Tracking Down Lost Bitcoins
Tracking Down Lost Bitcoins, It’s a common crypto problem: Because people tend to forget the private keys that give them access to their crypto investments, countless coins — e.g. Bitcoin, Ethereum, Litecoin, Dogecoin, Solana — have been lost. As much as 20% of the entire supply of Bitcoin might be lost owing to lost private keys.
Does that mean your lost Bitcoin or other crypto are truly irretrievable?
In many cases, unfortunately, recovering lost Bitcoin or any other crypto is impossible. There are, however, some ways to try and recover an old or lost crypto wallet along with the crypto stored there. The best methods for doing so — and whether or not it will work — depends on how you lost the wallet.
This guide will take you through the process of finding lost crypto, if it’s possible.
What Does It Mean for Crypto to Be Lost?
Crypto is generally considered “lost” if it’s irretrievable, unrecoverable, or otherwise out of circulation. But how you lose your crypto can determine whether you can ever recover it.
Lost Keys
Most often, crypto is lost when people lose the “keys” to their wallet. That is, they have possession of their coins, but may have forgotten their seed phrase or other tools that would help them access the wallet. Their crypto is essentially stuck in the wallet, with no way to get it out.
That’s why it’s important for users who choose to hold their own private keys — a 256-bit string of numbers — to have a backup seed phrase (like a secret password) stored safely.
If you’re able to find or remember your keys, or otherwise access your wallet, you may be in luck. There are some services that may be able to help, but beware of scams.
Sent to the Wrong Address
Coins also get “lost” when they are sent to the wrong address. Sometimes people make the mistake of sending Bitcoin (BTC) to a bitcoin cash (BCH) address, for example. This often results in permanent loss of funds.
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Fortunately, this has become increasingly rare, now that many wallets validate a recipient’s address (read more about what a Bitcoin address is) before allowing a transaction to go through.
Forgotten Passwords
Finally, you could lose your crypto by forgetting your password for a crypto exchange account. In most cases, however, the crypto exchange will let you create a new password. Tracking Down Lost Bitcoins
Having a platform’s help in reaccessing your wallet and holdings if you lose your password is one of the advantages of investing in a crypto exchange. Similarly, if you lose a hardware wallet, you can get a new wallet and restore your crypto balances using your old backup seed phrase — assuming you have those safely stored away.
What Happens if You Lose Your Crypto Wallet?
Recovering unclaimed crypto isn’t easy. There are cautionary tales about people who have lost millions of dollars worth of Bitcoin and still don’t have access to it. That’s not the end of the story, though, as some people who have lost Bitcoin might still be able to recover their coins.
Recovering Private Keys
Some developers have created software programs that can help recover the private keys to a Bitcoin wallet. But this only works in cases in which the individual who lost their keys has deleted some or all of their keys. Software usually can’t help those who have forgotten their passwords, PIN numbers, or backup seed phrases.
But if the user mistakenly deleted files with the relevant information, they may be able to recover them. And if a user has a portion of the private key, it may be possible to find the rest of the key.
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Recovering the Assets from a Lost Wallet
When you use a wallet, you’ll be able to unlock both the wallet and the crypto inside using your seed phrase. So, as long as you have the backup recovery seed, you can enter that into a new wallet and regain access to your crypto assets in a wallet, even if it’s lost.
But ultimately, whether you can recover assets from a lost wallet will depend on how the assets were lost. Tracking Down Lost Bitcoins
Scammers
If you fall victim to one of the many Bitcoin scams out there, it may be possible to recover your assets. For example, if you’re somehow tricked into giving a scammer your seed phrase or wallet passwords, they can access it, change those passwords, and effectively take ownership of your wallet.
In that case, you may be able to get help from the wallet’s support team. But in many cases, keeping passwords and seed phrases secure is on the user, and no one would be able to help.
You should also be aware that some scammers may pose as crypto recovery specialists in an effort to gain access to your wallet. If you hope to hire a company to help you recover lost Bitcoin wallets, do some serious research to make sure it’s a legit operation. Tracking Down Lost Bitcoins
Losing Cold Wallets
If you lose your cold wallet — and most cold wallets are hardware wallets — it is usually possible to recover the assets you had stored on it. It all depends on whether you have your recovery phrase. If you do, you should be able to safely and securely recover your assets and store them in a new wallet.
But again, it all comes down to whether you kept and securely stored your keys.
Prevent Lost Bitcoin by Safely Storing and Sending It
In a way, Bitcoin allows anyone to become their own bank. This has several advantages, but it also has several risks. Mainly, the risk that users might not be able to recover an old bitcoin wallet if they’ve lost their private keys.
Many people choose to store their private keys in a cold storage wallet in their personal possession. These include hardware, software, audio, and paper storage options that exist offline; cold wallets can be a more secure, long-term method of holding coins. The big tradeoff is that doing so puts 100% of the responsibility for securing those assets in the hands of the holder — if you lose them, there’s no recourse.
The best way to prevent permanent loss of Bitcoin is to make sure that you safely and securely store your coins from the get go, and avoid mistakes when sending Bitcoin.
Storing Crypto
There are a number of ways you can store your crypto for safekeeping, but most investors will likely choose to either leave it on an exchange, or transfer it to a wallet.
Exchanges
Leaving your holdings on an exchange may be worth considering if you only have a relatively small amount of crypto. The chief risks in doing so are that your holdings are out of your hands — and aren’t technically “yours” (as the saying goes: Not your keys, not your coins!) — and they could be more vulnerable to a cyberattack or theft. Tracking Down Lost Bitcoins
Using a custodial wallet on an exchange does, generally, mean that you would be able to gain access to them again if you lock yourself out of your account.
Wallets
If you’d rather get your holdings into your own wallet so that you have full possession and control over them, you can do so by transferring them to a hardware or paper wallet. Just know that if you lose access to that wallet, it could be permanent — that’s the risk.
To ensure that you don’t, however, you can take a few steps:
• When setting up a new hardware wallet, safely store the backup recovery seed phrase.
• Create a PIN or password — not one that’s easy to guess or remember — write it down and keep it somewhere safe. Some people even get a safe or a safe deposit box where they store their passwords or seed phrases.
• Keep your wallet somewhere that you won’t forget. Some people even elect to keep their hardware wallets on their person at all times, putting it on their keychains, for example.
You might want to also consider using a paid service that helps users keep track of their private keys, and that can help you re-access your wallet if you lose your seed phrase. It’s an extra expense, but can provide peace of mind.
Sending Crypto
Making a mistake when sending a crypto transaction, whether from an exchange or from a private wallet, can result in total and permanent loss of funds. If that happens, there’s zero opportunity or chance to find your lost crypto. Here’s how to prevent it from happening:
• Whenever possible, use a QR code to get the recipient’s address. Sending coins to a QR code prevents mistakes or typos in the address. Using a string of characters can result in the funds being lost if even one character is off. Tracking Down Lost Bitcoins
• Always double-check to make sure the currency you’re sending matches the one received. For example, that Bitcoin being sent is going to a Bitcoin wallet. Many wallets and exchanges do this automatically, but it’s worth double checking.
• When sending a large transaction, send a smaller amount first, as a test. After the transaction has at least one confirmation on the network, then send the rest of the transaction.
These simple steps will go a long way toward helping holders avoid sending erroneous crypto transactions.
Total Amount of Lost Bitcoin
We don’t fully know the total amount of lost Bitcoin, but it’s estimated that roughly 20% of the Bitcoin mined thus far is unrecoverable. It may be in lost wallets, or in accounts or wallets that people have forgotten the passwords to.
However, there’s a chance that some of it could be recoverable, as new companies with recovery methods are sprouting up in recent years. Tracking Down Lost Bitcoins
5 Largest Bitcoin Fortunes Lost
If you truly want to make your head spin (or at least force yourself to write down your recovery phrase), read on to learn about the biggest Bitcoin fortunes that have been lost — that are widely known about, anyway.
1. Satoshi Nakamoto
Next to nothing is known about Satoshi Nakamoto, the creator of Bitcoin, including whether it’s an actual person, or a group of individuals. But what is known is that Nakamoto has, or had, a wallet containing more than 1.125 million Bitcoins. At one time, it was worth billions of dollars.
Those coins are still out there, somewhere.
2. Stefan Thomas
Stefan Thomas is a software developer from California who held more than 7,000 Bitcoins, worth, at one time, hundreds of millions of dollars. But Thomas forgot the password to the USB wallet he held them on, and has not been able to recover them.
3. James Howells
James Howell, similar to Thomas, had a laptop that stored roughly 7,500 Bitcoins. And he ended up mistakenly throwing it away, losing hundreds of millions of dollars in digital assets. He offered money to people to try and help him search nearby landfills to find it, but it remains lost. Tracking Down Lost Bitcoins
4. Gerald Cotten
Gerald Cotten, yet another would-be Bitcoin whale, co-founded a crypto exchange called QuadrigaCX. In what’s a fairly long and complicated story, Cotten ended up dying at the age of 30, and the keys and passwords to his exchange’s cold wallets were lost. Those wallets contained more than $100 million in assets.
5. Unknown
Another strange story: Allegedly there’s a Bitcoin wallet floating around with roughly 69,000 Bitcoins in it, and nobody has been able to access it. The U.S. Department of Justice reportedly has the wallet now, after it was passed around by hackers and crackers who had been trying to open it. Tracking Down Lost Bitcoins
Does Lost Bitcoin Affect the Network?
Bitcoin that is lost and deemed irretrievable is presumably out of the market forever. It’s as if you took a $100 bill and burned it — it doesn’t exist anymore. The difference being that there is no particular limit to the supply of $100 bills, but Bitcoin has a capped supply of 21 million (meaning there can never be more than 21 million BTC).
Other types of crypto that have a capped supply include: Litecoin, Cardano, Stellar, Chainlink.
For that reason, lost Bitcoin shrinks the maximum or existing supply of the asset on the market. Since it makes other Bitcoins more rare, these losses can, in effect, increase the value of the remaining Bitcoin or other capped crypto on the market. Tracking Down Lost Bitcoins
The Takeaway
No matter what type of cryptocurrency you’ve lost, it can be almost impossible to recover — especially if you’ve lost the private keys that gave you access to that crypto.
The easiest way to avoid losing crypto is to make sure it never gets lost in the first place. Doing so involves securing your private keys and other passcodes; setting up and backing up a secure wallet; and being careful when sending transactions. While there are services that may claim to help you recover lost crypto, beware of scams and high fees. Tracking Down Lost Bitcoins
One way to invest in crypto without worrying about losing your wallet, is by trading crypto via the SoFi Invest® platform. It’s never been easier to set up a crypto account with your Active Invest account. SoFi Invest doesn’t offer a crypto wallet, but it allows you to trade dozens of crypto in real-time through its secure, easy-to-use app. Even better, you can trade crypto 24/7, from the convenience of your phone or laptop. Tracking Down Lost Bitcoins
