Reuters / Dado Ruvic
- Bitcoin’s decentralized nature has been one of its biggest selling points, but flawed storage methods have made millions of tokens inaccessible.
- It is estimated that about 20% of the existing 18.5 million bitcoins – worth about $ 140 billion – are lost or trapped in blocked digital wallets, The New York Times reported on Tuesday.
- For now, these currencies are effectively protected by incredibly complex encryption and forgotten passwords.
- The solutions may still come from the cryptocurrency reform, Jimmy Nguyen, president of the Bitcoin Association, told Business Insider.
- Emergency mechanisms that can recover bitcoin in the event of forgetting wallet passwords or asset transfers can make it a more “open and friendly” cryptocurrency, said Nguyen.
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Cryptocurrency enthusiasts praise the decentralized nature of bitcoin. Still, the flawed methods used to protect digital tokens are pulling millions of bitcoins out of circulation with little hope of recovery.
Bitcoin owners have the private keys needed to spend or move tokens. These keys exist as complex data strings and are usually stored in protected digital wallets.
These wallets are then normally protected with passwords or authentication measures. While its complexities allow homeowners to more securely store their bitcoin, losing keys or wallet passwords can be devastating. In many cases, bitcoin owners are prevented from accessing their assets indefinitely.
It is estimated that about 20% of the existing 18.5 million bitcoins are lost or stuck in inaccessible wallets, The New York Times reported on Tuesday, citing data from Chainalysis. That sum is currently worth about $ 140 billion. These bitcoins remain in the world stock and still have value, but they are effectively kept out of circulation.
Simply put, these coins will be stuck indefinitely, but their inaccessibility will not change the price of the cryptocurrency.
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“There is a phrase that the cryptocurrency community uses: ‘neither your keys nor your coins,'” Jimmy Nguyen, president of the Bitcoin Association, told Insider.
For now, the saying is true. Some exchanges, like Coinbase, have some emergency recovery measures that can help users regain access to forgotten keys or passwords. But exchanges are less secure than wallets and some have even been hacked, Nguyen said.
The bitcoin community is now at a crossroads, where members are divided over whether bitcoin should maintain its strict security methods or exchange part of its decentralization for user-friendly safeguards.
Nguyen lands in the last group. The cryptocurrency defender argued that mechanisms should be put in place to allow users to recover inaccessible bitcoins in cases of forgotten passwords, transfers of goods and incorrectly addressed payments. The absence of such systems maintains a barrier between cryptocurrency enthusiasts and the population who have not yet been enthusiastic about bitcoin.
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“If I have the keys to your house, it doesn’t mean I have them. I may have stolen the keys to your house. You may have lent me the keys,” said Nguyen. “It does not prove who owns that property or asset.”
Maintaining the current method of storing bitcoin also reduces its value, both as a new form of payment and as a security, he added.
“There is an inconsistency, if not pure hypocrisy – among supporters of bitcoin, because they want to advance this narrative that you must have the private keys for the coins to be yours,” said Nguyen. “If they want the currency’s value to grow because its use is growing, then you should take a much more open and friendly approach to bitcoin.”
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