Reasons to remove Bitcoin from exchanges

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# 1 – If your coins are on exchange, you need the exchange’s permission to spend them. Under your own care, you can do what you want and pay who you want, when you want, at the price you want.

You will understand this if you have ever wanted to move your bitcoin from an exchange and have been blocked because you had to provide more identification documents or prove your source of income. You may have been blocked because you reached a 24 hour value limit that you are allowed to withdraw. Your funds may not have been available due to unscheduled system maintenance. It’s your bitcoin and yet you are in a position of powerlessness.

Bitcoin doesn’t really care who you are or how much you trade. You can move 100,000 bitcoins and you will be free to do so without any resistance at any time of the day, even on Christmas Eve, if bitcoin was in your possession.

# 2 – Your parts might not really be there. What you see is a promise that if you ask for your bitcoin they will give it to you. But if the exchange gets hacked or the CEO fakes his death and takes the private keys or the government steps in, all the pieces could be gone.

Newcomers log into their exchange and see “Balance = 1.0 bitcoin” and they think it’s their bitcoin. It’s not. It’s a number on a screen. Bitcoin is on the Bitcoin blockchain, the world’s distributed ledger. The entity that can move this bitcoin from one address to another is the entity that owns the private key that generated that address. The user of an exchange does not have the private key, the exchange does! It’s their bitcoin. Bitcoin belongs to whoever owns the private key. This is crucial to understand.

The exchange just has a legal agreement that the bitcoin is owned by the user and it shows the user their balance. But the user just has a login name, a password and a promise. Not a private key.

One sinister little trick that blockchain.com uses is a 24-word password to log into the website. It looks like a bitcoin private key, but it isn’t. It’s just a website password. Blockchain.com has the private key. This is quite misleading and confuses beginners as to the true nature of how Bitcoin works.

Many exchanges have been hacked and coins have been stolen from these exchanges:

Mount. Gox is the first and most famous. Quadriga CX, a Canadian exchange, went bankrupt after the CEO – the only person in the company with access to private keys (allegedly) – died (allegedly) while traveling in India. Users have lost all of their bitcoin to Cryptopia, an exchange in New Zealand. They were hacked and users lost their funds. Binance. $ 40 million worth of bitcoin was stolen, but Binance was rich enough that its users were unharmed. Embarrassingly, the CEO called for a rollback of the Bitcoin blockchain to recover lost funds, but the city was laughed at. More recently, the CEO of a Turkish exchange fled the country with $ 2 billion worth of bitcoins. not yet heard of it before.

There is no way to know if an exchange was really hacked or if it was the internal work of a dishonest employee. The bottom line is that if they are holding your bitcoin, you trust them to act honestly and securely.

You might not trust yourself to care for yourself. This is understandable. But it is your responsibility to educate yourself on self-guarding or at least only partially guarded collaborative guard. Most of the early Bitcoiners are probably sitting on a lot of bitcoin. They need to step up and look after their coins. People new to bitcoin can store their initial small stacks on exchanges and it won’t matter too much. But you are early. You have to take your responsibilities. All information is available online and free of charge.

# 3 – If coins are left on the market, they can engage in fractional reserve loans, effectively inflating the supply of bitcoin. If there is a massive public withdrawal, exchanges can and have gone bankrupt if they don’t have the pieces promised. The pieces disappear.

Fractional reserve is the fraudulent practice of accepting a deposit and then lending it, but the depositor has the illusion that their money is still available. Either way, this is both common and legal in the fiat banking world. If a bitcoin is deposited and then loaned out, the depositor should not have access to it, like a term deposit. It would be a full reserve or an individual bank.

If the depositor asks for their funds, what gets returned to them are the funds of another depositor and, in theory, no one is hurt. But if a lot of people want their funds all at once, then the obligations cannot be met.

This practice not only inflates the money supply, but constitutes a systemic risk.

By withdrawing your coins, you eliminate the risk for you of a bitcoin bank rush.

Trace Mayer, a once beloved Bitcoiner, kicked off Proof-of-Keys Day, the anniversary of the first Bitcoin block, on January 3. He started a movement where Bitcoin users celebrate by removing all their coins from the exchanges at the same time, putting stress on the system, to keep the exchanges honest. Any exchange that operated on partial reserves could be exposed if enough people participated.

# 4 – One day governments could ban withdrawals to private wallets, leaving your coins locked in and much less valuable. The true economy of bitcoin would be an open peer-to-peer market outside of exchanges, while coins trapped inside exchanges would be useless.

I fully expect governments to make this extremely difficult or outright ban coins from leaving exchanges in private wallets. We will fight, no doubt. But governments’ efforts will be in vain. Most bitcoin is not on exchanges. My estimate is that about two million of the 18.7 million mined are on the stock market.

The future of Bitcoin is that of peer-to-peer money, with most payments made over the Lightning network. Coins on an exchange cannot perform this function. Exchange coins will always have a middleman that you need to make payments.

Coins blocked on the exchange due to laws cannot be used as bitcoin is intended and they will have less value. If I offer a service and charge in bitcoin, I will only accept real bitcoin outside of exchanges. I will not take payment for bitcoin trapped in my exchange wallet. I won’t be alone. Therefore, there will be a price difference between the actual bitcoin and the bitcoin trapped by the IOU exchange.

# 5 – Powerful people who want Bitcoin to fail MAY be short in the futures markets. If we, The Resistance, buy bitcoin and pull it out of the exchange pool, we will end up imposing a decoupling of the price of paper bitcoin from physical bitcoin.

We are fighting people who print fiat. It is easy for them to lay bare the short bitcoin and remove the price as they can print money and therefore have no real risk. * Click here to learn more about how short selling can affect asset prices.

Here’s why they will fail: There is an army of Bitcoiners, true believers, who regularly buy bitcoin and withdraw coins from the exchanges. Most of the coins are already off the market. If the naked short attack is successful in bringing the price down, Bitcoiners will eagerly grab the cheap sats and remove even more bitcoins from the exchanges.

Miners can somewhat replenish the supply of coins on exchanges. Currently, miners could theoretically dump 900 bitcoins per day on the exchanges. When HODLers withdraw 900 bitcoins per day, the price is relatively stable. Wild price fluctuations can occur despite this, of course, as traders buy and sell coins among themselves. But as more and more coins are removed and mining supply decreases (by half every 4 years), there will come a time when there won’t be enough bitcoin available. This will result in a decoupling of the paper price of bitcoin in the futures market from the real bitcoin demanded by HODLers or traders.

Join the military to move this day forward and make bitcoin a success sooner. Stack bitcoin regularly – Dollar Cost Average (DCA) – and remove the coins from the exchange.

# 6 Unless you take coins under your own care, you will never fully appreciate how Bitcoin works.

If you don’t like it, you won’t buy enough. And that you will regret.

You will need to learn more about self-guard and tie a knot. It will also blow your mind and bring you closer to the truth about how incredible this technology is. You might even start using the Lightning Network and be totally obsessed with it. In the right direction.

This is a guest article by Arman le Parman. The opinions expressed are entirely theirs and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

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