Lost Passwords Lock Millionaires Out of Their Bitcoin Fortunes Bitcoin owners are getting rich because the cryptocurrency has soared. But what happens when you can’t access that wealth because you forgot the password to your digital wallet? Stefan Thomas, a programmer in San Francisco, owns 7,002 Bitcoin that he cannot access because he lost the password to his digital wallet.Credit...Nicholas Albrecht for The New York Times By Nathaniel Popper Jan. 12, 2021, 5:00 a.m. ET Stefan Thomas, a German-born programmer living in San Francisco, has two guesses left to figure out a password that is worth, as of this week, about $220 million. The password will let him unlock a small hard drive, known as an IronKey, which contains the private keys to a digital wallet that holds 7,002 Bitcoin. While the price of Bitcoin dropped sharply on Monday, it is still up more than 50 percent from just a month ago when it passed its previous all-time high around $20,000. The problem is that Mr. Thomas years ago lost the paper where he wrote down the password for his IronKey, which gives users 10 guesses before it seizes up and encrypts its contents forever. He has since tried eight of his most commonly used password formulations — to no avail. “I would just lay in bed and think about it,” Mr. Thomas said. “Then I would go to the computer with some new strategy, and it wouldn’t work, and I would be desperate again.” Bitcoin, which has been on an extraordinary and volatile eight-month run, has made a lot of its holders very rich in a short period of time, even as the coronavirus pandemic has ravaged the world economy. But the cryptocurrency’s unusual nature has also meant that there are many people who are locked out of their Bitcoin fortunes as a result of lost or forgotten keys. They have been forced to watch, helpless, as the price has risen and fallen dramatically, unable to cash in on their digital wealth. Of the existing 18.5 million Bitcoin, around 20 percent — currently worth around $140 billion — appear to be in lost or otherwise stranded wallets, according to the cryptocurrency data firm Chainalysis. Wallet Recovery Services, a business that helps find lost digital keys, said it has gotten 70 requests a day from people who want help recovering their riches, three times the number of a month ago. Bitcoin owners who are locked out of their wallets speak of endless days and nights of frustration as they have tried to access their fortunes. Many have owned the coins since Bitcoin’s early days a decade ago, when no one had confidence that the tokens would be worth anything. “Through the years I would say I have spent hundreds of hours trying to get back into these wallets,” said Brad Yasar, an entrepreneur in Los Angeles who has a few desktop computers that contain thousands of Bitcoin he created, or mined, during the early days of the technology. While those Bitcoin are now worth hundreds of millions of dollars, he lost his passwords many years ago and has put the hard drives containing them in vacuum-sealed bags, out “I don’t want to be reminded every day that what I have now is a fraction of what I could have that I lost,” he said. DEALBOOK: An examination of the major business and policy headlines and the power brokers who shape them. The dilemma is a stark reminder of Bitcoin’s unusual technological underpinnings, which set it apart from normal money and gives it some of its most vaunted — and riskiest — qualities. With traditional bank accounts and online wallets, banks like Wells Fargo and other financial companies like PayPal can provide people the passwords to their accounts or reset lost passwords. What Is Bitcoin, and How Does It Work? This is made possible by the structure of Bitcoin, which is governed by a network of computers that agreed to follow software containing all the rules for the cryptocurrency. The software includes a complex algorithm that makes it possible to create an address, and associated private key, which is known only by the person who created the wallet. The software also allows the Bitcoin network to confirm the accuracy of the password to allow transactions, without seeing or knowing the password itself. In short, the system makes it possible for anyone to create a Bitcoin wallet without having to register with a financial institution or go through any sort of identity check. That has made Bitcoin popular with criminals, who can use the money without revealing their identity. It has also attracted people in countries like China and Venezuela, where authoritarian governments are known for raiding or shutting down traditional bank accounts. But the structure of this system did not account for just how bad people can be at remembering and securing their passwords. “Even sophisticated investors have been completely incapable of doing any kind of management of private keys,” said Diogo Monica, the co-founder of a start-up called Anchorage, which helps companies handle cryptocurrency security. Mr. Monica started the company in 2017 after helping a hedge fund regain access to one of its Bitcoin wallets. Mr. Thomas, the programmer, said he was drawn to Bitcoin partly because it was outside the control of a country or company. In 2011, when he was living in Switzerland, he was given the 7,002 Bitcoins by an early Bitcoin fanatic as a reward for making an animated video, “What is Bitcoin?,” which introduced many people to the technology. That year, he lost the digital keys to the wallet holding the Bitcoin. Since then, as Bitcoin’s value has soared and fallen and he could not get his hands on the money, Mr. Thomas has soured on the idea that people should be their own bank and hold their own money. “This whole idea of being your own bank — let me put it this way, ‘Do you make your own shoes?” he said. “The reason we have banks is that we don’t want to deal with all those things that banks do.” Other Bitcoin believers have also realized the difficulties of being their own bank. Some have outsourced the work of holding Bitcoin to start-ups and exchanges that secure the private keys to people’s stashes of the virtual currency. Yet some of these services have had just as much trouble securing their keys. Many of the largest Bitcoin exchanges over the years — including the onetime well-known exchange, Mt. Gox — have lost private keys or had them stolen. Gabriel Abed, 34, an entrepreneur from Barbados, lost around 800 Bitcoins — now worth around $25 million — when a colleague reformatted a laptop that contained the private keys to a Bitcoin wallet in 2011. Mr. Abed said this did not dim his enthusiasm. Before Bitcoin, he said, he and his fellow islanders had not been able to access affordable digital financial products like the credit cards and bank accounts that are easily available to Americans. In Barbados, even getting a PayPal account was almost impossible, he said. The open nature of Bitcoin, he said, gave him full access to the digital financial world for the first time. “The risk of being my own bank comes with the reward of being able to freely access my money and be a citizen of the world — that is worth it,” Mr. Abed said. For Mr. Abed and Mr. Thomas, any losses from mishandling the private keys have partly been assuaged by the enormous gains they have made on the Bitcoin they managed to hold onto. The 800 Bitcoin Mr. Abed lost in 2011 were only a fraction of the tokens he has since bought and sold, allowing him to recently buy a 100-acre plot of oceanfront land in Barbados for over $25 million. Mr. Thomas said he also managed to hold onto enough Bitcoin — and remember the passwords — to give him more riches than he knows what to do with. In 2012, he joined a cryptocurrency start-up, Ripple, that aimed to improve on Bitcoin. He was rewarded with Ripple’s own native currency, known as XRP, which rose in value. (Ripple has recently run into its legal troubles, in part because the founders had too much control over the creation and distribution of the XRP coins.) Continu of recovering th of recoverne reading the main story As for his lost password and inaccessible Bitcoin, Mr. Thomas has put the IronKey in a secure facility — he won’t say where — in case cryptographers come up with new ways of cracking complex passwords. Keeping it far away helps him try not to think about it, he said. “I got to a point where I said to myself, ‘Let it be in the past, just for your own mental health,’” he said. People lose lottery tickets all the time. The difference is most lottery tickets expire within a year. Here there is chance to recover the password to the digital wallet, however small.
This is why Bitcoin is a long way from Ma & Pa general public use Like the banks in the 30's that lost everyone's savings. At some point an entity needs to find a way to insure these accounts
I work in IT, so a proper backup has to meet certain criteria or it's not a true backup. It stems from Disaster Recovery planning. 1. Two copies (outside of the original which may be constantly used). 2. At least 1 copy out of location (preferably not in the same city, i.e. fire, flood or tornado or earthquake wipes all copies) a. It is possible to store backups in the cloud if you trust your encryption (not passphrase, has to be certificate-based and certificate preferably not stored anywhere in the cloud and also encrypted) 3. Sudden death or brain damage should have a trigger/instructions for another person (don't make so easy, or could be an incentive to take you out, i.e. GF who takes off with the lover) 4. All copies encrypted with no backdoors. Don't trust any products running on a Microsoft or Apple OS/platform. Google is much better, but better to use the Chromium opensource OS if going that route. Still prefer Linux or other open source OS. 5. Most important of all, tested multiple times. A untested backup is not a backup. It's a hope and a prayer. Test it once a month, then once every 6 months, then once every year.
Shouldn't point 3 have had a triple asterisk at the end? Your 5 points can be summarized in one keyword redundancy.
Hey @johnarb , one of the big issues I have with Bitcoin was where I read about how it might be possible to crack passwords one day. Quantum computing isn't that far off, and a simple google search came up with this article. Since you're an IT guy, you will of course understand it even better than me. But my fear is that Bitcoin can suddenly drop is value very quickly if something like this were to happen. Any thoughts? This is why I said in my previous exchange with you that everything in this world needs to adapt and get better to stay current and relevant, but Bitcoin doesn't have that built in I don't believe. https://cointelegraph.com/news/no-a...instantly-reward-you-with-69-000-bitcoins-yet
Is there a way to prove that btc is inside ? If not, then what a marketing it is. Once this story is hyped enough & becomes urban legend, guy sells the wallet/key (whatever it is) to a bigger fool (auction?), say for only .5% of ,,potential" value & vanishes into thai jungle. Even if it's there, same could be done. Edit: sounds similar - https://www.marketwatch.com/story/b...n-history-gets-hollywood-treatment-2017-01-24 (good movie btw) There's another story, way older from 1850~, similar principle too. It goes, kinda, like this : 2 friends - scammers. Buys an old empty mine, then places some fake gold ore inside. Hires few guys, to help them with work. Hired hands, (victims), while mining/digging, finds fake gold. All of em have a meeting, and victims are send out to meet an expert, who can prove the quality of gold. Yet, victims are unaware, that the so called expert, is working for the scammers. Expert says that it's legit, so the victims, comes up with a genius plan - to lie about gold/ore quality & to buy out the mine from scammers. And they did it few/multiple times, where a victim, becomes a ,,scammer'' & then back to victim mode. Details, very blurred.
Quantum computer will break a lot of encryption, and bitcoin will probably not be on top of the list for the owner (owners) of the device. Think state secrets. Quite dangerous to have one, to be honest, you could find yourself bombed out of existence. And if you decide to attack bitcoin thinking that you'll run away with the loot, guess what? it will spread quickly that bitcoin has been cracked, so the value of the 1M bitcoins you just stole from many wallets will go to near $0 and for sure you just outed yourself that you have a QC and now a big target. Unless you're inside the Google data center or NSA facility, good luck to you. [PS: the other place to use QC is on the mining, which is not necessarily detrimental to bitcoin price, maybe, maybe not]