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Lost your bitcoin password? Call in the crypto-hunters

July 18, 2018

 About $25bn worth of bitcoin is floating out there in the ether, lost or ‘probably lost’

Three-and-a-half years ago, Roger Ver, a bitcoin evangelist so vocal in his support for the cryptocurrency that he was nicknamed the Bitcoin Jesus, showed me how to set up my own online bitcoin wallet. He rounded off his demonstration by giving me £5 worth of the currency. One day, he said, my holdings would be worth more than £1,000.

I thought little more of it — until December last year when bitcoin’s price rocketed and investors raced to cash out. My fiver had ballooned to £400 but there was a problem: to access funds, bitcoin holders need their unique “private key”, a long alphanumeric password that serves a similar purpose to a bank-card PIN. And I had lost mine.

Because of bitcoin’s decentralised nature — the cryptocurrency is not issued or guaranteed by a bank — it is almost impossible to recover these digital keys. There is no customer hotline, no database that holds them, no way to reset them. So a misplaced scrap of paper, missing USB stick or damaged hard drive can cost bitcoin owners dearly.

According to data from the blockchain research company Chainalysis, 3.7 million bitcoin (about $25bn worth), is floating out there in the ether, either lost or “probably lost” — meaning it is in wallets that have been untouched for years, despite the price spike.

Up to two million of this is thought to belong to Satoshi Nakamoto, the currency’s creator, though some argue she or he could just be sitting on it for now. Of the remainder, some owners are locked out of enormous windfalls: according to Chainalysis, 300 wallets contain between 1,000 and 10,000 bitcoin each. I have it easy with my £400; imagine being unable to get your hands on between $6m and $66m.

It’s no surprise then that a marketplace has sprung up to help anguished souls break back into their treasure troves. There are numerous websites that offer to hack into wallets by “brute force”, using supercomputers to try endless combinations of passwords.

Alternatively, several so-called “crypto-hypnotists” promise to help unlock your subconscious mind so that you can remember where you wrote your password down. Most charge in crypto: South Carolina-based hypnotist Jason Miller demands half a bitcoin upfront, plus 5 per cent of the recovered amount, for three sessions, available over Skype.

Others opt for a more DIY approach. Youssef Sarhan, an Irish entrepreneur who bought several hundred dollars’ worth of bitcoin in 2013, taught himself code in order to write a program to test tens of millions of password combinations. To no avail, he tells me. Worth close to $10,000 in December, his returns would have been “not life-changing — but certainly year-changing”.

Graham Tonkin, chief growth officer at cryptocurrency intelligence firm Mosaic, expects this field of “forensic archaeology” to develop with new tools that we haven’t even thought of yet. More broadly, he notes the “massive growth” of another industry: custodians who will hold cryptocurrencies safely for you.

Many cryptocurrency exchanges now offer custody solutions — but they are juicy targets for hackers. Other more specialised third-party services, such as Vo1t, go to extreme lengths to ensure security for their customers. Think private keys written on paper, then split in two and placed in two separate vaults in bunkers guarded 24/7.

As institutional players begin to dip their toe in the cryptocurrency space, these services are becoming more popular. “The analogy here is with gold,” says Philip Gradwell, Chainalysis’ chief economist. “I don’t keep my gold bars under my bed. I would put them in a vault if I could.” This seems logical — although it appears to go against the mission of the original bitcoin purists, who hoped to create a system of exchange free from any middleman.

Without a simpler way to hold and ensure the safety of crypto assets, it’s hard to see how the digital currency will become more widely adopted for everyday payments. In the meantime, I’m going to have one last hunt for the notebook that might contain my password.


Hannah Murphy

 

 

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