Security of your crypto assets is of utmost importance and security measures are constantly evolving in an attempt to outlast attackers. However, theft is not the only thing you need to be worried about. With security left in the hands of users, management of passwords and seed phrases becomes their responsibility, and a tiny lapse can cause their assets to be locked away for eternity. Human error is another huge factor causing the loss of crypto assets, with forgotten passwords being the prime culprit.
With Bitcoin reaching an all-time high a few months ago, several of such stories have emerged. The same people who acquired BTC without thinking much of it, have turned to cash in their fortunes after realizing their value only to be hindered by their misplaced passwords. In this article, we look at 5 of such cases where lost credentials have caused several sleepless nights and a frenzy amongst crypto holders.
The Infamous Pseudo-millionaire Programmer
No story of unattainable crypto is complete without the San Francisco-based German-born programmer, Stefan Thomas. Having been given 7002 BTC back in 2011, Stefan thought to cash in on his supposed fortune recently, then worth $220 million. The only obstacle in his way is the forgotten password to his IronKey USB drive containing private keys to his digital wallet and the failure to save his seed phrase. With 2 more password attempts out of 10 left, Thomas aims to forget about his new found anxiety and has stowed away his IronKey in order to reclaim his inner peace.
The entrepreneur who realized the meaning of “personal” computer
This time, Gabriel Abed, an entrepreneur from Barbados had his colleague to blame, at least partially. In 2011, his laptop, containing the private keys to a Bitcoin wallet holding 800 BTC , was reformatted by his colleague. Having lost $25 million worth of riches, Abed was painfully made to realize the repercussions of mishandling private keys.
The Oblivious Fortune Ditch
Similar to Thomas, the UK-dweller, James Howells accidentally threw away his hard drive in 2013 holding keys to 8,000 BTC, now worth around $132 million. Howells has been at odds with the local authorities ever since, just to receive permission to dig up and scavenge the local dump in Newport, South Wales. He plans to hire experts and set in motion an AI-powered search mission worth $11 million lasting almost 3 years once he gets permission from the authorities who have not entertained any requests so far due to environmental concerns.
Teaching through example
Alexander Halavais, social technology professor at Arizona State University who bought $70 worth of bitcoin back in 2010 lost all of his Bitcoin due to a forgotten password, with no backup. Considering the $0.003 per-coin value in 2010, its value would now be a whopping $387 million. Truly an expensive mistake, one that he wishes to forget.
From Billionaire to Debtor
This story reiterates the importance of private key security through the case of Matthew Mellon, a pseudo-billionaire who lived a lavish life. Most of his assets, worth more than $190 million, were in the form of XRP, a cryptocurrency managed by Ripple. However, he was shockingly found dead in April 2018, supposedly due to a heart attack, prior to which he never revealed his private keys, reportedly stored on hardware devices under an alias distributed geographically. With no disclosure of their location, the crypto was thought to be lost. However, with help from Ripple, the assets were later retrieved. With several investment agreements, tax dues, debts and inheritance proceedings, his crypto assets had to be liquidated in order to pay them off.
When dealing with crypto, since it’s not monitored and managed by a central entity such as a country or company, the associated risks fall on the user, in exchange for unconstrained access to assets, anonymity and being in charge of your own money. So, it becomes imperative for the user to guarantee his own security, for which Cypherock provides a robust take.
Self-custody of money is a powerful tool in mitigating counterparty risk, but brings its own set of challenges with key management as most lost-crypto cases arise from the mismanagement of private keys, the most essential component for your asset security. Additionally, private key management today poses a single point of failure where wallets today create backups of the private key either on local devices or on one particular piece of hardware.
When using Cyperock, the private keys are generated completely offline and broken into 5 unique shards, stored on individual hardware components - one X1 wallet and four encrypted NFC-enabled X1 cards. When any one of the four X1 cards is tapped onto the X1 wallet, it results in the reconstruction of the private key allowing you to make transactions. Your crypto is secure even if you lose 3 of the 5 shards. A sharded private key eliminates the problem of private keys being a single point of failure, and enables users to maximize their operational security by geographically distributing shards.
Interested in learning more about Cypherock, and how Cypherock X1 is enabling you to prevent loss and theft of your crypto? Check out our website for more details.
The blockchain architecture had overlooked the human inability to maintain credentials to their assets with approximately 20% of the world’s crypto, worth around $307 billion, locked away according to Chainalysis, a cryptocurrency data firm. That is why you need something, rather than someone, to do it for you. With robust security in mind, the Cyperock X1 guarantees to be your best partner along your crypto journey.