Forgetting your private key: The story of lost Bitcoin assets

Around 18.89 million out of the overall 21 million Bitcoin supply is already in circulation in the market. However, 20% of this number is considered lost forever. It’s highly unlikely that these coins will ever be retrieved by their owners, especially if they lost their private keys to access their crypto wallets.

How can such an unfortunate circumstance happen in the age of digital innovation? Browse through BTC Post to learn more about how many lost Bitcoins are there and why owners have lost their access to them.

Lost Bitcoins in a nutshell

According to a report provided by crypto research firm Chainalysis, around 3.7 million Bitcoins are no longer accessible due to various reasons. Most of these unlucky investors lost their private keys since they never expected that the flagship cryptocurrency would rise to US$46,000 at press time.

On the other hand, some Bitcoin assets are lost because the original owners have already died and they were not able to transfer them before they have perished. It’s a tragedy that a lump sum of these assets that are worth staggering amounts are lost and will never be retrieved.

Why can’t investors retrieve their private keys?

Bitcoin is a digital alternative for fiat currencies. This allows users to utilise peer-to-peer transactions without having to deal with third-party intermediaries like banks that impose high tariffs on transactions.

To avoid any phishing attacks and hacking incidents, Bitcoin creator Satoshi Nakamoto safeguarded the coin’s blockchain with sophisticated cryptography wherein you can only access your funds if you have a private key. This makes it hard for others to access your crypto wallet.

However, this security comes with a price, especially if you did not take precautions in storing your key. Once you lose that key, it’s impossible to get back the coins you have invested in. 

Since Bitcoin’s blockchain is an open-source ledger running on a decentralised network, no customer service or override function can help you out. Losing that key means permanently saying goodbye to the wallet and the coins that it contains. This is the price for the tight encryption of the ledger.

Where did the lost Bitcoin go?

These lost Bitcoins still exist virtually, though they sit in the owners’ crypto wallets, never to be used again. Moreover, these will never re-enter the circulation, further shrinking the maximum supply of Bitcoin in the market.

Satoshi’s stash

When asking about how many lost Bitcoins are there, one should also know that a small chunk of the overall supply, at around 1.1 million coins, is HODL-ed by the founder. This is referred to by the crypto community as Satoshi’s stash.

Since Bitcoin went live in 2009, the consensus among crypto enthusiasts is that Satoshi hasn’t touched his stash and has no intentions of moving it to avoid drastically affecting the current price and supply. 

Unfortunate stories of lost Bitcoin

Losing Bitcoin’s is a tragic loss for individual investors, that’s why during Bitcoin’s sudden bump and mainstream adoption, stories of lost Bitcoin resurfaced on the internet to inform new investors and encourage them to take extra precautionary steps. Check some of them below:

A locked hard drive with 7,000 BTC

American programmer Stefan Thomas is one of the investors who forgot their private key. More than a decade ago, he made a short video explaining how cryptocurrency works and was paid around 7,000 BTC, now worth around US$324 million for the service.

He then proceeded to store it in an IronKey digital wallet on a hard drive and write down the key on a piece of paper that he then lost. It’s highly improbable for someone to memorise the string of characters that make up the key and now Thomas only has 2 final attempts to recover his Bitcoin until it’s lost forever. If he fails to guess the password twice, the wallet will encrypt itself.

7,500 BTC lost in the dump

In another unfortunate case of lost Bitcoin, British computer engineer James Howells accidentally threw his hard drive containing the private key into the trash.

Unlike other investors who lost their keys, Howell is still hopeful that he can find that hard drive. He continues to ask local officials to let him search landfills in the hopes of finding it and retrieving around US$348 million worth of Bitcoin assets.

Howell is confident that the platter containing the code is still intact inside the hard drive. Once he finds it, he plans on asking data recovery experts to rebuild the drive or retrieve the data directly from the platter.

How can you safely store Bitcoin assets?

With stories of lost Bitcoin assets in mind, you might be wondering how you can safely purchase and store your coins. Don’t worry, there are plenty of ways on how you can protect your assets from the prying eyes of internet hackers.

Here are some tips that you should keep in mind:

Keep the private key for your wallet off the grid

One of the reasons why many people have lost access to their private keys is because they wrote it on a piece of paper and forgot where they placed it. That’s preventable if you are responsible enough to keep track of where you last placed the password. 

For instance, write your private key in a notebook or a book that has sentimental value to you instead of on a piece of paper. This way, there are fewer chances of you forgetting about it in the future.

Moreover, you should also consider keeping several copies of the key. You don’t have to disclose what the string of words means because the password is meaningless without access to your wallet.

Never give away your private key

Once the wrong person gets hold of your key and access to your hardware or software wallet, your assets can be stolen. So unless you’re planning on leaving your coins to someone, never disclose your private key to anyone. 

Keep a separate wallet for crypto transactions

Several types of wallets are available in the digital sphere today. If you are planning to HODL some of the assets, make sure to store them in a separate hardware wallet to keep them safe. You can use a financial service platform or exchange for everyday transactions for easy access to the assets you don’t want to HODL.

Online wallets, however, are more susceptible to hacks compared to hardware ones. Make sure that the wallet you have has a two-factor authentication that can safeguard the encryption of your assets.