Securing Your Bitcoin: 5 Lost Bitcoin Stories
Nov 1, 2023
General Wallet Use
Over the last 15 years, Bitcoin has led to many life-changing outcomes for users or miners in the network. But, of course, not everyone has been so lucky. Estimates over the years have suggested that between 20 to 30 percent of bitcoin has been forever lost, often misplaced by users who didn’t properly secure their BTC.
In this blog post, we'll go into a handful of stories of users who, for various reasons, lost access to their BTC. These stories will cover some of the most significant Bitcoin wallet losses, along with more common day-to-day mistakes. We’ll also emphasize the steps you can take to safeguard your precious assets from the get-go.
Lessons Learned From 5 Lost Bitcoin Horror Stories
The Hard Drive Fiasco
In 2013, James Howells, who was one of the first five miners in the Bitcoin network, lost over half a billion dollars worth of bitcoin in a garbage dump, literally.
Howells had amassed a large amount of bitcoins when it was relatively easy to do so. But since he had two identical wallets, he mistakenly threw out the hard drive that contained his wallet information while cleaning his house. The drive has rested at the bottom of a landfill for over a decade, and Howell has been trying his hardest to get permission to excavate it.
Takeaway: Always label your hard drives and take backup.
Forgetting passwords is pretty common — but doing so in the crypto world can cost you. Ask Stephen Thomas, a German programmer, who forgot his password and is just two failed password attempts away from losing his 7,002 bitcoin.
Tomas’ wallet of choice — an Ironkey wallet — gives users ten attempts to unlock their devices before permanently locking them out. The only other possible recovery method involves breaking the drive apart and scanning it under an electron microscope to read individual flash drive pieces — a lengthy, costly process with a low success rate.
Stephen has reportedly made peace with this situation and is currently the founder of several crypto-related companies.
Takeaway: Learning to secure your private key is the most important aspect of your crypto journey. Losing access to your private key often means that not even experts can assist in its recovery. So, write it down and store it in multiple places. Plus, it’s also not a bad idea to distribute your assets across multiple wallets — just in case.
Broken laptops, reformatted laptops, laptops which got thrown out — the list goes on when it comes to losing bitcoin due to laptop issues. Gabriel Abed, an entrepreneur, lost about $25 million in assets when his colleague reformatted his laptop. In the same vein, a Redditor claimed to have lost access to over 10k BTC when his mother threw out his old broken laptop.
Takeaway: Do not store the key to your assets in one place. You can also opt for a physical device like a hardware wallet for additional control.
Crypto can often be filled with promises of making you rich if you invest in a particular coin or project. You get people asking you to click a specific link and connect your wallet to receive airdrops of popular projects. Bitcoin investment schemes with promises of lucrative returns on investments are common.
Unfortunately, most, if not all, of these offers are scams designed to drain your wallets of their assets. Many investors have lost large amounts of bitcoin in scams like these, with over $2.5 billion in lost crypto reported to the FBI in 2022.
Takeaway: If an offer sounds too good to be true, it probably is. Be careful when accessing websites with your main wallet. You could also use a secondary throwaway wallet to test out high-risk ventures. It's crucial to ensure that your primary and secondary wallets have no links between them, and avoid using the same device for added security.
Focus on self-custody
While custody-based protocols and exchanges have introduced Bitcoin to many users, they also have a notorious history of going bankrupt, getting hacked or freezing users' assets. In fact, one of the oldest Bitcoin exchanges, Mt. Gox, and its former customers are still working out ongoing legal proceedings from numerous security breaches that plagued the exchange while it was operational.
Takeaway: If you can, opt for self-custodied wallets like Leather for day-to-day transactions. With a self-custodied wallet you, alone, have access to your private keys and therefore your funds. You have full control over your assets, including how you would like them to be used.
Keeping Your Bitcoin-Backed Assets Safe
Properly safeguarding your Bitcoin assets usually involves a multi-layered approach — like storing your keys in multiple secure locations, maintaining thorough records of passwords and private keys, and diversifying across wallets for added safety.
The wallets you choose also play a huge role in the security and accessibility of your assets. You want a wallet that keeps your Bitcoin safe while letting you participate in the growing BTC ecosystem like Leather — the Bitcoin wallet for the rest of us.
Leather is self-custodial, which means you have complete control over your private keys and assets. With Leather, you can also put your Bitcoin to work and actively participate in the entire BTC ecosystem — Ordinals, Stamps, BRC-20, and so much more.
Whether it's for everyday transactions or long-term storage, Leather is the go-to Bitcoin wallet to keep your assets safe.