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Do you care about privacy? Proof-of-Keys 2020 Analysis

Jan 10, 2020

In this piece we break down the inflow and outflow exchange data from Proof-of-Keys day on January 3. Proof-of-Keys day is a day when the community is supposed to send assets from exchanges to personal wallets. (4 min read)

On January 3, 2009, Bitcoin came into existence and changed the future of finance. To celebrate Bitcoin’s anniversary in 2020, January 3rd is declared by the community as “Proof-of-Keys” day (signaled by the unique hashtag: Jan/3➞₿🔑) to push the critical narrative of “not your keys, not your bitcoin.”

While cypherpunks and many others that are part of the cryptocurrency community promote censorship resistance and advocate for personal privacy rights, did the community put their money where their mouths were? The best way to observe this would be to watch exchange inflows and outflows.

In other words, on January 3rd, we would expect to see a serious outflow of Bitcoin from major exchanges to personal wallets. At the very least, it would be interesting to see a decreased inflow to exchanges on that day as compared to the day prior, January 2.

Here are the results.

Using data from TokenAnalyst.io, we show the net flows from the top major exchanges. Net flows is the difference between inflow and outflow volume from the exchange on that day.

For example, here is how Bittrex was calculated:

Bittrex January 3:

Inflow: 338.6718 BTC

Outflow: 906.877 BTC

Net flows: -568.21 BTC or 91.24% more outflows

Bittrex January 2 Net flows: -131 BTC or 33% more outflows

See the entire chart below:

The Takeaway

There are a couple of interesting events that happened, but difficult to correlate. Bittrex saw a large increase of outflows from 33% on January 2 to 91.2% more on January 3. Kraken went from 13% inflows on January 2 to 36% net outflows on January 3, which is the type of data we'd expect on Proof-of-Keys day.

On the other hand, Kucoin had opposite data from what we’d expect with 61% outflows on January 2 and 17% net inflows on January 3, along with Bitstamp having opposite data. This means more BTC entered than exited on Proof-of-Keys day! Additionally, exchanges like Deribit and Okex had an increase in inflows. This means that overall after analyzing the above data, there is no strong correlation that shows people withdrawing from exchanges to wallets.

The purpose of Proof-of-Keys day is not to discourage trading on exchanges. Exchanges provide liquidity, high speed trading and help move the industry forward, but Proof-of-Keys day is meant to reinforce self-custody by having fewer funds on exchanges and more in your personal possession. This protects your from exchange hackings and exchange shutdowns. In turn, this brings everyone closer to true financial sovereignty, security, and responsibility.

Was it a success? We will say yes on some exchanges, but no so much on others. All in all, Proof-of-Keys day was far from a home run. It's all of our jobs as crypto enthusiasts to promote self-custody. Evidently, there is more work to do. If you're looking for a place to securely store your assets, then try out BRD as one of the leading non-custodial wallets in the industry. BRD is mobile, easy to use, and your funds are always at your disposal if you do get the urge to send funds over to trade on exchanges.


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