With a self-custodial architecture of ‘be your own bank’ but on an immutable blockchain, any lost and inaccessible coins on the Bitcoin network remain visible but untouchable. There is no bank and no bailout - only the owner and their private keys.
The familiar warning about exchange-held BTC of “not your keys, not your coins” now becomes the even more dramatic “no keys, no coins” in the off-exchange world.
Bitcoin relies on private keys (unique 256-bit cryptographic strings) to control and transfer ownership between addresses. Forgotten passwords, lost seed phrases, overwritten files, corrupted drives, or discarded hardware all result in irreversible inaccessibility.
Real-World Losses
Real-world cases highlight the dramatic scale and drama of lost Bitcoin. In 2013, the now infamous Welsh IT engineer James Howells accidentally discarded a hard drive containing private keys to 8,000 BTC in a landfill, worth roughly USD 900mn at current prices. But local city council rulings about environmental regulations prevent the obsessed Howells from launching a search for the lost hard drive.
Stefan Thomas, former Ripple CTO, lost access to 7,002 BTC (circa USD 777mn today) after forgetting his IronKey hard drive password, which locks permanently after 10 failed guesses. In January 2021, with two attempts left, Thomas described to the New York Times his repeated, desperate, and unsuccessful efforts to regain access.
Deaths also contribute to Bitcoin inaccessibility when holders die without succession plans. Gerald Cotten, CEO of Canadian crypto exchange QuadrigaCX, allegedly died in 2018 without revealing how to access USD 190mn in client funds, which included substantial Bitcoin holdings.
Romanian early Bitcoin miner Mircea Popescu drowned off a Costa Rica beach in 2021, widely rumoured to have left up to 1 million BTC inaccessible. (potentially worth USD 111bn). While the size of Popescu’s BTC holdings is unproven, he was known to have had sizeable holdings.
And then there’s Bitcoin’s creator, Satoshi Nakamoto, who pulled his own vanishing act in April 2011, leaving behind an estimated 1 million BTC mined between 2009— 2010. This Satoshi stash is now possibly ‘lost’ forever, or has been left intentionally dormant as a ‘donation’ to the network.
If ya can’t hold it ya don’t own it… end of story.
ReplyDeleteCharles Ponzi would be proud.
ReplyDeleteSimilarly, my father and 2 brothers died (heart attacks) before the age of 62 and never had the opportunity to start the retrieval process of the over $1mil that had been stolen from them throughout their lifetime.
ReplyDeleteWho got that money?
Jose, Juanita, Queen'tashi, and Mohammid. Probably. And 15 or so of their offspring. Plus some Russian mobsters and potentially some cartel peeps running a scam to augment human and drug smuggling.
DeleteFunny enough, I was just talking to someone about that landfill story yesterday. He's invested in gold and silver, I put my money in blued steel and copper jacketed lead. We'll see what pays off in the long run.
ReplyDeleteit was is from its inception a wealth strip mining operation for suckers, and a way to get around and move lots of money, for unallocated funds outside the global monetary system, it was never a secure system, they have the keys, always had them, you and I don't, making it securely difficult is to create the appearance of security. Its a system of racketeering, though complex, enough peoples money is safe to create the illusion, simplified its not unlike deposits on bottles and cans, those millions of unclaimed deposits add up thru time, and then who actually gets that wealth? Or parkking meters, thats a classic block chain-ish system, its all cash, the amount of money truly subjective till its in an account, no way in God's green earth to know what was the take from the meters. Block chain doesn't secure your wealth, it secures the theft of your wealth, but see how they did the tricksey rabbit on everyone?
ReplyDeleteI think you are correct, in as much as it exists today,... Not sure the original intent was inherently wicked... I think it has been co-opted
DeleteRemember when some banks shut down customers’ access to their accts due to involvement in something they didn’t approve of? Digital currency doesn’t (necessarily) have to go through any bank, brokerage, or federal entity. You do need access to the internet, but expect the appeal of a nearly-pure democratized currency will continue to grow. Au/Ag you can hold, but transfers with difficulty; digital, you can’t hold, but is readily transferable. They compliment each other.
Delete