate crypto investors on how to create and use non-custodial wallets and to also remind them that they can truly own their assets if they solely have their private keys in their possession.
To celebrate the Bitcoin blockchain created by Satoshi Nakamoto.
Let's move on to looking at some of the necessary precautions to put in place when participating since we now know everything there is to know about the proof of keys days.
1. I will consider withdrawing my assets or funds using a stealth address (a one-time address for every transaction) in Incase I intend to move my funds back into the exchange at some point. This is mainly to avoid compromising my identity because exchanges track addresses linked to accounts.
2. Because of the similarities associated with some of the blockchain addresses, I will make absolutely sure to use the correct blockchain address before performing any transaction.
3. I will also keep in mind the withdrawal limit in the exchange i am moving my assets from.
Question 3.) Do you prefer Centralized exchanges or Decentralized wallets for storing your cryptocurrencies? Why?
Centralized exchanges are online cryptocurrency platforms used for selling and buying cryptocurrencies. Transactions in these platforms are carried out with the help of central authorities. Thus; when an investor agrees to store assets in a centralized exchange (Kraken, Coinbase, and Gemini), he/she has literally handed over ownership to the platform just like how we trust our traditional banks to hold our monies. Centralized exchanges provide their customers with security and also use their network to find trading partners.
Decentralized exchange(DEX) as the name suggests, is a form of crypto exchange that enables users/traders to transact funds to each other securely without the involvement of any central authority or middle man. Some of the centralized exchanges allow its users to use P2P (Peer-to-peer) transaction which relies on automated smart contracts. Examples of decentralized exchanges include Tokenlon, Uniswap, and Venus.
To answer the question above, although both exchanges provide security to their users, I would personally opt-in for decentralized exchanges due to the below reasons;
Decentralized exchanges provide complete privacy unlike centralized which may ask you for KYC (know-your customer) details.
Decentralized exchanges make it almost impossible for hackers to steal your funds because there is no central authorities in between transaction making it less prone to intruders.
DEX allows its customers to have absolute control over their funds and wallet as compared to centralized exchanges which takes ownership over your assets/tokens.
Question 4.) Let us assume it is Proof of Keys Day:
a.)Transfer at least 20 Steem from your Binance wallet to your Steemit wallet.
To initiate the transferring process, I will first login to my verified Binance account as shown in the picture below.
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- Now, click on wallets and locate Fiat and Spot
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- Search for Steem in the search box provided and click on Withdraw.
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This is the most important aspect of the transaction, so you really need to be careful at this point. In the address bar, you are required to enter your Steemit username, unlike the alphanumeric address that we usually use when moving funds to different wallets.
There is no need for you to worry much about the Network selection, because Binance usually provides it.
Enter the amount you wish to transfer, in our case 20 and click on withdraw .
From the screenshot below, I entered an amount of 21.570, but because of the transaction fees associated with Binance, an amount of 0.01 would be deducted.
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- Make sure all the details you provided are correct before clicking on "CONTINUE".
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Just to be certain that the account really belongs to you, Binance sends an OTP via SMS and Email to verify their customer's identity.
From the below image i have entered the OTP that i received from Binance.
Click on "Submit" to transfer the Fund to your Steemit wallet.
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- Click on "Complete"
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An amount of 21.560 Steem has been sent successfully.
4b). Transferring an amount of 50 Tron(TRX) from Binance to my Steemit Wallet.
To successfully transfer any amount of Tron from Binance to your steemit account, you need to
1. Login to your Tronlink account (the account connected to your steemit wallet).
2. Click on Tron (TRX) and locate "Receive" from the new pop-up window
3. Copy the address provided.
Now, continue by Login to your Binance account.
click on wallets from the pop-up list provided and select Fiat and Spot.
- Search for TRX using the search box and click on withdraw located at the opposite end.
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Its now time to paste the address i copies earlier from my TronLink wallet into the address field.
You should take note of the Network type although it is usually provided by Binance, you are however required to choose them yourself sometimes.
Enter the amount you wish to send as shown in the below screenshot and click on withdraw. Not forgetting the transaction fees associated with The exchange as well (fee= 1 TRX).
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- Carefully check through the details you entered and click on "CONTINUE" if only you think they are legit.
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Verify your Identity by receiving OTP codes from the Binance network.
Click on Submit
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- Click on Complete
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As seen from the screenshot below, i have successfully transferred an amount of 55 TRX to my Steemit account.
Question 5.) In one statement, what is the major significance of the transfers in question 4.
The major Significance of the transfer is to Prove to centralized exchanges that, I have every right to manage and do anything I want with my funds without passing through any central authorities.
Based on the recent Coinbase incident that occurred earlier this year where hackers took advantage of their 2FA and accessed over 6,000 users' accounts and stole their funds is a typical example to prove that centralized exchanges are not safe as they claim to be. It's high time we start to manage our own assets by moving them to our decentralized exchanges. It was a great honor participating in this particular task, I have learned a lot. Thank you very much professor @awesononso, for this wonderful lecture.
Hello @verdad,
Thank you for taking interest in this class. Your grades are as follows:
Feedback and Suggestions
You should justify your the presentation is better.
I noticed some content paraphrased from other sources. Always be as original as possible.
You did not properly get the point in the last question.
Thanks again as we anticipate your participation in the next class.