Proof of Keys Debate Resurfaces Following Coinbase Victory

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  • The Proof of Keys movement has been reignited following Coinbase’s recent legal victory over a former customer
  • Coinbase refused to hand over Bitcoin Gold tokens to customers at the time of its creation, citing security concerns
  • The case highlights again that if you don’t own your private keys then you don’t truly own your tokens, the key tenet of the Proof of Keys movement

Coinbase’s recent legal victory against former customer Darrell Archer has highlighted the importance of holding your own tokens rather than running the risk of exchanges preventing you from accessing them. Archer sued the exchange after they withheld Bitcoin Gold (BTG) tokens he was due after the project forked from Bitcoin in 2017, but suffered eventual defeat last week at an appeals hearing. The ruling has reaffirmed the work of the Proof of Keys movement, who emphasize the mantra that if you don’t own your own private keys you don’t truly own your coins.

Coinbase Withholds Archer’s BTG

Archer took Coinbase to court in 2018 after it refused to honor the 350 BTG tokens that Archer was due as part of its creation. Archer was holding 350 Bitcoin on the exchange when Bitcoin Gold forked from Bitcoin in October 2017. This entitled him to 350 BTG tokens, but Coinbase took it upon themselves to restrict all Bitcoin holders from receiving the tokens due to what they perceived as a “major security risk” – Bitcoin Gold developers had not released the code to the public.

Archer sued, claiming a breach of contract, but the exchange emerged victorious last week when an appeals court ruled that Coinbase had not failed in its duty towards him by refusing him access to the BTG tokens. As Proof of Keys advocates would tell you, had Archer held his coins off the exchange and in his own personal wallet his BTG would have been immediately credited to him to hold or trade on supported exchanges as he wished.

Proof of Keys Movement Rekindled

The fiasco is a reminder of the work being done by those behind the Proof of Keys movement, who try to educate new entrants into the space on the risks of leaving their coins on exchanges with its mantra – not your keys, not your coins.

Many people enter the cryptocurrency world through exchanges and don’t think twice about leaving them there. After all, they probably don’t know about hardware wallets and the Proof of Keys movement, and see exchanges as a safe, convenient way to store their coins. However, as Coinbase v Archer has shown, those that leave their coins on exchanges are at the whim of exchange operators, who can, it seems, withhold coins that users are entitled to for any number of reasons.

Archer’s experience defines what the Proof of Keys movement is all about. The movement even has a day attributed to it – January 3 – where supporters endeavor to spread the gospel of keeping your own coins in your wallet. In Archer they may have found a poster child for 2021.