Bitcoin has always been an enigma. While some have been major supporters of the decentralised digital currency that is built to be beyond any form of regulation, many have criticised it for its apparently clear lack of stability and the distinct security risks that it represents. As investing in Bitcoin today has grown into something very elaborate and worthy of long hours of strategising, early investors in the cryptocurrency did not have so much to fear. Today, though, some are left stranded, inches away from crores of rupees of wealth that could have been theirs – but for a lost password. One such individual is Stefan Thomas.
Thomas was one such early investor of Bitcoin, and from back when its value was in mere single-digit (or at best double-digit) dollars, Thomas owns 7,002 Bitcoin till date. In a bid to keep things safe for the long run, Thomas stored all of his Bitcoin keys in a tiny, encrypted hard drive called IronKey – the digital equivalent of the medieval cryptex. However, there is a catch to storing things in IronKey – anyone in possession of the drive will get 10 attempts to unlock it by entering the right password, failing which the drive will encrypt itself forever, no second chances ever. Thomas happens to have forgotten his password, and to make matters worse, has already exhausted eight of his 10 chances at entering the right password. The excruciating truth? Today, as of writing this article, his 7,002 Bitcoin are worth $245 million, or almost Rs 1,800 crore.
Thomas’ ordeal, first reported by The New York Times, represents a plight that represents some of the biggest pitfalls of Bitcoin. To begin with, Bitcoin operates on the laws of cryptocurrency. The technology essentially makes sure that the cryptographic key, which serves as the identifier of a cryptocurrency (in this case, a Bitcoin), is completely unique, and only the one in possession will ever know it. There are no organisations or a centralised body that has the power, or a master key, to access all or any of this data, unless the key is specifically shared with them. Hence, if you forget the password to your crypto wallet, there is no company or helpline that can help reset it or give you back access to it – the way a standard financial institution or bank would.
Thomas’ suspended windfall also represents the volatility of Bitcoin. Unlike equities or any commodity for that matter, Bitcoin is not attached to any material of physical value, as a result of which the transactions that fluctuate its valuation cannot be controlled by any regulatory body. It is also theoretically possible for dark web bodies with possession of significant amounts of Bitcoin to manipulate its value without leaving behind any traces to track, or any law to hold them accountable for. While Thomas would today rue his luck, and in his own words, “spend sleepless nights” thinking about that one forsaken password, there is no guarantee that he can hold on to his wealth forever – unless he manages to find some way to cash in on it soon.
The Times report claims that as much as 20 percent of all Bitcoin, amounting for as much as $130 billion or Rs 9.5 lakh crore in ‘real’ money, is stuck in such crypto wallets with forgotten passwords that may never, ever be found or unlocked again. The amount of money stuck in this form is titanic – more than the GDP of many nations around the world, even. Of this, Thomas’ ordeal represents 0.2 percent of the total amount estimated to be stuck behind a forgotten password. What’s striking to think is how even such a fractional amount is gigantic enough to give Thomas a lifetime of wealth, should he somehow, miraculously, rediscover what his IronKey password once was.