fbpx
Articles

Happy Proof of Keys Day!4 min read

January 3, 2020 3 min read

author:

Happy Proof of Keys Day!4 min read

Reading Time: 3 minutes

What is Proof of Keys Day?

Proof of Keys is a cultural tradition born out of one of Bitcoin’s core values: sovereignty. Now in its second year, Proof of Keys is a call to action to withdraw all BTC from exchanges and custodians once a year on the anniversary of the mining of the genesis block, January 3rd. Today, the Bitcoin blockchain turns 11 years old, and if you listen closely, you can hear the quiet sound of people sending Bitcoin from exchanges and custodians to addresses generated by their own hardware wallets, smartphone wallets, and full nodes.

Payment processor, not custodian

At OpenNode, we cannot help but fully embrace this tradition and greater concept. To begin, we aren’t a purposed custodian. We don’t charge a custodial fee, nor do we need to hold clients’ Bitcoin in order for our business to work. We aren’t an exchange either. Exchanges must keep large pools of liquidity under their own custody to establish market efficiency as clients are trading.

OpenNode is a payment processor. Once a transaction completes, we have no interest in or desire to hold clients’ funds. In fact, our clients exhibit an impressive unwillingness to hold funds on our platform. For example, the average time our clients take to withdraw their Bitcoin is four days. We offer free weekly batched withdrawals on-chain, and free Lightning Network withdrawals at any time.

Automatic conversion and scheduled withdrawals: purpose built with self-custody in mind

We allow automatic conversion to several traditional currencies, such as the US dollar and the Euro, and many of our clients take advantage of this feature. We would prefer not to hold customer funds, whether it’s denominated in BTC or traditional currencies. In fact, most of the time we don’t end up doing so. Our clients regularly withdraw their money, assumedly because the revenue generated via the OpenNode platform is required to cover cost of goods, labor, and other business expenses. That’s why we made our platform more intuitive: clients wanted scheduled withdrawals of USD so they are not constantly transferring money from OpenNode to their bank accounts. We listened, and now our clients can schedule daily automatic withdrawals so that they get their money more quickly and we aren’t forced to be a custodian of USD, EUR, and others.

Features can only guide

Our automatic conversion and scheduled withdrawal features can’t force behavior. Sometimes, we end up as a custodial solution, especially for new clients that don’t yet know the importance of using non-custodial wallets. Clients who want to participate in Proof of Keys but don’t have the technical capacity to do so can reference www.proofofkeys.com to learn more, but we will be the first to warn you that technical competence to safely store your Bitcoin should not be acquired in one day. Actually, quite a bit of technical competence is required just to understand all the material on the Proof of Keys website. There’s no toll-free phone number to call if you mishandle your Bitcoin. There’s no “help” email address or “contact us” website. We encourage all of our clients to acquire the knowledge and skills necessary to custody your own Bitcoin, while at the same time maintaining a stance of caution for anybody new to this new financial ecosystem. This is one of the main reasons why OpenNode is set up the way it is in terms of custodianship. We allow business people to get involved with Bitcoin without the risks associated with losing their funds due to incomplete bitcoin knowledge.

Proof of Keys is about self-custody

In general, we have three client types: Client #1 earns BTC, automatically converts to USD, and schedules daily withdrawals. Client #2 earns BTC and withdraws BTC in a timely manner. Notably, Client #2 is likely already set up with his or her own wallets, and the most likely participant in Proof of Keys. However, based on our data, we believe Client #2 is already a Proof of Keys enthusiast and doesn’t need our motivation on January 3rd to withdraw funds from our platform. Client #3 earns BTC but keeps it on the OpenNode platform.

The Proof of Keys movement is primarily to motivate Client #3 not to use OpenNode as the custodian of their BTC, but in our best judgment, Client #3 has the steepest learning curve to ascend. How many of our users fall under the description of Client #3 and want some help understanding the world of self-custodial Bitcoin? Reach out and tell us! We’re here to help you any day of the year, not just on Proof of Keys day.

Nik Bhatia is a Research Strategist at OpenNode. In his past he traded US Treasuries and interest rate futures for Payden & Rygel, a Los Angeles based investment manager with over $100 billion assets under management. He received his Masters in Finance from IE University in Madrid, Spain in 2013, and received his Bachelors in Social Sciences (Economics) from University of Southern California in 2011. He is a CFA charterholder. His goal is to bring a capital market to Bitcoin in order for it to achieve status as a global reserve currency.