Since a cryptocurrency is a digital asset, it cannot physically be handled, so how to prove ownership of cryptocurrency? Various distributed ledger technologies such as Bitcoin, blockchain, and other digital commodities. It is important to note that these assets are inextricably linked to the private keys of the founders. There are various ways to do verification of crypto ownership. Here we have thrown light on all of these methods.
Proving Crypto ownership
You must prove that you have the private key in order to ensure that you are the holder of Bitcoins or some other crypto ownership. You would not want to disclose the private key. However, this could compromise your possession if only a part of it or a picture of it were to be publicly disclosed.
By owning the private key, or even a fraction of it, and using powerful algorithms to attempt to figure out the remaining parts, hackers may seize your cryptocurrency.
For this purpose, it is not a smart option to directly disclose the private key in order to prove your custody of cryptocurrency holdings. Which other techniques are there? Let’s discuss them below!
How To Prove Crypto ownership: A Guide To Verification
Here are the three different yet unique ways which can be utilized to prove and validate the ownership of the crypto assets you hold.
- Exchange of a Minimal Quantity of Cryptocurrency
A small amount of cryptocurrency may be exchanged from a virtual wallet to a 3rd person. That person can serve as an impartial mediator to validate the crypto assets as a way for certain individuals and organizations to verify ownership. This strategy, meanwhile, might still be susceptible to theft since the modest sum can be seized rather than returned, or it can be corrupted in transmission.
- Create an Account Statement for a Cryptocurrency
You could additionally use a statement you created from your cryptocurrency bank account, market, or account to verify your possession of digital assets. Such a statement must preferably comprise your identity, the amount of your ownership in US currency, the date and time of the transaction, as well as other relevant details.
Another alternative is to upload a screenshot. If the other side is knowledgeable of and comfortable with the integrity of the used virtual wallet, then this might be permissible.
- Your Private Key is used to Sign a Message.
Utilizing your private key to authenticate a particular message provides the most reliable technique to verify possession of crypto assets.
By doing this, you are capable of proving that you are the legitimate owner of your cryptocurrency assets and exchanges without needing to disclose your private key or execute a financial transaction, even the smallest one, as mentioned earlier.
A valid signature and the statement “I own this address” are the only things needed to demonstrate possession effectively. The statement can be as brief as that.
Proof Of Ownership And Bearer Assets
Every asset, document, or security delivered in material form to the client is known to as a bearer asset, instrument, or guarantee since it does not include any evidence of crypto ownership.
Anyone who is in the custody of the documentation or certification authorising ownership is the legal owner, and the holder of a bearer instrument is the individual who holds it.
The issuers of a bearer asset do not retain ownership details. This indicates that the commodity is transferred without a legally binding document or even another system confirming ownership.
The certification or documentation is basically handed over from one individual to another in order to claim control. Additionally, there is no need to report the transfer.
Message Signing – The Best Technique To Prove Ownership
You can demonstrate that you are the owner of a certain address through message signing, which is the preferable way to prove ownership. By verifying possession of that address, you can verify that you are in charge of the cryptocurrencies saved in a particular Bitcoin exchange location.
Message signing and message confirmation are functionalities that are provided by so many wallets, particularly hardware wallets. This is how it functions, and it has proven to be a trustworthy function.
To prove ownership, you choose an address and add a unique statement. The wallet will turn your message into a single number after you sign, then create a signature with your private key.
Now, anybody can decode the personal message and confirm the signed message by providing the custom message, signature, and public key. In this way, you have proved your authority of the private key connected with that particular Cryptocurrency wallet while not even exposing your personal private key.
Can you determine the owner of a crypto address?
Since no individual data is actually recorded on the blockchain, identifying a Bitcoin address by itself is impractical. However, there are techniques by which an individual’s information may well be traced to specific wallets they hold and operations they have carried out. Bitcoin is pseudonymous, indicating that it cannot be assumed private.
What does blockchain ownership proof mean?
By its fundamental properties, blockchain technology provides evidence of ownership for each financial transaction of an asset. On the other hand, several businesses are proposing non-fungible currencies to be used in a blockchain proof of ownership.
Is it possible to track stolen Bitcoin?
Theoretically, you can track your misplaced cryptocurrency by maintaining a close eye on the blockchain, but then, in reality, this is difficult owing to the currency’s secrecy and the probability that the criminal would turn to crypto exchange to transfer the stolen cash to hard currency straight away.
Can you discover who owns a cryptocurrency wallet?
A Bitcoin wallet handle is described as a pseudonym, unique from someone’s actual name, because it does not need to be hidden but can be hard to find. Although the information is not connected with a particular identity, recognising or identifying a pseudonym is still possible.
Now you know the three different ways if you are questioned about how to prove crypto ownership. These digital currencies such as Bitcoin and many others have a direct relation with the individual’s private key. Yet the only preferable way to prove the ownership of your assets is only by the message signing technique.