‘Chances are basically zero’ of recovering some Bitcoin passwords worth millions: cryptocurrency firm

Bitcoin, the ephemeral cryptocurrency currently experiencing a high on the market, has also provided some of the lowest of lows for those who forget or misplace the passwords to their digital wallets.

Around 20 per cent of the existing Bitcoin — currently worth around $140 billion — appear to be in lost or otherwise stranded wallets, according to the cryptocurrency data firm Chainalysis.

And while it may seem like a simple matter of writing down a password somewhere secure, the reality of owning Bitcoin in a volatile market is quite a different experience.

“Owning Bitcoin is a bit like owning a passphrase that is very long, and we know that people are terrible at remembering their passphrases,� said Diogo Monica, co-founder and president of cryptocurrency security company Anchorage on CTV’s Your Morning Friday.

“Now imagine that that passphrase holds tens of millions or hundreds of millions of value,� Monica said. “This is a part of technology that is called the “bearer instrument,� that means it works exactly like the cash in your wallet.�

“If you lose your wallet, you also lose your cash and there is no way to recover it, the same works for Bitcoin.�

The story of San Francisco-based investor Stefan Thomas, who lost the password to his Bitcoin wallet with a value of approximately US$140 million, made headlines when he revealed he only has two out of ten tries left on his password device to access his fortune – and he’s not the only one.

Gerald Cotten, the CEO of Canada’s largest cryptocurrency exchange QuadrigaCX, died unexpectedly while travelling in India in 2019. He alone knew the passwords to the company’s offshore digital wallets, leaving Quadriga in the lurch – unable to gain access to Bitcoin and other digital assets worth $180 million. 

Monica said that most instances of individuals, not companies, forgetting their passwords arise from time passing between when they buy Bitcoin, to when it surges in price – sometimes years later.

“A lot of the people who have lost Bitcoin, have not lost it when it’s worth $35,000 dollars, they’ve lost Bitcoin because when they invested it was worth one dollar, five dollars, $10 dollars. They have bought some and then forgot about it, and then all of a sudden you have an increase in price so dramatic that those types of values – a couple of hundred of dollars – nine years ago, seven years ago, are now worth hundreds of millions,� he said.

Monica explained that anyone who is investing heavily in Bitcoin now is not using a small, consumer level device for that exact reason.

“If you lost the password and you don’t remember any aspects about it, the chances are basically zero,� to recover it, Monica said.

But all that changes depending on what kind of digital wallet you have, and how much is in it.

“If you lost the password to a hardware wallet – say you forgot the pin, there might be a chance for you to recover it, especially if there is 200 million dollars on the line,� Monica said.

“Anyone who is a security expert would definitely take 10 per cent of that to spend months to work on breaking that particular wallet, and they’re likely to be successful.�

Digital recovery services, such as Wallet Recovery Services, are lucrative.

The business says they have helped thousands of customers recover their riches by helping find lost digital keys and recovering passwords for Bitcoin and other crypto-currencies – for a standard fee of 20 per cent of the wallet’s value.

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