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 of 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.
Bitcoin, which has been on an extraordinary and volatile eight-month run, has made a lot of its holders very rich in a short time, even as the coronavirus pandemic has ravaged the world economy.
But the cryptocurrency’s unusual nature has also meant that many people 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 sharply, 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 had gotten 70 requests a day from people who wanted 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 get access to 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 of sight.
“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.
The dilemma is a stark reminder of Bitcoin’s unusual technological underpinnings, which set it apart from normal money and give 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.
But Bitcoin has no company to provide or store passwords. The virtual currency’s creator, a shadowy figure known as Satoshi Nakamoto, has said Bitcoin’s central idea was to allow anyone in the world to open a digital bank account and hold the money in a way that no government could prevent or regulate.
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. (...)
But the structure of this system did not account for just how bad people can be at remembering and securing their passwords.
by Nathaniel Popper, NY Times | Read more:
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