This is an opinion editorial by Konstantin Rabin, a finance and technology writer.
When it comes to doing stupid things, we all have had our own experiences, but few mistakes are as costly as the ones made with Bitcoin. Over the years, I have seen friends lose chunks of BTC due to some avoidable mistakes and, I dare say, I myself have not been immune to that either.
It is estimated that around 3.7 million BTC has been lost over the years thanks to blunders, misadventures and circumstances of all sorts. That accounts for nearly 20% of all currently-minted bitcoin, and that number of lost BTC keeps growing. In this article, I will share some of the crazier stories that I have heard, experienced, embellished or concocted to illustrate how one might lose their holdings and what you can do to avoid becoming the punchline of the next silly lost bitcoin story.
The Laptop That Flew Away
One of my friends, let’s call him Alex for posterity’s sake, was an early Bitcoin enthusiast. It took some time before he was ready to buy in though, and after a saving spree and setting up a new laptop that would be used purely for crypto trading, he finally took the plunge and invested a decent chunk of cash into it.
There he sat, on the 10th-story balcony of his apartment and, well, you can probably see where this is going. He had just set up a new wallet, bought some BTC, and within five minutes, the computer had made its way down from the 10th floor to the street below. His laptop was destroyed, and with it the bitcoin that he was securing on it. How exactly this happened is still a matter of debate, as Alex claims the wind did it, but I suspect he probably caused it all by himself.
This was a massive blunder on his part, but avoiding it has a very simple solution: Always write your security phrase and private key down securely before depositing any bitcoin into a corresponding wallet. Keep a hard copy of your wallet, it is always safer than storing everything in cold storage on a single device.
Tip one: Always backup your private keys in multiple secure locations, preferably offline.
The Not-So-Secret Phrase
Sarah, another fake name, decided to use a seed phrase that would be unforgettable to create her new BTC wallet. The idea was simple, just take a page from a classic book and use it as is. Well, guess what? It was a stupid idea. Not only did she use a common book to choose a phrase from, she even shared the idea on a Bitcoin forum. Soon enough, she had a few new followers on Instagram, and after some nice conversations chatting with these new friends about her hobbies and the books that she enjoys reading, she woke up one morning and her Bitcoin wallet was empty.
This might seem like a very stupid choice and an unlikely result, but a silly mistake like this can cost you a lot in the end. There is a very good reason why most wallets use random phrases, and just like creating a strong password for other sites, it is always best not to use a sequence that can be brute-forced easily.
Tip two: Keep your seed phrase private, keep it random and avoid mentioning anything about it online or in public conversations.
The Unlucky Hard Drive
Then there is “James,” who got into Bitcoin mining during its early days. This was back when it was still possible to mine from home with your old gaming rig and a graphics card. He dug up his old PC, made sure it was all working, went through the process of turning it into a miner, and sat back amassing a bit of BTC. OK, to be fair, he didn’t mine millions, but he did manage to mine a bit and stored it all on an old HDD external hard drive. It’s not hard to imagine what came next: The hard drive failed, and despite trying every data recovery method known to man, he was unable to retrieve his lost coins.
For James, it all went to pot, as the hard drive he used were still some of those old, non-solid state ones, and all of the data it contained was lost. When it comes to hard drives, the failure rate of HDD over solid-state drives (SSDs) is significant, so also make sure to go for a drive that is more robust, just in case.
Tip three: Consider using SSDs and robust hardware wallets wherever possible to protect your funds from hardware failures.
The Fake Giveaway
The protagonist of our next tale was just getting into cryptocurrency when he bought a few BTC, followed industry influencers and was doing all of the things that a good “Bitcoin bro” should. Then, one day, he stumbled upon an exciting opportunity offered by none other than a fake Twitter account impersonating a well-known crypto celebrity (an all-too-common occurrence). The scammer promised to double any BTC sent to a specific address and, believing that some rich celebrity would have his best interest at heart, he sent his coins to the scammer, and it was all over.
The sad thing is, after his negative experience, he dropped out of the crypto world and will probably never return to it. The story of his loss will echo out and discourage even more people from getting involved with Bitcoin. But, as the old adage goes, “If it looks too good to be true, it probably is.” Just be smart and don’t fall for stupid scams.
Tip four: Be cautious of online scams, fake giveaways and always verify the authenticity of any cryptocurrency promotion.
Coffee Shop Arbitrage
Now it is time to share one of my own mishaps: My friends and I used to meet at a small coffee shop halfway between our apartments to sit and chat while doing a bit of day trading with BTC. The coffee shop accepted bitcoin, which made it the perfect place for us to chill. Being the cautious guy that I am, my trusty hardware wallet was at hand, as I consider it the safest way to store cryptocurrency. So far, so good, right? No scams, I’m using a hardware wallet, have my private key written down in my safe at home, and all best practices have been followed.
But then, while comparing exchanges, I noticed a decent arbitrage opportunity between a Korean exchange and the one I had been primarily using for trading. So, I jumped on the opportunity, bought at one price, and was ready to go sell on a Korean exchange for a decent profit.
I sent the BTC from one exchange to the other and waited. As I sat there watching the screen, the price went up on the Korean exchange. Well, actually the price of BTC went down overall, but in the 10 minutes it took for the transaction to clear, the Korean exchange had closed the gap and the price was now the same as on the other exchanges. There I sat, transaction fee paid, my bitcoin on an exchange I did not want it on, and all for nothing.
To be fair, this is perhaps the smallest loss that I have mentioned, but it is something that can be avoided easily enough. Bitcoin is a long game and is all about the HODL. If you try to make a quick buck, you will probably run into some problems.
Tip five: Play it safe. Bitcoin is a long-term investment.
Keep Your Coins Safe
OK, so these are just a few ways in which you could stupidly lose your bitcoin holdings. While there are surely many other ways to, the five tips coming from these stories should serve everyone who is interested in Bitcoin.
It all boils down to not being greedy, falling for scams or chasing mismatched prices on some exchange or other. Remember to keep your seed phrase secure and randomized and keep everything securely offline so as not to lose all of your BTC if some software or hardware error occurs. And, above all, always keep in mind that investing in bitcoin is a long-term endeavor that will only truly pay off if you hang on to your coins in a safe and secure way.
This is a guest post by Konstantin Rabin. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
Published at Thu, 17 Aug 2023 14:00:00 +0200