Disclaimer: The information in this blog represents the opinions of its author and is for educational purposes only. It is not intended as investment advice. Cryptocurrency markets are extremely risky so you should only invest money you are willing to lose.
In The Game
Anybody can make a wrong bet on the price of a cryptocurrency. There's no shame in that. In fact, it may be a source of pride - like a battle scar - at least you had the chutzpah to get into the game.
How To Feel Like An Idiot
But losing money out of carelessness, forgetfulness, or sheer stupidity - now THAT's embarrassing. Imagine if you were James Howell, who mined 7,500 bitcoin when they were nearly worthless, and then carelessly threw away the hard drive they were stored on a few years later. Those coins would be worth more than $100 million today. There's just no way around it - you gotta feel like an idiot.
Welcome to the bizarro world of lost cryptocurrency. There are an estimated 2-3 million "lost" bitcoins - and we're not talking stolen or hacked - those are presumably still in circulation under the control of the thieves or hackers. We're talking lost, as in vanished, vaporized, evaporated into the digital netherworld, like gold bars lost at sea or a bonfire of $100 bills.
You Can Lose It .... DUH!
I have no idea why people are surprised to learn that it's possible to lose cryptocurrency. Read Satoshi's paper - cryptocurrency is "peer-to-peer digital cash" That warrants repeating - it's digital CASH. Try this experiment - fill a wallet with cash (and no ID) and leave it on the sidewalk. Come back an hour later. Guess what? You just figured out how easy it is to lose digital cash.
Different Mechanics, Same Principle
The mechanics of losing the digital variety is slightly different, but the same principle applies. Instead of a wallet made of leather, digital currency is stored in a virtual wallet. These wallets have a public address, which is a long string of random characters that is used to send and receive, and a private code for the owner to access their crypto-funds.
Unbreakable cryptography is what secures cryptocurrency and makes it virtually impossible to alter, manipulate, hack, or counterfeit. It's not the math, but human stupidity that makes it vulnerable.
Storing Your Codes
You can store your private codes on a computer of course, but if you don't back it up and it crashes, they're gone. A USB "hard wallet" will store them offline for you - but what if you lose that? The wallet manufacturer, like Trezor for example, will give you a "recovery seed" - a series of random words that can be fed into a cryptographic key-generation algorithm to reassemble your private key. Better write those down and keep them in a safe place.
A third party app or cloud-based wallet are also options, but again this potentially exposes your private keys to the possibility of hacks or theft.
Got a PhD?
If you don't have a PhD in cryptographic math, I wouldn't blame you at this point for being somewhat flummoxed by this dazzling array of choices. You're not alone. Non-tech-geeks attempting to navigate this convoluted cryptographic labyrinth has led us to the present situation of several million bitcoin having disappeared.
The funny thing about this strange new world is that as more money keeps pouring into the crypto-space, and the value of cryptocurrencies keep rising, people are willing to go to absurd lengths to recover their lost coins.
The author of this piece in Wired was sidetracked before he could execute his plan to punch his recovery seed into sheet-metal for safekeeping. Having forgotten his PIN, he relates a heart-pounding tale in which the time-delay between PIN-entry attempts doubles every time you get one wrong - he quickly gets to 2,048 seconds (34 minutes) and calculates that he will have to wait 34 years for his 31st guess.
Your Hypnotist Will Take Her Cut
The author's harrowing journey included a trip to a hypnotist, and it turns out that bitcoin recovery has spawned its own little hypno-specialty. Most hypnotists accept bitcoin as payment and some may negotiate a percentage of any recovered funds. Veronika Marymur is a hypnotist who has reportedly helped half her clients recover their lost bitcoin.
Metal? Stone? How About Skin?
Punching it into sheet metal or carving it into stone still seem a bit iffy? How about storing your bitcoin address on, or even IN your own body? Some people get QR codes tattooed onto their body (presumably in private areas), and - are you ready for this? - there's even a bio-implantable NFC (near-field communication) chip that serves as an implantable wallet.
A Bank In The Palm Of Your Hand
A tiny RFID chip (the same radiofrequency device used to track products and pets) in a glass capsule can be discreetly implanted under the skin (it won't show up on an airport body scan). It receives data and power from paired devices via NFC antennas. Since you can store twenty-six 33-character keys and it can be overwritten more than 100,000 times - you could store all your cryptocurrency for an entire lifetime in the palm of your hand.
Pretty soon your wallet anxiety may be gone and making payments will be as simple as the wave of a hand.