How Do Bitcoin Wallets Get Lost?
Due to the nature of Bitcoin and cryptocurrency, all responsibility for holding and securing the currency falls to the individual holder. There is no bank or private institution capable of restoring lost passwords to wallets. According to the New York Times, an estimated 20% of all Bitcoin currently in circulation (18.5 million at the time of writing) is held in lost wallets. That’s part of the reason the remaining Bitcoin has gotten more and more valuable.
These fortunes are lost the same way people lose email accounts or old photographs stored on computers. Forgotten passwords, hardware malfunctions, replacing defective hardware, you name it. The potential for human error involved in holding carelessly is high enough. With this knowledge, let’s look at the biggest lost bitcoin wallet list:
1) Satoshi Nakamoto’s Wallet
Legendary creator of Bitcoin, Satoshi Nakamoto, has a well-known Bitcoin fortune that they have been sitting on since the earliest days. There’s been much speculation about why Satoshi did this and why Satoshi exited the world of Bitcoin right as it started to attract mainstream attention.
Satoshi’s wallet contains an estimated 1.1 million Bitcoin, but according to a new report from 2020, it may have been slightly higher. It is still up for debate whether or not Satoshi will ever touch their enormous fortune. Such an event would certainly shake the foundation on which Bitcoin stands. Much of the myth, lore, and values that Bitcoin is built upon rests upon the mysterious, and seemingly altruistic founder who has yet to touch their funds. For all we know, Satoshi’s private keys could be buried, distributed, or even destroyed.
If Satoshi were to ever recover their Bitcoin it would instantly make them one of the richest people on the planet with tens of billions of dollars worth of BTC.
2) Stefan Thomas and the Lost Password
The tale of Stefan Thomas made a lot of headlines earlier this year.
The San Francisco software developer held an estimated $220 million in a lost Bitcoin wallet he simply forgot the password to. Stefan jumped on the Bitcoin hype train in 2011 and acquired 7,002 Bitcoins. Stefan held his Bitcoin wallet on an IronKey USB stick and without the password he had a total of ten password attempts to open the key.
Before turning to social media and news headlines for assistance, Stefan attempted eight times to crack into his own USB storage, giving password guessers just two attempts to crack the code. Stefan has since “made peace” with his lost fortune.
3) The Buried Treasure of James Howells
In a similar vein to Stefan Thomas, UK resident, James Howells lost his Bitcoin fortune of 7,500 BTC, when he accidentally threw away an old laptop, mistaking it for an obsolete one in 2013. The hard drive of which he had saved his wallet on. James offered the Newport town council a 25% share of the contents of the wallet if he found the laptop after being given permission to search for it in a landfill in the Welsh town. He also offered an additional 50 million British Pounds to assist anybody suffering from the COVID-19 pandemic.
The Newport town council forbade James from searching for the wallet, claiming that the licensing permit of the landfill forbids any form of excavation. In addition to the legal challenges, this would also cause significant environmental damage to the area. The attempt to search for the wallet could cost millions on it’s own, with no guarantee that the laptop could be found, or even function. James made an additional offer to the council after he had received offers from hedge funds offering to help finance the search, looking for a slice of the reward pie, but with no luck.
4) The Disappearance of Gerald Cotten
Gerald Cotten was a Canadian investor most well known for co-founding the cryptocurrency exchange, QuadrigaCX. This whale of a tale comes right out of cinema. Gerald founded QuadrigaCX in 2013, after graduating from the Schulich school of Business in Toronto.
On the surface, Gerald looked to be running an honest business. But behind the curtain, Gerald was acting as the sole curator of the exchange. Quadriga had no official bank accounts, since banks at the time had no method of managing cryptocurrency. The list of shady means of transferring funds and the inner workings of Quadriga only grows the deeper you look into this case. The Ontario Securities Commission (OSC) put out a full report of the incident. In addition, WordPress blogger Amy Castor has published a full timeline of events tracking the story in vivid detail.
By 2016, Gerald had turned Quadriga into a one-man operation, firing all of the staff. Between 2013 and 2016, Gerald had paved the way into creating his own money printer and was creating tokens within the Quadriga ecosystem at will.
The OSC would later discover that 95% of activity on Quadriga, was conducted by Gerald himself using a false identity. In 2018 Gerald married his longtime girlfriend, drafted a will, leaving all of his ponzi scheme gains to his wife, and was declared dead by Indian medical authorities in December of that year due to cardiac arrest caused by complications related to Crohn’s disease. Cottent took the private keys to his fortune to the “grave”. His death is a topic of suspicion and it is believed by some that he may have faked his own death.
5) Individual X Marks the Spot; The 69,000 Bitcoin Challenge
Originally found in an auction on the dark web, the world’s seventh largest Bitcoin wallet, containing roughly 69,000 Bitcoins was stumbled upon by some creative hackers one day in 2018. Ever since then the wallet has changed hands many times, each time given to a hacker trying to crack into the thing with no success yet. Due to its underground point of origin, many believed the informal contest to be a hoax.
In September of 2020, Hudson Rock chief of technology, Alon Gal published a tweet relaying the information to twitter users after coming into possession of the wallet himself. Alon told Motherboard interviewers in 2020 that a common occurrence on hacker forums was to acquire wallets with large sums in them and then sell them to other hackers who thought their hardware was up to the task of cracking the codes. Hot off the heels of an article published by Bitcoin.com, the US justice department filed a civil complaint, stating they now had control over the wallet.
The report refers to the owner of the wallet as “Individual X”. Whoever this person is, is known to the US government, but not to the public. In order to audit the origin of the coins, the justice department hired the services of Chainalysis, a blockchain analysis company who discovered that Individual X is believed to have stolen a large chunk of change from the infamous contraband website, Silk Road. Former owner of Silk Road, Ross Ulbricht confirmed that he was aware of Individual X stealing from him.
It seems that Individual X had intended to sit on the coins until the situation involving the black market website calmed down. That, or they sold the wallet and offloaded their fortune, which had attracted far too much attention after the takedown of Silk Road.
The Need for Reliable Custody
Bitcoin has been around for more than a decade and in that time, there have been many people who lost their bitcoins-and no one knows for sure how many of those coins are gone forever or how much of that can be recovered.
According to estimates from Glassnode data, about 10% of the currency Bitcoin supply or 1,857,721 Bitcoins might never be found. Other reports estimate it might be as high as 25%. That is billions worth of value which will remain inaccessible forever essentially reducing the circulating supply of the cryptocurrency.
As such, the need exists for security and insurance against the loss of huge amounts of Bitcoin due to poor custody. Despite the increasing amount of Bitcoins lost forever, there is still more Bitcoin to be mined.
Get yourself a reliable crypto wallet to avoid becoming another statistic!
