What Happens When Bitcoins Are Lost?
Throughout the seven years that Bitcoin has been in circulation, thousands of Bitcoins have been lost or otherwise forgotten.
There are many reasons why Bitcoins are lost. Many people mined Bitcoins back when they were worth next to nothing and simply forgot the information for their wallets. Some have had crashes or technical difficulties on their devices, making this information near-impossible to recover. One of the most famous stories about lost Bitcoins involves a flash drive, containing nearly $7.5 million in Bitcoin, lost in a city dump, never to be found.
When Bitcoin’s value was very low, losing your digital wallet wasn’t a big deal. However, now that Bitcoin’s value has skyrocketed, there is much more at stake.
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No Recovery Options
When you lose physical cash, there is always a chance someone will find it and it will go back into circulation. If you forget the PIN to your bank account, you can talk to your financial institution and they can recover your information.
However, Bitcoin’s virtual security measures make these approaches impossible. Bitcoin wallets can only be accessed through the user’s private key, which no one else has access to. Once a transaction has been processed on Bitcoin, there is no way of undoing it. Generally, these features benefit Bitcoin users, because they prevent theft and fraud. On the other hand, in the event of lost or forgotten Bitcoins, they can be a serious downside to the system. Once Bitcoins are lost, there is almost nothing that can be done to recover them. If they were stored on a device like a flash drive or hard drive, they will be especially difficult to trace.
Safety Measures For Bitcoin
Now that Bitcoin is becoming more popular and more consumers are using it as an investment opportunity, things are changing. Many Bitcoin companies are investing their time and money into finding ways to recover lost Bitcoins.
Several analyses have shown that less than two thirds of Bitcoins in existence are in circulation. Many of these are just held in savings, but many of them are lost. These Bitcoins are likely worth millions, if not billions, of dollars. Since each Bitcoin transaction is verified on the block chain, there is a way to go back and trace every single transaction. Each ‘hash’ (a term referring to the encrypted transaction records) is linked directly to the original block. This is called the Genesis Block. Many people are researching how to use the Genesis Block as a way to recover lost Bitcoins, or at least determine their location. However, this will be very difficult, because Bitcoin transactions are intended to be completely anonymous.
Luckily, many Bitcoin companies have developed services to help prevent their customers from losing their Bitcoins. Some of the larger wallet companies now offer password recovery services. Bitcoin Armory provides users with a secure printout of their wallet information. There are also one of a few services to provide technical help for restarting or repairing devices that contain lost Bitcoins. However, as Bitcoin’s value continues to rise, it is crucial that users keep careful track of their Bitcoins, to avoid losing such valuable assets.
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