As Bitcoin Prices Swing, Millionaires Lose Sleep Over Lost Keys – The New York Times
“Even sophisticated investors have been completely incapable of doing any kind of management of private keys,” said Diogo Monica, the co-founder of a start-up called Anchorage, which helps companies handle cryptocurrency security. Mr. Monica started the company in 2017 after helping a hedge fund regain access to one of its Bitcoin wallets.
That year, he lost the digital keys to the wallet holding the Bitcoin. Since then, as Bitcoin’s value has soared and fallen and he could not get his hands on the money, Mr. Thomas has soured on the idea that people should be their own bank and hold their own money.
“This whole idea of being your own bank — let me put it this way, ‘Do you make your own shoes?” he said. “The reason we have banks is that we don’t want to deal with all those things that banks do.”
Other Bitcoin believers have also realized the difficulties of being their own bank. Some have outsourced the work of holding Bitcoin to start-ups and exchanges that secure the private keys to people’s stashes of the virtual currency.
Yet some of these services have had just as much trouble securing their keys. Many of the largest Bitcoin exchanges over the years — including the onetime well-known exchange, Mt. Gox — have lost private keys or had them stolen.
Gabriel Abed, 34, an entrepreneur from Barbados, lost around 800 Bitcoins — now worth around $25 million — when a colleague reformatted a laptop that contained the private keys to a Bitcoin wallet in 2011.
Mr. Abed said this did not dim his enthusiasm. Before Bitcoin, he said, he and his fellow islanders had not been able to access affordable digital financial products like the credit cards and bank accounts that are easily available to Americans. In Barbados, even getting a PayPal account was almost impossible, he said. The open nature of Bitcoin, he said, gave him full access to the digital financial world for the first time.
“The risk of being my own bank comes with the reward of being able to freely access my money and be a citizen of the world — that is worth it,” Mr. Abed said.
For Mr. Abed and Mr. Thomas, any losses from mishandling the private keys have partly been assuaged by the enormous gains they have made on the Bitcoin they managed to hold onto. The 800 Bitcoin Mr. Abed lost in 2011 were only a fraction of the tokens he has since bought and sold, allowing him to recently buy a 100-acre plot of oceanfront land in Barbados for over $25 million.
Mr. Thomas said he also managed to hold onto enough Bitcoin — and remember the passwords — to give him more riches than he knows what to do with. In 2012, he joined a cryptocurrency start-up, Ripple, that aimed to improve on Bitcoin. He was rewarded with Ripple’s own native currency, known as XRP, which rose in value.
(Ripple has recently run into its legal troubles, in part because the founders had too much control over the creation and distribution of the XRP coins.)
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