While everybody seems to be jumping on the Bitcoin bandwagon in recent times, many have begun to wonder what happens when Bitcoins are lost. Bitcoin and other digital assets worth millions of dollars are lost each year. More often than not, these lost cryptocurrencies cannot be recovered and permanently leave the circulating supply.
How do investors lose Bitcoin?
The most common way that coins are lost is through human error and investors must take every precaution to protect their coins from falling into the abyss. It is estimated that 20% of all existing Bitcoin, worth billions of dollars, have been lost within the system, and this is unlikely to be recovered.
The biggest proportion of Bitcoin loss is when investors lose their private key or password that gives them access to the wallet where their coins are kept. In other instances, investors either misplace their hardware or failed to create a backup, and this makes it impossible for them to recover their funds. Some investors also lose their Bitcoin by sending it to an incorrect address and don’t have the ability to reverse that transaction.
How do investors recover lost Bitcoin?
Recovering lost Bitcoin is an incredibly difficult task considering that tokens that are held in digital wallets are protected by cryptography and only accessible with a private key. While these stringent security measures are excellent for keeping Bitcoin safe, they can lead to the coins becoming permanently inaccessible. That is perhaps the disadvantage of investing in cryptocurrencies like Bitcoin where there is no provision for password storage from wallet providers unlike commercial wallets such as PayPal.
There is hope of recovery, however, with the growing cottage industry of wallet hunters who help investors to access their lost funds. Wallet hunters typically charge anywhere from 10% to 40% of the recovered funds for their efforts and use highly specialised techniques in their quest to unlock an investor’s wallet. Wallet hunters attempt to recover passwords and access corrupted cryptocurrency wallets through aggressive decryption methods.
This involves the use of specialised software that generates and tests potential passwords in their millions with the hope of breaking into an investor’s digital wallet. This process could take months and enjoys a success rate of approximately 30%. Sentiment amongst
wallet finders is that it is particularly helpful if the investor remembers a portion of the password as this lowers the time frame.
For those investors who have stored their Bitcoin on hard wallets that have been lost or stolen, there is currently no way to recover their funds unless they are in possession of that device again.
How can investors avoid losing Bitcoin?
It is very important for investors to be diligent with their transfers. It is best to conduct transfers in a quiet place where there are no disturbances or interruptions. Investors must make sure that the wallet address that they are sending the funds to is correct. It is recommended that investors copy and paste the address, or use a QR code for certainty.
Investors must also use a trusted storage method. While there are many cryptocurrency wallets available for storage, the more established platforms offer added levels of security and make provision for password recovery if you have lost your private keys — a massive slice of luck in times of need!
While the thought of investing in Bitcoin is an exciting prospect filled with a potentially rewarding future, investors must make every effort to safeguard their Bitcoin and other cryptocurrencies from negligent loss. It is vital to exercise caution when conducting transfers and storing your Bitcoin in soft and/or hard wallets. Ultimately, the onus is on the investor to ensure that their Bitcoin is secure and easily accessible.
It is important to note that investing in Bitcoin and other cryptocurrencies is a risky and highly speculative proposition. This article does not provide recommendations, advice or guidance regarding cryptocurrency investments but is rather our opinion on such investments. Investors must conduct their own research and engage in the services of qualified professionals before making any financial and/or cryptocurrency investment decisions. We do, however, recommend established platforms like Wisly to monitor and analyse crypto investments.