- Bitcoin’s decentralized nature is one of its biggest selling points, but imperfect storage methods make millions of tokens inaccessible.
- About 20 percent of the existing 18.5 million bitcoins – worth about $ 140 billion – are expected to be lost or stuck in locked digital wallets, The New York Times reported on Tuesday.
- For now, these coins are effectively locked behind incredibly complex encryption and forgotten passwords.
- Decisions can still come from cryptocurrency reform, Jimmy Nguyen, president of the Bitcoin association, told Business Insider.
- Emergency mechanisms that can recover bitcoin in the event of forgotten wallet passwords or property transfers can make it a more “open and easy to use”
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Cryptocurrency enthusiasts praise the decentralized nature of bitcoins. Yet the imperfect methods used to secure digital tokens have taken millions of bitcoins out of circulation with little hope of recovery.
Bitcoin owners keep the private keys needed to spend or move tokens. These keys exist as complex data strings and are often stored in secure digital wallets.
These wallets are then usually protected by passwords or authentication measures. While their complexity allows owners to store their bitcoins more securely, the loss of keys or passwords for the wallet can be devastating. In many cases, bitcoin owners are blocked from their holdings indefinitely.
Approximately 20% of the existing 18.5 million bitcoins are expected to be lost or locked up in inaccessible wallets, The New York Times reported on Tuesday, citing data from Chainalysis. At present, this amount amounts to about 140 billion dollars. These bitcoins remain in global shipments and still hold value, but are virtually kept out of circulation.
Simply put, these coins will remain trapped indefinitely, but their unavailability will not change the price of the cryptocurrency.
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“There’s this phrase that the cryptocurrency community uses: ‘Not your keys, not your coins,'” Jimmy Nguyen, president of the Bitcoin Association, told Insider.
For now, the saying is true. Some exchanges, such as 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 already at a crossroads, where members are divided over whether bitcoin should maintain its rigid security methods or trade part of its decentralization for easy-to-use safeguards.
Nguyen landed in the last group. The proponent of cryptocurrency argues that mechanisms need to be put in place to allow users to recover inaccessible bitcoins in the event of forgotten passwords, property transfers and incorrectly addressed payments. The lack of such systems maintains a barrier between cryptocurrency enthusiasts and the population that has not yet warmed to bitcoin.
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“If I keep the keys to your house, it doesn’t mean I own the keys. I may have stolen the keys to your house. Maybe you lent me the keys,” Nguyen said. “It does not prove who owns this property or this asset.”
Maintaining the current method of storing bitcoin also reduces its value, both as a new method of payment and as collateral, he added.
“There is a discrepancy, if not outright hypocrisy, among Bitcoin supporters, as they want to spread this story that you have to have private keys to be your coins,” Nguyen said. “If they want the value of the coin to grow because it is growing in use, then you need to take a much more open and easy-to-use approach to bitcoins.”
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