Although Bitcoins don’t have physical representation, they can still be lost just like fiat currencies. But if they are stored digitally, how is this possible? Can lost Bitcoins be recovered? Answer all these questions and more when you continue reading Cryptoshimbun’s list that entails everything you need to know about it. Check it out down below:
What are lost Bitcoins?
Lost Bitcoins are coins that are not being used or spent. But due to cryptocurrency’s digital nature, these are not actually ‘lost’ since they are still in the blockchain. They are just no longer in circulation anymore. One of the main reasons a coin is considered lost is when a private key linked to it gets lost or hacked. Without it, the kept fund becomes unusable.
Lost Bitcoins do not occur through flawed systems or faulty transactions but are mainly caused by individuals. This is because blockchains cannot be altered and all transactions are permanent which makes it hardly possible for mistakes to happen.
In other terms, they can also be called ‘unmoved coins’. One of the most well-known unmoved coin holders is Satoshi Nakamoto. He has kept his Bitcoins unmoved ever since creation and no one knows where and if his private keys still exist. But he claims that unmoved coins are beneficial to the market since it lessens the circulating supply and makes existing coins more valuable.
How are Bitcoins lost?
As mentioned earlier, Bitcoins are both voluntarily and involuntarily lost due to individuals. Holding Bitcoins and keeping them out of circulation, as Satoshi Nakamoto did, is an example of voluntarily losing Bitcoins. Involuntary, on the other hand, is when individuals lose their private keys and become unable to access their funds.
Are lost Bitcoins retrievable?
Yes and no. Depending on how the coins were stored, there is a possibility that they can or cannot be restored.
There are various companies that offer crypto retrieval for a hefty price, one of which is Crypto Asset Recovery. Despite Bitcoins vaulted security, they have been recovering lost Bitcoins ever since 2017. ‘We estimate that about 2.5% of that approximately 20% of lost coins could still be recovered,’ says Chris Brooks, founder of Crypto Asset Recovery.
Their recovery process starts by asking the customer a list of passwords they might have used. They try to get a general idea of what it might have been, like a birthdate, an anniversary, a phone number and so on before running them on their program to open the account.
Brooks commented on their method, saying, ‘We might run tens of millions to hundreds of billions of password variations before we get it, or we decide that it’s not worth putting more computational resources into it.’
This retrieval process can be successful if the coins were stored within a bigger system. But if they are kept in self-storages like flash and external drives, retrieving them may be impossible once they or the private keys are lost, corrupted or destroyed.
How many Bitcoins are lost?
As of current reports, over 4 billion Bitcoins are lost. Most of these are stored in private e-wallets and self-storages that cannot be opened because of lost keys. This case covers over 20% of lost Bitcoins.
Common reasons people lose their Bitcoins
There are various reasons why people lose their Bitcoins but some are more frequently done than others. Here is a list of the top reasons how Bitcoins are lost:
Losing your seed phrase
Most investors might take this for granted but the seed phrase is something you should safely keep since this is also as important as your private keys. These act as the backup in accessing your locked wallets in instances you lose your private keys.
Also called Bitcoin seeds, it consists of 12 to 24 words generated by your wallet that provides you access to your funds. These can be anything under the sun like spoon, foam, door, parrot and so on. Always keep a physical copy of this hidden away. Avoid keeping your seed phrases on your devices since these can still be prone to hacks.
Dealing with crypto issues themselves
Another main reason is when individuals choose to handle crypto issues themselves. This is also called ‘self-sabotage’ since you’re trying to handle an issue you know less or nothing about, possibly making matters worse. An example is when an individual starts to have issues with a flash or external drive or laptop then decides to reformat it in hopes of fixing the issue.
A good tip to go by when you start to face technical difficulties is to contact a specialist and not touch or make drastic changes to your device. It’s important to handle your cryptocurrencies tediously and carefully so if you’re faced with a crypto problem, have it checked by an expert.
Not understanding crypto fully
Last but not least is not understanding how cryptocurrency fully works. It’s highly understandable that most people won’t be able to fully grasp everything about crypto since it’s new and is still going through the acceptance stage of relevancy. But what most investors need to know is that it is different from traditional assets.
Investing in traditional assets like bonds and stocks are easier for investors since these are usually handled at a brokerage. But cryptocurrency, on the other hand, is mostly handled directly by the investor through an e-wallet, making it harder to recover lost funds.
For traditional assets, all firms have to do is look through their system to recover the lost asset. They can even offer to reset your password and create a new one. But for cryptocurrency, the only backup you have when losing your private keys is seed phrases. Losing this will make it extremely hard if not impossible to access your locked funds.
A great way to go about this issue is by signing up with a custodial wallet. These are managed by a trading firm that can assist you in gaining access to your wallet if you lose your private key or seed phrases.