Too
Much Crypto
Has Been
Lost Forever,
But ‘
Smart Wallets’
Can Stop The Attrition
Too Much Crypto Has Been Lost Forever, But ‘Smart Wallets’ Can Stop The
Attrition
by Bitcoinist
6 hours ago
in Industry
0
For a cryptocurrency• Экономика » Финансы » Платежные средства » Платежные системы интернета » Криптовалюта that many say will one day replace fiat, Bitcoin• Экономика » Финансы » Платежные средства » Платежные системы интернета » Криптовалюта » Bitcoin’s total
supply of 21 million tokens seems like quite a low number. With the world’s
population estimated at just over 8.07 billion people and growing by the day,
there simply isn t enough Bitcoin• Экономика » Финансы » Платежные средства » Платежные системы интернета » Криптовалюта » Bitcoin to go around.
What’s more, the supply of Bitcoin• Экономика » Финансы » Платежные средства » Платежные системы интернета » Криптовалюта » Bitcoin that can actually be used is dwindling by
the day, as a result of BTC being “lost” by users who misplaced their private
keys, leaving them trapped forever in the digital abyss.
Of course, no Bitcoin• Экономика » Финансы » Платежные средства » Платежные системы интернета » Криптовалюта » Bitcoin can ever be lost because these assets live on the
blockchain• Информационные технологии » Информационно-коммуникационные технологии » Информационные технологии и телекоммуникации » Базы данных » Публичная база транзакций » Блокчейн
• Высокие технологии » Информационные технологии и телекоммуникации » Базы данных » Публичная база транзакций » Блокчейн, but what does happen is that they can become inaccessible when
users fail to take proper precautions. We can always locate the last address
that any BTC was sent to, but the problem is what happens when the owner of
that address misplaces their so-called seed phrase, which is essential to
access that wallet.
Seed phrases are random strings of 12 or 24 letters that are used to secure
cryptocurrency• Экономика » Финансы » Платежные средства » Платежные системы интернета » Криптовалюта wallets. They’re just like passwords in that, you enter the
seed phrase to be able to interact with the wallet in question. But unlike
traditional passwords, the decentralized nature of crypto means there’s no
comeback if you happen to forget it. Because you never “sign up” for a crypto
account, there’s no way to recover that seed phrase via email• Коммуникации » Интернет-коммуникации » Электронная почта
• Коммуникации » Интернет-коммуникации » Электронная почта » Адрес электронной почты if you misplace
it, and that is the reason why millions of dollars’ worth of Bitcoin• Экономика » Финансы » Платежные средства » Платежные системы интернета » Криптовалюта » Bitcoin have been
effectively lost forever.
Bitcoin• Экономика » Финансы » Платежные средства » Платежные системы интернета » Криптовалюта » Bitcoin’s Biggest Losers
Over the years, a number of horror stories have emerged of lost fortunes, with
some unlucky former Bitcoin• Экономика » Финансы » Платежные средства » Платежные системы интернета » Криптовалюта » Bitcoin hodlers losing access to millions of dollars’
worth of funds.
Take the case of U.K. information technology engineer James Howells, who has
been fighting legal battles for the best part of a decade to try and recover a
lost hard drive containing over 8,000 BTC that was accidentally discarded in
2013.
According to Howells, the hard drive in question was placed in a black bin bag
and later mistaken for trash, which is why it ended up in an enormous landfill
site near the Welsh town of Newport. At the time, his 8,000 BTC were worth
just a couple of hundred dollars, but that was before Bitcoin• Экономика » Финансы » Платежные средства » Платежные системы интернета » Криптовалюта » Bitcoin went on an epic
journey that saw the price of one BTC rise from less than a dollar to over
$50,000 today. It’s estimated that Howell’s lost fortune is now worth around
$443 million at today’s prices.
Unfortunately for Howell’s, Newport’s City Council has steadfastly refused to
allow Howells and his team of engineers to dig up the landfill site to try and
recover the lost hard drive, stating that his proposals “pose significant
ecological risks”.
A similar tale involves the software developer Stefan Thomas, who says he
bought more than 7,000 BTC back in 2011 when the price was less than $20. The
value of his BTC has exploded and it’s now worth more than $380 million, but,
he made the mistake of storing the seed phrase on a USB flash drive• Информационные технологии » Информатика » Носитель информации » Usb Flash Drive – and
protecting that seed phrase with a password• Информационные технологии » Информатика » Защита информации » Аутентификация » Пароль.
Unfortunately for Thomas, in his haste to secure his seed phrase he forgot to
secure the flash drive itself, and he cannot remember the password• Информационные технологии » Информатика » Защита информации » Аутентификация » Пароль he used to
protect it. Despite multiple efforts made by numerous cryptography experts, he
has so far been unable to regain access to that device, meaning he cannot
recover the seed phrase to his crypto fortune.
How Many Bitcoins Are Left?
Because Bitcoin• Экономика » Финансы » Платежные средства » Платежные системы интернета » Криптовалюта » Bitcoin is entirely decentralized, it’s impossible to know precisely
how many BTC have been lost to the aether, as there’s no way to keep count.
However, various studies have shown that there is an enormous amount of
Bitcoin• Экономика » Финансы » Платежные средства » Платежные системы интернета » Криптовалюта » Bitcoin-based value that can no longer be accessed by its owners, save for
them overcoming odds of trillions-to-one and correctly guessing their lost
seed phrase.
In a 2023 study, the digital research agency Cane Island estimated the number
of lost Bitcoin• Экономика » Финансы » Платежные средства » Платежные системы интернета » Криптовалюта » Bitcoin at more than six million, which is close to a third of
Bitcoin• Экономика » Финансы » Платежные средства » Платежные системы интернета » Криптовалюта » Bitcoin’s overall supply of 21 million.
If that estimate is accurate, it means more than $300 billion worth of Bitcoin• Экономика » Финансы » Платежные средства » Платежные системы интернета » Криптовалюта » Bitcoin
has been lost forever, based on its current market capitalization of just over
$1 trillion in September 2024.
Other studies suggest that Cane Island’s estimate is indeed accurate, with an
earlier report by TheBlock showing that 29% of Bitcoin• Экономика » Финансы » Платежные средства » Платежные системы интернета » Криптовалюта » Bitcoin’s supply had not moved
in the last five years. While some of those coins might just be in long-term
storage and still accessible by their owners, it’s likely that a significant
number of them are out of reach.
What Can Be Done?
Irrecoverable does indeed mean irrecoverable, and there is no way to regain
access to any wallets whose seed phrases have been permanently misplaced, but
we can do something to secure the existing and still-accessible supply of BTC.
Thanks to recent innovations around account abstraction, the crypto industry
has seen the emergence of a new generation of so-called “smart wallets” that
aim to replace seed phrases as the standard for crypto security.
Although seed phrases are extremely robust in terms of securing wallets, if
anything, the problem is that they are too robust. Seed phrases are the only
way to access crypto, which means that users cannot be forced to give up their
funds, not even by law enforcement.
But this iron-clad security also means there is no contingency plan for those
who lose their seed phrase, and that is the reason why so many BTC tokens have
been permanently removed from circulation. It’s also thought to be one of the
most off-putting things about crypto, and is seen as a major obstacle to its
wider adoption.
This is why new, account abstraction wallets like Ambire Wallet are getting so
much attention. With account abstraction, it has become possible to decouple
crypto wallets from their seed phrase and instead create “smart accounts” that
utilize traditional smart contracts. These smart accounts can be deployed on
Ethereum and act as an alternative to the traditional seed phrase.
With Ambire Wallet, users can create an account using an email address• Коммуникации » Интернет-коммуникации » Электронная почта » Адрес электронной почты and a
traditional password• Информационные технологии » Информатика » Защита информации » Аутентификация » Пароль. The wallet uses some clever custom logic, which enables
the user to recover access to it even if they lose that password• Информационные технологии » Информатика » Защита информации » Аутентификация » Пароль simply by
using their email• Коммуникации » Интернет-коммуникации » Электронная почта
• Коммуникации » Интернет-коммуникации » Электронная почта » Адрес электронной почты to reset it.
Ambire Wallet explains that the advantages of account abstraction extend
beyond simplified account recovery, with users able to secure their crypto
funds using a combination of hardware wallets, two-factor authentication• Информационные технологии » Информатика » Защита информации » Аутентификация and
biometrics• Информационные технологии » Информатика » Защита информации » Аутентификация » Биометрия. In this way, Ambire Wallet is as unhackable as any seed phrase is
but comes with the distinct advantage of not needing to use a piece of paper
to ensure you’ll always be able to access it.
How Does It Work?
It’s important to point out that Ambire Wallet is a self-custodial wallet,
just like MetaMask, Trust Wallet and Coinbase Wallet, for example. This is
important for crypto users, because it means they retain full control of their
funds. No one else can access them, not even Ambire Wallet itself, and users
cannot be blocked in any way, so they’ll always be able to transact.
From the perspective of the user, all Ambire Wallet does is keep things
simple, with an experience that’s more akin to signing up for a cryptocurrency• Экономика » Финансы » Платежные средства » Платежные системы интернета » Криптовалюта
exchange such as Binance• Экономика » Финансы » Платежные средства » Платежные системы интернета » Криптовалюта » Binance. Simply enter your email• Коммуникации » Интернет-коммуникации » Электронная почта
• Коммуникации » Интернет-коммуникации » Электронная почта » Адрес электронной почты, type in your password• Информационные технологии » Информатика » Защита информации » Аутентификация » Пароль, and
your wallet account is automatically created and it’s fully under your
control.
Where it differs from Binance• Экономика » Финансы » Платежные средства » Платежные системы интернета » Криптовалюта » Binance is the way it works under the hood. Whereas
Binance• Экономика » Финансы » Платежные средства » Платежные системы интернета » Криптовалюта » Binance maintains a cryptographically secure database of user’s passwords to
enable account recovery, Ambire Wallet uses clever multi-signature techniques
based on the concept of two security keys. One of those keys is stored on the
user’s device and encrypted with their password• Информационные технологии » Информатика » Защита информации » Аутентификация » Пароль, and the other is stored by
Ambire on its backend infrastructure, to ensure users will always have access
to their balances.
A Superior Security Model
With its seedless crypto accounts, Ambire reckons it has helped customers to
recover more than $200,000 worth of funds that would have already been lost
had those users instead relied on seed phrases. Thanks to its simple,
email• Коммуникации » Интернет-коммуникации » Электронная почта
• Коммуникации » Интернет-коммуникации » Электронная почта » Адрес электронной почты-based recovery process, it promises to transform the whole idea of
crypto security, and the likes of Howells and Thomas can only wish that such
innovation had occurred much sooner than it did.
As Ambire Wallet’s popularity increases, it’s becoming clear that account
abstraction represents a game changer for the crypto industry, and it will
ultimately lead us into an era where lost crypto funds are something that no
longer occurs. It’s bringing Web2 functionality and user-friendliness into the
Web3 industry, and that’s exactly what the crypto industry requires if it’s to
appeal to the mainstream masses.
