Uncovering the mystery of lost Bitcoins
Just like real-world money, Bitcoins can also be lost. But if they’re digital and have no physical entity, how is this possible? Can lost Bitcoins be retrieved? Continue reading to find out how this happens and how you can protect yourself from losing your Bitcoins.
What are lost Bitcoins?
When Bitcoins stored in a digital or hardware wallet cannot be accessed anymore, they are considered ‘lost’. In this sense, they are not missing but are just locked up in a wallet with no way of acquiring it.
How can bitcoins be lost?
So how do you lose access to Bitcoin? One way is if you lose your private key. To ensure the system’s security, the network uses two keys: private and public keys.
The public key is the address you give to others so they can send you Bitcoins. On the other hand, the private key is the address you use to access the Bitcoins sent to you. The latter is the password that lets you use your funds for whatever purpose. It appears as a 62-character long address.
As long as no other person knows your private key, you’re the only one in control of your funds. On the other side of the coin, if you lose your private key, no one can help you access your funds.
There are different reasons why bitcoins are lost, and most of the time it’s either accidental or due to human error.
With the use of blockchain technology, Bitcoin fully guarantees the network’s security. All transactions uploaded in the blockchain are immutable and once validated, there’s no way to change the data.
Bitcoin removes the need for institutions so no third party can access your precious information and control your funds. While this sounds like utopia for some, it also comes with some drawbacks.
Since there are no banks, you are the only person in control of your funds. So if you forget your key or lose your wallet, there’s no customer service you can call to help you. That’s why crypto people always emphasize the need for world-class security encryption when it comes to storing their funds.
Common ways Bitcoins become lost
Most Bitcoins become lost because of human error and/or mismanagement. Some forget to collect mining rewards while others accidentally swap processing fees with the value of the transaction. No matter the reason, the fault usually lies in the owner and not in the protocol itself. Other ways include theft and fraudulent attacks on exchange sites. But in these rare situations, Bitcoins are not really ‘lost’ but stolen from their owners.
Below are some of the most common ways people lose access to their Bitcoins:
Broken or lost devices
Aside from keeping Bitcoin in online wallets, they can also be stored away from the net on hard drives. In fact, this is supposedly the safest way of storing your digital assets. However, if motherboards become fried or these devices break, then the owner loses access to the Bitcoins stored inside and the data kept in them can no longer be retrieved.
In other cases, owners lose or change devices such as laptops and/or mobile phones and forget about the coins stored inside them. One of the most popular lost Bitcoin incidents is James Howells’ in 2013.
After cleaning his house, he accidentally threw his hard drive into the trash along with 7,500 Bitcoins stored inside it. Howell tried to retrieve the hard drive in the local landfill, but the law prohibited him from doing so. Unfortunately, he never recovered his mined coins.
Forsaken by their owners
Back when Bitcoin could still be mined using normal laptops, people minted numerous Bitcoins and just forget about them. Only a few people knew about cryptocurrencies back then, and there was not a lot of practical use for it, so it was normal for people to buy Bitcoins for fun and not do anything with them. These forgotten coins could be worth millions today, with Bitcoin’s current price trading at $18K.
If someone who owns cryptocurrency passes away without sharing their credentials with anyone, their Bitcoin is also lost for good. That’s why some people recommend that crypto holders include their digital assets in their last will and testament, so their funds won’t go to waste.
Sending funds to a wrong address
If you send your coins to the wrong public key or address, you won’t be able to retrieve them either. Since there is no personal information attached to transactions, there’s no way to know who you accidentally sent your funds to. To make sure you’re sending your coins to the right address, it’s best to scan the QR code rather than typing it in manually.
Forgotten private keys and passwords
As previously mentioned, your private key is the only access point to your crypto treasure chest. And, unlike the keys to your house or car, there’s no replacing it once it’s lost since each private key is fully unique.
How many lost Bitcoins are out there?
According to Chainalysis, an analysis firm specializing in all things related to blockchain, about 17% to 23% of all Bitcoins have already become unrecoverable. An estimate of 2.78 million to 3.79 million BTC is forever lost to humanity. This amounts to around 300 inaccessible wallets containing anywhere between 1,000 to 10,000 Bitcoins.
But analysts predict that this number will start to drop as the technology surrounding crypto security improves. To prevent more Bitcoins from being lost, it’s important to drive awareness about this phenomenon and discuss numerous methods on how to strengthen existing security protocols.
Can lost Bitcoins be retrieved?
If you lose your private key, the odds of getting your lost Bitcoins back are close to impossible. However, if you lose your Bitcoin because you misplaced a storage device, there’s still a chance of retrieving your funds. If your problem is a busted part in the device, see if it can be fixed. Other than these possibly solvable situations, there’s no way to find lost Bitcoins once they are lost.
How to track down and find lost Bitcoins
Cases of lost coins and keys are common in the crypto world. To help these people find their lost funds, wallet hunters emerged with a mission to find lost Bitcoins and forgotten keys. Individuals and companies work together with law enforcement agencies and crypto holders to gather information about the possible locations of these coins.
Crypto hunters use advanced technology and hardware to accomplish this mission. Often, they’ll require any detail the owner remembers about their private key. Then, they will run all the possible combinations which can break through the account using a self-executing computer program.
These services usually cost anywhere between 5% and 40% of the recovered amount, though prices vary depending on who you ask. Most wallet hunters offer a fixed price up front, while some request an additional fee once the funds are retrieved. The success rate varies depending on the kind of service you hire and the client’s memory. Wallet Recovery Services, an online wallet hunting company says their supercomputers can crack through 30% of all their client requests as long as they have a small piece of helpful information about their key.
Another way of retrieving information is by hypnotherapy. Jason Miller, a hypnotist from South Carolina, uses a collection of techniques that help people access older memories and remember important information such as their private keys or misplaced storage devices.
In exchange for his services, Miller charges 1 BTC per session and an additional 5% of the amount recovered. He says 50% of all the inquiries he has received turned out to be successful.
Implications of lost Bitcoin
Since Bitcoin has a maximum supply of 21 million, having lost Bitcoins means that there will be fewer coins in circulation once the maximum number has been mined. People predict all Bitcoins will be completely mined by 2140 or even earlier.
However, there’s no reason to panic since Bitcoin can be easily divided into smaller units, unlike fiat currencies.
How to prevent losing Bitcoins?
Take the extra step of securing your coins to avoid the frustration of losing your Bitcoins. Hardware wallets are the go-to when it comes to storing your funds. For an extra layer of security, keep an offline copy of your private key, but make sure you’re the only one who has access to it.
Words by: Leann Padilla