While bitcoin spent the last decade shooting many people into millionaires, other owners of the world’s largest cryptocurrency have missed out. why? one of the main reasons: they have lost access to their account. in fact, it’s estimated that more than $100 billion worth of bitcoin will be lost, but some is recoverable, says at least one company.
A 2017 report by chainalysis, a forensics firm, estimated that between 2.78 million and 3.79 million bitcoins have been lost. That’s out of a total of nearly 19 million in circulation today, and a maximum supply of 21 million tokens when bitcoin is fully mined. at the high end, that could be about 20 percent of the current supply gone forever. or is it?
Reading: How to find out if i have bitcoin
Merchants who have lost access to their bitcoins or other digital currencies and assets may have the ability to get them back, at least with the help of a high-tech company.
bitcoins can be recoverable
bitcoin’s vaunted security works both ways, preventing bad guys from getting your stash but also, and often, you too!
One of the most promoted aspects of bitcoin and other cryptocurrencies is their security. not only are they nearly impossible to forge, but the transactions are nearly irrevocable. once someone has your bitcoins, they own them forever. It’s a similar situation if you forget your password, it gets dropped as part of a move, or you drop a hard drive containing the coins.
but chris and charlie brooks, father and son founders of cryptoassetrecovery.com, have been recovering bitcoins and other digital assets since 2017 for people who lost their passwords, despite high security.
“We estimate that about 2.5% of that 20% of lost coins could still be recovered,” says chris brooks. the figure comes to $4 billion in recoverable assets with bitcoin trading close to $44,000, she says.
Of course, not all digital assets are recoverable. Damaged or discarded hard drives are likely to be gone forever. but crypto asset recovery says you have a decent chance of recovering your lost loot if you had encrypted private keys but forgot your password or had a bad hard drive with private keys.
However, even if you have a wallet and they can open it, you may not have any coins. Former bitcoin owners who dabbled in cryptocurrency years ago may just be hoping they had some long-lost treasure left on that old hard drive, but they weren’t sure and decided to take a look just in case.
“about half of the wallets we crack are empty,” according to chris and charlie.
how you can recover your trapped crypto from a locked digital wallet
All kinds of digital assets could be stuck on a hard drive somewhere: bitcoin, ethereum, dogecoin, or any number of popular cryptocurrencies. But also nfts, or non-fungible tokens, which can be digital art, a collectible, music, or something else, are also increasingly caught up. all of these are potentially recoverable.
The typical crypto asset recovery success story involves “an early adopter of bitcoin with a blockchain crypto wallet,” says Charlie Brooks. these wallets are more than half of what they see. an early enthusiast may have bought a few coins and then forgotten about them. but now, with a single bitcoin exchange for a lot of money, even a few coins could be quite a haul.
once they’ve been contacted, crypto asset recovery consults with customers, asks for their best guesses for passwords, and gets to work. Even if you only know part of your password or have a general idea of what it might be, the odds of accessing your lost crypto assets are significantly increased.
From there, the team tries to “brute force” your account, trying all sorts of potential passwords based on your suggestions.
“We could run tens of millions to hundreds of billions of password variations before we get it, or we decide it’s not worth putting more computing resources into it,” says chris brooks.
beware of scammers advertising asset recovery services
Given the sensitive nature of the job, you may need to rely on an asset recovery company with possible passwords for your crypto account, which you may also be using elsewhere.
The promise of gaining access to their lost bitcoins can tempt even the most cynical owner to let their guard down with those who promise to help them get their money back. that’s easy to do if you can have hundreds of thousands, even millions of dollars, stashed away in a digital wallet somewhere.
but officials caution consumers to carefully check any asset recovery company they hire. many so-called companies are simply scammers who access your account and then run away with the profits, if they can access your account at all. they can ask for a fee up front to get the job done, with the promise that you’ll eventually get your cryptocurrency and then walk away with that cash.
The scams are very sophisticated, according to the Commodity Futures Trading Commission (CFTC). Scammers may even issue false press releases and testimonials that appear to attest to their asset recovery services.
Officials point to several red flags for consumers to watch out for:
- You are charged a fee before services are provided.
- Your physical address is not provided or you are located outside of the US. uu.
- the company does not have a phone number and you are asked to communicate via chat applications.
- the firm requests your bank account details so that the recovered money can be deposited there.
those are some of the most important signs, although the cftc offers other warning signs and tips to stay safe.
3 common ways crypto traders lose access to their coins
Cryptocurrency has become immensely popular in recent years and is a trendy trading vehicle for many youngsters who are new to investing. a recent bankrate survey revealed that almost half of American millennials were at least somewhat comfortable with owning cryptocurrencies. But regardless of age, cryptocurrency traders may not be familiar with the different ways these digital assets can be held, meaning they could get their account locked.
Cryptocurrency owners can lose access to their assets in various ways, and these are some of the most important.
1. not fully understanding how custody works
Unlike traditional assets like stocks or bonds, which are always held for you at a brokerage house, owners can hold cryptocurrencies directly through a cryptocurrency wallet or a trading company can hold them on their behalf. but this difference is crucial to recover your assets.
If a company holds custody of digital assets for you, then you can work through their system to regain access to your assets. so it’s like a traditional investment firm in this way. you can verify your identity and the company will reset your password, and you’re ready to roll again.
but if you take custody of your digital assets, you won’t have that luxury. Unfortunately, many who are new to cryptocurrencies do not understand when they have taken custody of their assets and the responsibilities that come with it. To access your assets in custody, you will need your seed phrase, a collection of 12 to 24 words generated by your crypto wallet.
Because of the potential dangers of owning assets yourself, Chris and Charlie Brooks strongly recommend that those new to crypto sign up with a custodial wallet. With a custodial wallet, you can communicate with your merchant and relatively easily access your cryptocurrency.
“Understand what it takes to manage a bitcoin wallet before you dive in,” Charlie says.
2. lose your seed phrase
People misunderstand the risks of crypto, says Charlie. “the much more likely risk for most people is losing their seed phrase, not having it stolen from a hacker, although that does happen of course.”
“The biggest misconception that gets people in trouble is not understanding that the seed phrase is a representation of your private key,” says chris brooks. “If you lose that, you’re in trouble.” Many people don’t realize that the seed phrase is so important, she says.
the seed phrase unlocks your wallet as well as all your cryptocurrencies in the wallet. therefore, it is vital that you maintain access to this seed phrase. “It’s not like a bank account with a password that they can just reset,” Chris says.
Moving is a very common time for someone to lose their opening sentences, they say, but there is a simple solution.
“buy a $30 safe on amazon and store your opening phrases in it,” says charlie. “you need a place to store them so no one thinks ‘hey, I need to throw this out’.”
“One of the biggest obstacles we face is customers sabotaging themselves,” says Chris.
Self-sabotage occurs when people try to fix problems on their own and only make things worse.
“about 30 to 40 percent of the people we can work with have problems with an old laptop hard drive,” says chris. “they reformatted it or gave it away, for example.”
But the solution here is relatively simple: “stop touching things, don’t reformat or reinstall a wallet,” says chris. She resists the urge to try to fix something, because it will probably end up making it worse.
While it appears that a substantial portion of bitcoin is lost to the sands of time, your cryptocurrency stock may not be a victim. so it may be worth your time to see if you can recover your lost assets. And it certainly always pays to understand what you need to do to properly manage your account so you don’t run into problems in the future.
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