Many crypto fans appreciate cryptocurrencies like Bitcoin mainly because of their decentralization and freedom from all regulations.
However, a recent example of a German programmer in the US shows that the latter can also become a disadvantage for users.
Actually, Stefan Thomas had done everything right when he received several thousand Bitcoins from a Hodler in 2011 and did not sell them until today. According to reports from the New York Times, he is in possession of 7,002 Bitcoin worth approximately $242,380,000 (as of Jan. 13, 2021). He stored the password of his wallet on a hard drive called IronKey and additionally wrote it down on a piece of paper for security. But it is precisely this piece of paper that he can now no longer find.
Without access to the wallet, the Bitcoins are worthless to him. Users of IronKey have a total of ten attempts to enter the correct password until the hard drive is locked and the Bitcoins are consequently lost forever. Thomas already tried his luck eight times – but without success.
I just lie in bed and think about it. Then I go to the computer with a new strategy, it doesn’t work and I’m desperate again.
Even the manufacturers of the hard disk could not help the programmer on his password search. Finally, Thomas decided to put the computers with the lost Bitcoins out of his sight, as he felt constantly reminded of his faux pas when he saw them.
Thomas‘ loss is not an isolated incident
Customers of traditional banking do not automatically lose their assets by forgetting their password. The situation is different for users of a crypto wallet. Jan Bindig, CEO at data recovery specialist Datarecovery, warned of precisely this problem back in 2018:
If you lose or forget your password, you’ve automatically lost all your Bitcoins.
Despite these warnings, users seem to make the same mistake over and over again. So did a Los Angeles-based entrepreneur. He too forgot his password and lost thousands of Bitcoins this way. He told the newspaper Brad Yasar that he had spent several hundred hours over the years trying to get back into his wallet.
According to Chainalysis, one-fifth of the existing 18.5 million Bitcoins had already been lost in this way. 3.7 million Bitcoin had thus virtually simply vanished into thin air.