This article originally appeared on VICE France.
Every time the value of Bitcoin skyrockets – as it did earlier this year – so too does the anxiety of the thousands of holders who’ve lost the access code to their digital wallets. Called a “seed”, this sequence of 12 to 24 auto-generated words is the only way you can prove your Bitcoin belongs to you. Without it, you’re forever locked out of your investment.
Forgetting your seed can be a costly mistake. Just ask the German computer programmer who, as of January 2021, has two password guesses remaining before his estimated €200 million (£176 million) in Bitcoin is lost forever. According to estimates by the cryptocurrency firm Chainanalysis, nearly 3.7 million Bitcoin – around 20 percent of the 18.6 million in circulation today – are currently inaccessible.
Higoze, a 28-year-old French stuntman, is one of the many sore losers. He invested about €165 (£145) a few years ago and saw his money triple after an initial period of stagnation. “At that point, I was like: ‘Hey, I’m a Wall Street guy now!’” Higoze said. “I’m gonna get rich without lifting a finger! I can just watch Netflix on my couch all day.” Then the value of the cryptocurrency crashed, but Higoze wasn’t too worried. “I was a little bummed,” he said. “It was kinda like losing 200 bucks at the casino.”
Since making his initial purchase, Higoze has changed phones a few times and lost access to the wallet app where his cryptocurrency is stored. The only way he can get to his money now is to enter his seed, which he can’t find or remember. “I’ve looked everywhere,” he said. “It bugs me just thinking about it because it was all my fault. Everyone tells you how important it is to keep track of your seed.” He figures his investment must now be worth over €1,600 (£1,413). “With that money, I could have gone to Turkey to get a hair transplant,” he said, joking that all the Bitcoin-induced stress sped up his hair loss.
Launched in 2009 by its mysterious creator Satoshi Nakamoto, Bitcoin is the first and most successful blockchain-based cryptocurrency. The currency is completely digital and was created to have a maximum circulating supply of 21 million Bitcoins (BTC), a quantity that cannot be changed. The idea is that this upper limit makes the currency scarce and therefore valuable. After shooting up to a high of €34,000 (£30,000) on the 8th of January, 2021, the highly-volatile currency fell and then rose again within a couple of weeks. As of the 27th of January, it is valued at around €25,000 (£22,000) per Bitcoin.
Even if you’ve taken steps to save your password, it’s still pretty easy to lose it. Back in 2012 or 2013, Canadian journalist Maxime mined some bitcoin – a process that involves solving a computational puzzle to generate new currency. He then diligently stored his seed on a hard drive – which unfortunately got corrupted. He thinks he might have lost a couple of hundred euros, maybe a thousand. “I was initially fascinated by the fact it was an alternative to money,” he said. “I never thought Bitcoin would be worth so much today – otherwise, I would have kept mining!”
Paul*, a 38-year-old French gamer and Twitch streamer, also lost access to his BTC because of a hard drive fiasco. In 2019, he bought €400 (£353) worth of BTC to order weed on the dark web. “I bought €100 of weed,” he said, “then months went by and I didn’t really think much about the whole Bitcoin thing.” One day, he reformatted his hard drive after a crash. “That’s when I realised the text file where I’d put my wallet key was gone. Boom. End of story,” he said. He estimates his loss at about €1,500 (£1,325).
Many users who’ve lost their seed wonder why the system relies on something so vulnerable to human error. “The idea behind Bitcoin is that freedom comes with responsibilities,” said Yves Bennaïm, a Swiss crypto-specialist and founder of the think-tank 2B4CH. “When you lose your Gmail password, Google can verify your info. But with Bitcoin, there’s no central administrator.”
Basically, if you want a totally anonymous and de-centralised form of currency, you can’t expect the kind of convenience that Google and Facebook offer.
In addition, although losing access to money is bad news for the BTC holder, it’s actually good for the rest of the system. “People who lose their access are actually contributing to the network, because the remaining Bitcoin becomes more valuable,” said Bennaïm. He suggests you deposit your seed in a safe box at your bank, just like you would with other valuables. And for extra safety, you can also have it engraved in metal resistant to fire, corrosion and other types of disasters, a service offered by a number of companies.
Bennaïm said some Bitcoin holders falsely declare they’ve lost the key to their crypto stash to avoid being monitored too closely by tax authorities. In France, and in most European countries, Bitcoin is subject to a capital gains tax – in fact, only a few countries don’t tax cryptocurrencies. According to the French Bitcoin association Le Cercle du Coin, there are at least a few Bitcoin holders based in France who say they have lost access to eight-figure sums. Of course, it’s unclear whether they’re lying to evade taxes or telling the truth – and authorities have no easy way to verify this.
If you too have run into the misfortune of being locked out of your wallet, your best bet may be to contact Dave “Bitcoin” (as he likes to be called) from Wallet Recovery Services. The platform helps cryptocurrency holders recover access to their money. Dave developed his own software, which tries millions of word combinations to crack open your digital treasure chest. He estimates his success rate at 35 percent, and says he often sees demand go up when crypto prices are on the rise. He charges 20 percent of the recovered sum if he manages to get access to the wallet, and nothing if he doesn’t. “I am quite persistent,” he said. “There are some cases where I’ve unlocked a wallet after a few years.”
Maxime, Paul and Higoze all said they’re not interested in this service, because they didn’t invest a lot of money. “On the other hand, if Bitcoin goes up to $100,000 [£72,000] someday, I might very well change my mind,” said Higoze. However, it seems unlikely we’ll see him back on the Bitcoin market anytime soon. “Investing in Bitcoin isn’t really worth it for me anymore,” Higoze said. “Back when I started, you could get a nice slice of the Bitcoin pie for $200 [£145]. Now, you only get some crust.”