Bitcoin can make you a millionaire, provided you retain access to your wallet.
With a market capitalization of US$380 billion, Bitcoin has established itself as the most prominent cryptocurrency today. While Bitcoin continues to dominate the crypto market, its price crashing from an all-time high of over US$68,000 in November 2021 to US$19,775 a year later has left people pulling their hair, with some even attempting suicide.
But perhaps the ones who have experienced the most significant losses in Bitcoin aren’t people who have lost money but those who have lost access to their Bitcoin investments. If you have ever felt frustrated about losing a password or throwing away an important document, just wait to hear how these people lost millions of dollars worth of Bitcoin for the same reason.
James Howell’s lost hard drive
In 2013, 36-year-old engineer James Howell threw away the hard drive containing the cryptographic key to his Bitcoin wallet while clearing out his house. Howell used to have two identical hard drives and ended up throwing away the wrong one, locking himself out of his 8,000 BTC holdings, which would be worth close to US$158 million as per the current exchange rate.
This hard drive ended up in a landfill in New Port, Wales. Howell has been trying to get permission to excavate the landfill to retrieve his lost drive for nearly a decade with no luck. The local government of New Port believes that trying to dig up the drive would adversely affect the environment and has thus firmly denied his requests.
Things took an interesting turn this year. Howell brought on venture capitalists (VCs) Hanspeter Jaberg and Karl Wendeborn to fund his excavation attempt using robot dogs as well as a team of eight experts in data extraction and landfill excavation. This final effort to extract the hard drive would cost the VCs US$11 million. If the drive is successfully retrieved, the VCs will receive US$50 million worth of Bitcoin. Howell intends to keep 30% of the rest of the holdings, give another 30% to those who work on the excavation and also give US$60 to each resident of New Port.
Stefan Thomas’s lost password
Former Chief Technology Officer (CTO) of Ripple, Stefan Thomas, made headlines in 2021 for forgetting the password of the hard drive that contained the key to his Bitcoin wallet. The hard drive, known as the Iron Key, has been designed to be impervious to all attacks and only provides users with ten attempts before they are permanently locked out of the drive. As of 2021, Thomas is down to his final two attempts.
The Bitcoin wallet that Thomas cannot access contains 7,200 BTC, which would be worth over US$142 million today. As per Thomas, the only other way to retrieve the information would be by breaking the drive apart, removing its chip and putting it under a scanning electron microscope to read the individual flash memory cells.
However, this process would require a lot of time and money, and even after that, there are chances that he would fail to retrieve the information. Thomas has been trying to log into the hard drive since 2012 and says he has now made peace with his loss.
Individual X’s Bitcoin hacking challenge
If you are a frequent reader of our website, you would be familiar with how the crypto space has its fair share of hackers and cybercriminals. Many cybercriminals steal crypto wallets and try to unlock them to access the funds inside. If they are unsuccessful in cracking the passwords, they sell them to other hackers.
The same had been happening with Individual X’s wallet, the seventh-largest Bitcoin wallet in the world. As far back as 2018, it had been making the rounds among hackers, who would pry the wallet open to access the 69,000 BTC (worth over US$1.18 billion as per the current exchange rate) it contains.
The blockchain analysis conducted by Chainalysis on this wallet found that all the funds inside had been sent via transactions from the dark net marketplace Silk Road. The site was used for money laundering and drug trade until the Federal Bureau of Investigation shut it down in 2013. The founder of the site, Ross William Ulbricht, was arrested in the same year and has since been serving a life sentence. While the Silk Road was still online, an unnamed individual, referred to as Individual X by the authorities, had been stealing from Ulbricht by manipulating a security loophole in the site.
As of 2020, U.S. federal authorities have seized all the funds in Individual X’s wallet. In 2021, the government signed an agreement with Ulbricht that a portion of the seized Bitcoins would be used to pay the US$183 million in restitution as a part of his sentence.
These are only a few of the many cases of lost Bitcoin fortunes. As of 2021, 20% of all Bitcoin is either lost or in wallets that can no longer be accessed. These stories tell us that privacy and security are a double-edged sword. While the private keys used to access Bitcoin keep them secure, if the user forgets their key, their wallet can become permanently inaccessible.
Ultimately, it is vital for there to be strong security measures to keep Bitcoin safe. So, all we can do is be careful with our belongings and keep tabs on all our passwords so that we don’t land ourselves in the same situation as Thomas or Howell.
Header image courtesy of Freepik