In the early days of bitcoin, I jumped at the opportunity to learn something useful and new and in the process change the world. That was waaay back when I could mine enough bitcoins on my desktop so I could trade some and give some away. This was the time when bitcoin was “really cheap”.
I was very excited about the new technology and have given many of my friends a few bitcoins; to show them how this new thing worked. Naturally, my friends surely thought “…here he comes with yet another one of his inventions…” and politely listen to my explanation of the blockchain, loaded the app on their mobile phones, created their wallets, accepted the bitcoin and nodded and smile a lot as I ranted on and on about how this was going to transform and empower people in the future.
Fast forward a few years when the price of bitcoin moved above $10,000.00 USD and kept going up a few months ago, I started to get calls that roughly went like this:
my friend: “Hi there, do you remember when you gave me those bitcoins?”
me: “Yes, I remember, can you believe it, they are worth a small fortune now!”
my friend: “Well yes, I want to sell them, but I forgot the password for my wallet, do you know how to do a password recovery or how to reset the password?”
me: “well… [long silence], you see, there is no such thing as a password recovery method that I know for X wallet…”
my friend: “Huh? [you can kind of hear a big gasp], what do you mean there is no password reset?”
The privacy, security and fraud triangle
Bitcoin was designed with the idea of privacy and decentralization. This was accomplished by using very high security. The dark part of privacy is that it lends itself to fraud. And in order to implement anti-fraud measurements, you need to expose the participants on a transaction. By now you should begin to figure out it is an all or none type of conundrum.
In summary, if you lost your wallet password (keys or PIN) there is not a place, person, organization that has a way to re-issue a new one like they do at your local bank, because it will violate your privacy and security, and will expose you to fraud.
The distributed ledger part
At one conference I overheard someone explaining to their friend about the blockchain, it is a difficult concept to grasp for a non-techie, and I was sensing a bit of frustration on the guy trying to explain it to this friend until he said: “Man… the blockchain is in the cloud!”. What I think he meant is that it is not centrally located, everyone (kind of) has a copy on their machine of the blockchain, so it is technically not in the cloud but it kind of is. The key take away here is that because it is not owned or controlled by a central organization, it is up to each an everyone to look after your own keys (aka passwords). The cool thing about the blockchain ledger is that you can inspect any account on it as well as all the transactions on it.
Let’s repeat it together 3 times: increase security, increase security, increase security.
I spend a lot of time analazing, new technology, new and innovative companies, ICOs (aka Initial Token Offerings), funds and more to invest on (or not). I am not a financial advisor nor I play one on TV, and I dont recommend anyone getting into something he or she is now knowledgeable about. But there is ONE thing EVERYONE should do: increase your level of security. I started a new practice a few years back; now when I start to teach anyone about how to get into crypto trading I have them adopt a new mantra. It is very simple, I tell them to repeat three times what is the first thing and the most important thing they need to do to keep their investments safe: increase security, increase security. increase security.
This of course means don’t forget your password but go the extra length to secure your wallet keys (maybe use hardware wallets), use very long passwords (maybe use LastPass), implement two-factor authentication (2FA) on all your accounts or use a YubiKey and if you must exchange sensitive information encrypt your emails (maybe use Virtru) or use a fully encrypted email service like ProtonMail for example.
It is sometimes inconvenient, but believe me, it is a small price to pay not to lose your money. One more for extra credit — if you have old email or social media accounts that you do not use, close/delete them. Same goes for old blogs, picture sites, or accounts in e-stores you no longer buy from. Remember, someone trying to hack you to gain control of your bitcoins will go through ALL your accounts, old PCs, old USB drives, etc to gain information they can exploit.
If you can’t remember your password we should thank you!
I am truly very sorry for those friends of mine and everyone else who lost access to their wallets; they technically lost a small fortune. There are people advertising ways to recover access, but the reality is that it is not that simple. In the bright side, the amount of bitcoins that will ever be minted is fixed and thanks to all those who lost their keys, the number of bitcoins in circulation will slowly shrink and therefore the value of the ones available to trade will increase… and for that, we should thank you.
In short, don’t lose your password!