3 Ways to Verify Crypto Ownership
1. Penny Test or Small Transfer Test
Banks use a penny test to confirm account ownership. Crypto ownership verification involves a "small transfer test." This test requires moving a small amount of cryptocurrency between the same person's wallets. Then, one checks the blockchain to ensure the transfer occurred as intended.
- Cost: Performing the transfer requires the client to incur gas fees on the blockchain, albeit a small one. Such fees can add up quickly. This can happen if the client has multiple wallets or if the transfer test needs to be done more often to prove ownership at different times. This is not a "real" business transaction. It is for audit purposes only. The client may need to transfer the cryptocurrencies back to the original wallet, incurring extra costs.
- Security: The transfer test exposes some private data, like the wallet address and its key, tied to the client. This goes against the basic virtue of blockchain technology.
- Ease of use: Owners of the wallets must handle the transfer, but they can generally conduct it with ease.
2. AStablish
AStablish provides a simple Excel plugin. It authenticates crypto ownership at a low cost. It also streamlines auditors' work.
- Cost: The AStablish Excel plugin usually costs $10 on the Microsoft Store. But it's free now. This helps you save money on gas fees while using a penny test.
- Security: The client authenticates a message with their wallet's private keys. An auditor can then check if the signature matches the wallet address and public keys. This proves ownership of the digital asset. This prevents the exposure of sensitive data.
- Ease of use: AStablish integrates with Microsoft Excel, providing direct access. Additionally, there are helpful resources available to help you get started.
3. Block Explorers
To verify crypto ownership, it's enough to know the wallet's private key. You can complete transactions by signing them with this key. You can then use a block explorer to verify the transaction.
- Cost: Most blockexplorers available on the internet are free to use.
- Security: Block explorers will help companies verify crypto ownership. But it is a complex process. Individuals, like the CFO, may hold the private key. The company owns the wallet. In this case, the proof relies on matching the transactions in the wallet with the company's books.
- Ease of use: Existing blockchain query tools let users fetch only the latest transactions. And the data is neither systematic nor meaningful (e.g., by time periods). After data extraction, auditors will need to spend extra time. They must first transcribe data from many sources. Then, they must compile and format it for the digital asset audit.
Summary
| Parameters | Penny Test | AStablish | Block Explorers |
|---|---|---|---|
| Cost | Blockchain gas fee incurred (1/5) | Free (4/5) | Free (5/5) |
| Security | Some private data exposed (2/5) | All sensitive data protected (5/5) | Proof is reliant on matching transactions with company’s book (3/5) |
| Ease of use | Generally easy (3/5) | Easy as it is integrated with Excel (4/5) | Difficult and time consuming (1/5) |
| Total Score | 6/15 | 13/15 | 9/15 |
To summarise, AStablish stands out as the best tool to verify crypto ownership as it is the most cost-effective, secure, and easy to use comparatively.
Frequently Asked Questions (FAQs)
What is a digital asset audit?
A digital asset audit is a comprehensive evaluation of an organisation's digital assets (all digital files, wallets, software, and hardware that an organisation owns or uses). The audit aims to identify, assess, and document the organisation's digital assets, their value, and their potential risks.
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