Despite its years in circulation, Bitcoin is still an enigma for many, considering the intricate way the cryptocurrency works. Unlike traditional currencies stored in banks, bitcoin is actively being lost by people throughout the world, never to be recovered.
A recent study carried out by Chainalysis analysed the amount of the cryptocurrency that has been lost so far. Out of 16.7 million coins mined as of 11/2017, it is expected that 2.56 million coins have been lost so far by being put out of circulation. 1.04M BTC out of the original coins are nowhere to be found, whereas 2% of coins purchased or sold, and 2% of strategic investments are facing the same fate. On the other hand, millions of dollars have been lost by people who have made unwise investment choices, by selling their coins at a low value, after failing to predict price fluctuations.
Missing Bitcoin, Image by Forbes
To put things better into perspective, most of the times, coins are lost for the following reasons: users forgetting their private keys, users spending BTC when its price is low, users throwing away computers/hard drives containing their private keys, or exchanges dealing with stolen funds.
Once coins are lost, there is little to nothing that can be done in order to get them back. The bitcoin protocol does not offer a system for recovering lost coins, as part of its security measures. This has resulted to many people digging in quarries, landfills, and other turning to hypnotherapy as an effort to remember their forgotten private keys.
While Bitcoin does create winners, in this article, we are going to cover several stories of people who have lost large quantities of bitcoin, for any of the reasons outlined above.
Back in in the summer of 2013, while he was cleaning up his desk, the man mistakenly threw away a hard drive belonging to his broken laptop. Several months later, he remembered that the drive held a total of 7,500BTC the man had mined in 2009.
James Howells, Image from the Independent
At the time of realization, bitcoin’s price just exceeded the $1,000 mark for the first time, thus giving the lost hard drive a value of over $7 million. Today, its value is of over $60 million. During the next couple of years, the man mostly accepted his fate, but it became more and more difficult as the value continued to grow. In a recent statement regarding the loss, the Welsh man mentioned that:
You know when you put something in the bin, and in your head, say to yourself ‘that’s a really bad idea’? I really did have that
Following the realization, Howells began thinking of methods to get his coins back. One of the viable solutions was to start searching the dump for the hard drive, which he did. However, he lacked the funds for a proper hunt, therefore an Indiegogo campaign was set up to help him raise money and manpower, which would be required to find the hard drive in question. Couple of years later, and there haven’t been many more updates on the story. It is believed that the search was ceased.
A couple of years ago, Simpson threw away a generic 250GB hard drive that was already facing a few technical difficulties. At that time, the hard drive contained a data file with over 1,400 BTC in it, which wasn’t that big of a deal then. Unfortunately for him, today, the coins are valued at over $11 million.
Campbell Simpson, Image from Gizmodo
He explained that he purchased the coins back in 2010, at 1.5 US Cents apiece, and spent around $25 on all his coins via PayPal. According to the man, back then, bitcoin trading was not yet mainstream, whereas mining was still extremely easy. In a Gizmodo interview, he noted:
I used the opportunity to clean up some of the accumulated tech detritus that comes with being a technology journalist. USB sticks, 3D glasses, USB cables, PC components — all that sort of literal junk. A pile of junk that went into a skip. That hard drive was in the pile, and it had that damn annoying click. I had better portable hard drives.
Laszlo Hanyecz & Bitcoin Pizza Day
If you have been following bitcoin news over the last couple of years, then chances are that you might have seen this story pop up around the 22nd of May every year. On the same date, back in 2010, Laszlo Hanyecz, paid a BitcoinTalk user 10,000BTC, in exchange for two Papa John’s pizzas. At that time, bitcoin was only a year old, and it was nowhere close to fame, considering the fact that 10K BTC only meant $25 USD. Fast forward a couple of years, and at the time of writing, we’re talking about $80 million spend for two pizzas. A few months back, when the bitcoin price was in the $20,000 zone, the two pizzas valued $200 million. According to Hanyecz,
It wasn’t like bitcoins had any value back then, so the idea of trading them for a pizza was incredibly cool (…) No one knew it was going to get so big.
In 2010, bitcoin merchant adoption was close to zero, yet today, there are over 100,000 merchants taking the cryptocurrency as a method of payment. Following the increasing popularity of the Bitcoin Pizza Day, it is now celebrated as an event reminding the community of how much prices can change, and the positive (or negative) events that volatility can have on the value of things. Additionally, numerous pizza places, especially those which accept BTC as a method of payment, have begun hosting promotions on the date.
Laszlo Hanyecz, Image from CoinStaker
There isn’t much information available on what happened to the 10,000 coins once they have been sent. While they weren’t really put out of circulation, they surely represented a big loss for Mr. Hanyecz.
All people go through the frustration associated with no longer being able to remember a password, or PIN. However, most of the times, the password doesn’t give people access to tens of thousands of dollars. Mark invested $3,000 in bitcoin in 2016, and decided to purchase a hardware wallet that could be used to keep his coins safe. Generally, cold storage options are deemed to be the safest methods of storing crypto assets, but they come with two vulnerabilities – you can’t lose the drive, or forget its password. Unfortunately, this is exactly what happened to Mark, who wrote down the mnemonic phase on a piece of paper. A while later, he lost the paper in question, but didn’t consider that an issue until he realized that he no longer remember his PIN. At that time, the coins were worth roughly $30,000, but today, they are worth a lot more.
Mark Frauenfelder, Image from Wired
Following the loss, Mark resumed to asking people for help on various forums, and hiring others to help crack his drive. Finally, he found a person who was capable of hacking in the wallet, thus once again giving him access to the lost coins. This is a successful story, yet the chances of regaining access to a drive containing coins, or a wallet are generally slim when the mind forgets, or hardware is physically lost.
A man named Simon used Tor back in 2011, and stumbled upon an illegal marketplace, selling guns, counterfeit documents, drugs and the such. He then decided to pay 10,000 BTC for a false passport, and throw in an extra 6,000BTC as a tip. Unfortunately for him, not only did the seller fail to deliver, but he also did not foresee how the value of bitcoin was going to increase over the years. The sums remained in his exchange account, so he felt generally safe at that time. However, two years later, a Russian man had been arrested for offering bitcoin money laundering services, via the Liberty Finance platform, which Simon used for the transfer. All exchange funds were seized by the FBI, yet if that wouldn’t have happened, Simon may have had regained access to over $400 million.
Mt Gox Customers
Back in early-2014, the Japan-based Mt Gox, was the world’s biggest bitcoin exchange, effectively handling 70% of all transactions. By the end of the year, Mt Gox was bankrupt. What happened in the meantime? Well, following a massive hack, the company lost around 740,000 coins (6% of all BTC in circulation), valued at over $500 million. Today, the stolen coins are worth over $5 billion, hence putting Mt Gox at the top of the list for the most expensive bitcoin heists so far.
On the 7th of February 2014, withdrawals were stopped and Mt Gox claimed that it was attempting to obtain a technical view of the currency process. Not long afterwards, all operations were stopped, and a leaked document exposed the hack the world, and set bitcoin prices plunging. The hack led to the birth of numerous conspiracy theories claiming that funds were lost long before, and that the exchange management may have had something to do with the event. Evidence did shed some light onto the matter, yet so far, affected users haven’t received much of a reimbursement.