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The world of cryptocurrencies offers great benefits for users and one of the greatest is self-custody. It is about the ability of people to manage and store their capital securely without the need for a trusted third party. However, self-custody can become a double-edged sword if undertaken carelessly.
Basically, that is the story of Stefan Thomas, a Swiss engineer living in the United States. In 2011, he made an audiovisual work explaining basic terms about Bitcoin. As a reward, the company that hired him paid him 7,002 bitcoins, which at that time was equivalent to just under $7,000 dollars.
Knowing the potential for future growth and wanting to keep his coins secure in a decentralized manner, Thomas opted for self-custody. In that sense, it stored the private keys of its tokens on an IronKey USB hardware. The problem is not very difficult to guess, the holder lost the backup copies with the device passwords.
Since then, Thomas’s life became a nightmare, with enormous anxiety and anguish to get his money back. At the current price of BTC, the theoretical fortune of the computer scientist amounts to more than $680 million. Another of the big problems that the holder faces is that its USB only offers 10 attempts to type the password before deleting the information.
Cryptocurrency self-custody requires a plan
According to the WIRED site, the owner of the USB with $681 million dollars in cryptocurrencies under self-custody has already typed the password boxes 8 times with failed attempts. That means you only have two attempts left before you lose your bitcoin seed phrases forever. He is currently working with some white hat hacking companies to try to crack the password.
Some of these firms claim that they decrypted the passwords of some of these USBs previously. Basically, they managed to hack the hardware code to create infinite password proof attempts. From there, with advanced computing, they make a brute force attempt with trillions of possible passwords until they find the correct one.
In 2021, when the price of BTC reached the all-time highs of the previous cycle, The New York Times interviewed Thomas. He stated that the level of stress to which he has been subjected for almost 14 years is extreme, especially when the price of BTC rises and he has no possibility of collecting a portion of the profits for himself.
According to data from portals such as Chainalysis, Thomas’ case is not isolated. Breaking away from centuries of bank custody tradition is not easy. Hence, carelessness has caused millions of bitcoins to be lost in lost passwords. In theory, the issuance cap of 21 million coins is much lower due to this painful involuntary token burning.
Self-custody in the short term is simple, but if the person plans to hold large amounts in the long term, they may face dangers. For example, leaving your coins as an inheritance in the event of death or memory loss requires a very sophisticated plan.
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