Cryptocurrencies, such as Bitcoin, have many great features (privacy, full-ownership/control, speedy and low-cost transacting, security, etc), which set them apart from government-run fiat currencies. With the proliferation of exchanges like Coinbase, Gemini and even Square's mobile wallet, Cash App, Bitcoin and cryptocurrencies are also easier to manage (buy/sell/trade) than ever before. Despite the convenience that these exchanges offer, especially those new to cryptocurrencies, there are some major downsides to leaving your crypto-holdings on these exchanges. In celebration of the 10-year anniversary of the very first Bitcoin block being mined (aka, the Genesis Block), we want to offer a bit of a PSA, reminding you that in order to truly own your cryptocurrency, you need to hold the private keys.
One of the founding tenets of Bitcoin is its ability to be completely owned and controlled by the posesser, essentially giving one the power to run their own bank. One would have control over their level of security, and everything related to the ownership of their assets. In the words of influential Bitcoin holder, Trace Mayer, this gives us "monetary sovereignty". We hold and manage our Bitcoin through use of a wallet, but unless you own the private key associated with that wallet, you don't really own anything.
Custodial wallets are those in which you DO NOT OWN the private keys; the opposite being non-custodial, in which you hold the private keys, via use of recovery words. Recovery words are either 12 or 24 English words taken from a 2,048 word list, and represent your private key. The private key is just that, the KEY to your Bitcoin/crypto wallet, and should be kept PRIVATE, treated with absolute care, and never ever shared with anyone. If another party were able to access to your private key (your 12 or 24 recovery words), then that party would be able to access to and control any funds stored on your Bitcoin/crypto wallet. Custodial wallets, like those given to you by Bitcoin/crypto exchanges, are ultimately controlled by someone other than you. The unfortunate thing is, when you keep your crypto assets on an exchange, that exchange holds your private keys, and ultimately have ownership of your assets. Let me give you a personal example of why trusting a custodial wallet could prove problematic.
When Not Owning Your Keys Bites You in the Butt
In November, purchases of BCH (Bitcoin Cash) were through the roof; the overbought nature being associated with notion that BCH was going to fork, thus giving the holder of that coin an equivalent amount of the newly-created coin derived from the fork. Exchanges, like Binance and Coinbase, made claims that holders of BCH before the fork, on their respective exchanges, would indeed be given their newly created Bitcoin Cash SV (BCHSV) coins soon after the fork and market stabilization. While Binance soon offered the BCHSV to customers, Coinbase STILL has not made these coins available to their customers (and good luck getting any response from customer service). This is unfortunate as I cannot access these coins because I trusted the exchange, which owns the PRIVATE KEYS for those coins; the availability to take ownership of what's rightfully mine is lost. If I had kept my BCH in a non-custodial wallet (again, where I hold the private keys/recovery words), such as a desktop wallet (ElectronCash), or a mobile wallet from a reputable store (Google Play / App Store: Atomic Wallet), I could have gained access to the new coins right away, and then could make decisions with what to do with them at the time of my choosing. This is not meant to disparage Coinbase, as they generally offer a great service by making cashing out Bitcoin/cryptocurrencies transparent, simple and cheap. They also allow simpler access to being able to buy/sell/trade your crypto assets. However, your coins are at their mercy, and subject to loss from the centrally-located exchange being hacked, freezing of your account, or in my case, lame-duck refusal to pass ownership of new coins from a fork.
Trace Mayer is behind the Proof of Keys celebration, of which the mission statement is, "Not Your Keys; Not Your Bitcoin". January 3rd marks this next 'celebration', and we also encourage everyone to do this, and exercise the fact the your cryptocurrency is YOURS. Beyond this, it's an exercise in ending our reliance on a 3rd party money transmitter, a concept which is highly important for cryptocurrency holders, but also a very new one. Finally, the movement to get HODlers to pull their funds from exchanges also functions as a stress test for the xchanges themselves. This exposes any exchanges untruthfulness regarding the amount of crypto they actually hold, and forces these exchanges to be held accountable for the liquidity of their users' funds. We hope you join the community in this, as it shows the real power the HODLers have, and that we cannot be controlled or manipulated by these centralized exchanges. Checks and balances are something we don't consider when we think of traditional banking, but this is cryptocurrency, and here we do have the power to enforce such checks.
Below are quick tutorials on withdrawing cryptocurrency, specifically Bitcoin, from both Coinbase's exchange and from Square's Cash App. Best of luck, everyone; now let's exercise our rights, and the freedom to control our own assets!
*Always be sure to PASTE in an address, never enter manually*
*Coinbase uses a SEND MAX feature in the AMOUNT box, using this function on the BTC box works best*
*If you've already enable withdrawals, you will skip the first 2 parts of this step*
*Either scan a QR, or you'll need to paste in the address, then confirm by pasting again*