Weak crypto security can cost fortunes – Weekly news 3/2021


Despite heavy price swings, Bitcoin is still faring far better than in previous years. The recent intense rise has also created a lot of wealth for investors. But this enrichment has its flip side, as growing wealth also carries a higher risk of losing it.

Unfortunately, this has been the case for many Bitcoin and cryptocurrency users. Particularly early adopters may already have lost access to their wallets and private keys in numerous ways. In the past week we have seen several of these grievous stories surface.

Therefore we will this week focus on why taking care of one’s own crypto assets is so important. Any crypto users taking themselves seriously should also be acquainted with proper data security. Many have not done so with dire consequences – leading them to comb through landfills in search of lost hard drives and shattered dreams.

In other news we will talk about the Capitol Hill riots, in which key players were apparently funded with bitcoins by a now-deceased French donor. Furthermore we will discuss Goldman Sachs and JPMorgan, the latest institutional parties to enter the crypto market.

Last week’s news can be read here.

An estimated four million BTC have been lost forever, adding to the already scarce asset’s value.

25% of crypto users have weaker security than they think

Cryptocurrency hardware wallet manufacturer Ngrave has released initial results from a still ongoing survey. The survey assessing crypto security reveals roughly a fourth of all crypto users do not protect their funds as well as they believe.

According to the survey, around 62% of users keep at least a part of their currencies in one or more exchanges. Within this group up to 96% are using two-factor authentication, but a quarter neglects making a backup version of their 2FA codes.

Nearly half of all users store their login details either online or otherwise inconsistently. In turn 44% of exchange users do not maintain a list of reliable addresses to which coins from the exchange could be transferred.

87% of physical hardware wallet users maintained a practice of sending test transactions before transferring larger amounts. However, 67% also kept safety copies on paper, meaning they would be jeopardized if they fell into the wrong hands.

The higher the value of cryptocurrencies climbs, the more it underlines the importance of carefully assessing one’s own data security. Two-factor authentication is recommended for all service users, while personal safety copies should be stored so that finding them does not automatically grant access to the funds. No essential login credentials should be kept online.

The higher cryptocurrency prices soar, the more valuable data security also becomes.

Coder locks $200M in BTC behind lost password

American coder Stefan Thomas has made headlines after reporting he has bitcoins worth around $217 million at the moment. The only problem is he has lost his password and can’t access the funds.

Back in 2011 Thomas received a donation of 7 200 BTC after making a tutorial video about Bitcoin. Back then the cryptocurrency’s price was counted in single-digit dollars. Thomas had forgotten his bitcoin trove, until he noticed the value had skyrocketed to unprecedented levels.

The IronKey solution used by Thomas is peculiar in that it only allows 10 attempts at guessing the password. If the user fails in all these attempts, the bitcoins will disappear into digital oblivion.

Thomas has already attempted accessing his funds eight times to no avail. This means he only has two remaining attempts to retrieve his fortune worth a fifth of a billion.

Concerned fellows on the internet have tried to come up with different solutions for Thomas, but so far his bitcoins remain firmly locked behind digital bars.

A good password is necessary for protecting crypto assets, but it is also worth remembering.

Thousands of BTC buried in Welsh landfill

The price rise of Bitcoin has also brought up another tragic story of lost treasures. Welsh IT worker James Howells mined bitcoins around the year 2010, garnering a total of around 7 500 units. However, Howells later inadvertently threw away the hard drive containing the private keys to his BTC wallet, which ended up in a local landfill.

Howells did his best to search the hard drive from the landfill, but his attempts failed. Trying to find a single hard drive from a landfill is like searching for a needle in a haystack without a magnet.

Now Howells has offered the city of Newsport a quarter of all his bitcoins if the city council allows him to even study the landfill thoroughly. The city has so far not even been willing to negotiate on the matter.  

Howells’ hard drive may in the future become a buried treasure tale comparable to pirate stories. Already now it is likely some gold diggers have been scavenging the place, and bitcoin’s rising value is likely to only inspire similar bounty hunters.

(Photo by Cezary p - CC BY-SA 4.0)
Many landfills may conceal small fortunes worth of lost cryptocurrencies. (PHOTO: Cezary p – CC BY-SA 4.0)

Deceased frenchman funded Capitol Hill riots

Blockchain analysis firm Chainalysis has released reports about an unknown French donor funding extremist groups before the Capitol Hill riots. According to Chainalysis, the Frenchman sent a total of 28 150 BTC to 22 different addresses, of which many belonged to far-right activists with online visibility. At the time, the donations of the day were worth roughly $522 000 dollars.  

The donations were sent on the 8th of December. The largest donation of 13.5 BTC was received by online personality Nick Fuentes, who has declined to comment on the case. Other significant donations were given to webpage VDARE and Ethan Ralph known from the GamerGate controversy.

The exact identity of the donor remains unknown. However, Chainalysis has gathered evidence strongly suggesting he was a now-deceased French computer programmer active with Bitcoin since at least 2013.

Chainalysis traced a blog believed to belong to the donor. The blog had been inactive since 2014, until it again showed activity on the 9th of December. The last message sent to the blog appears to be a suicide note. French sources have later confirmed the person in question is dead.

(Photo by Tyler Merbler - CC BY 2.0)
At least some rioters are believed to have planned their actions in advance. (PHOTO: Tyler Merbler – CC BY 2.0)

Goldman Sachs wants to provide crypto custody

One of the world’s biggest business banks Goldman Sachs is reportedly exploring digital asset custody in order to provide cryptocurrency services to their customers. The news comes from an inside source at at the bank.

“Like JPMorgan, we have issued an RFI looking at digital custody. We are broadly exploring digital custody and deciding what the next step is,” the anonymous source revealed.

The plans by JPMorgan and Goldman Sachs are related to a regulatory change in the United States giving more leeway to financial institutes interested in digital assets. Last week the San Fransisco-based bank Achorage was approved as the first national digital bank and licensed cryptocurrency custodian.

Goldman Sachs is one of the largest American banking institutes. (PHOTO: BigMac – CC BY-SA 3.0)

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