Former Ripple executive Stefan Thomas provides the crypto community with yet another “lost funds” use case, as the San Francisco-based programmer allegedly lost access to his Bitcoin wallet private keys.
Thomas holds over 7,000 Bitcoin, worth $240 million at the time of writing. He kept the private keys to his wallet in an IronKey hard drive, which encrypts the information in it, allowing just ten tries of entering a valid password, before encrypting the information.
According to the New York Times, Thomas has two more attempts to guess his password before a permanent loss of his Bitcoin stash. The ex-Ripple executive’s ordeal with the lost funds intensified after Bitcoin making a two-month rally, reaching a price point of over $40,000 per BTC.
The idea of having a fortune which can’t be touched, left Thomas doubting the concept of people becoming their own banks, as described in the original Satoshi Nakamoto Bitcoin whitepaper, published 12 years ago.
“This whole idea of being your own bank — let me put it this way, do you make your own shoes?” Thomas noted, adding that “the reason we have banks is that we don’t want to deal with all those things that banks do.”
As the problem with lost crypto funds continues, many third-party wallet providers and custodial services began emerging. However, despite insured custodians like BitGo, some crypto holders take security to extremes – like putting the private keys in opaque folders, spread across a whole country. The latter case is what the Winklevoss twins made to their private keys, and was described in the book Bitcoin Billionaires.
Despite the ever-growing number of crypto custodians and wallet providers, many crypto users still keep their digital currencies in exchanges. However, exchanges still possess high risks of hacking, like the case with Mt.Gox
Stefan Thomas, meanwhile, is not alone in his ordeal. Analysts estimated that around 20% of the entire amount of Bitcoin in existence today is in fact inaccessible. There are two main theories behind the inactive Bitcoins – either the access to them is lost forever, or they are in the hands of the Satoshi Nakamoto entity.
Lost private keys cases also include Barbados entrepreneur Gabriel Abed, who suffered from an 800 BTC loss after a colleague reformatted the computer, holding Abed’s private keys. However, Abed’s crypto stash remained almost intact, as the 800 BTC were a small fraction of his total Bitcoin possessions.