Oh Shit! The Lost Bitcoins Problem
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They are the stuff of nightmares.
If you don’t already know this one simple truth about lost bitcoins, now is a great time to learn it – once they’re gone, they’re pretty much gone for good.
For many, that’s a dealbreaker. If it wasn’t confusing enough to get your fiat currency onto an exchange, or to read a financial chart, or to know whether the entire $150 billion market could collapse any moment – why take the added risk of losing your cash to some foul-smelling hacker in a far-off land? (Or next door.)
But aren’t we all simply worried about the same thing we’ve been worried about our entire lives?
Aren’t lost bitcoins essentially the same thing as lost dollars, euros, or yen?
When you visit the store, you might take some cash with you. Enough to buy some groceries, probably not enough to buy a car. Why not? Because of a series of reasonable and prudent fears engendered by years of habit, societal norms, and (quite possibly) personal experience.
Fear #1: Around the corner lurks a mugger. Hopefully, the thief only takes your cash and driver’s license. Losing grocery money is an inconvenience, but losing enough cash to drive off in a new Volkswagen is possibly life-changing.
Fear #2: Through personal incompetence, which most of us have in spades, you accidentally leave your Golf GTI on the counter at the grocery store. Or drop it down a grate while fishing for keys. Or fall in a lake and soak it to the point of uselessness.
Fear #3: The salesperson at the VW dealership spies all that lovely cash bulging from your purse or jeans, and she now knows exactly how interested you are in this shiny new toy. Forget the dealer incentives, you’re paying sticker now, bucko.
And so on, and so forth. Carrying large amounts of fiat cash is a bad idea, generally. And even if you’re absolutely unafraid for any other reason and every dime you’re carrying is 100% legitimate, a simple traffic stop for cruising at 5mph over the limit can become an exercise in tiresome explanation when the cops spy the $45,000 on the passenger seat.
How do we deal with these fears? We carry credit cards. Credit cards allow banks to charge us interest at punitive rates, which essentially replicates Fear #1 on a more socially-acceptable level. Credit cards also allow banks to exercise their own corporate incompetence (Fear #2) by opening fake accounts in our names, blowing up the world economy, etc. etc. ad nauseam. And of course, you basically can’t buy a car on a credit card anyway, because dealerships don’t want to pay the merchant fee. So at least you don’t have to worry about that.
But cryptocurrency is far worse because…
Well, maybe not. The same fears are common to cash, credit card, and cryptocurrency alike. Fear of your money being stolen (muggers, banks, hackers). Fear of incompetence (losing your cash, allowing Equifax access to your social security number, sending your Ether to a carpet store in Muncie).
The fears are the same. Cryptocurrency is new, and so we haven’t yet formed normal habits around it. And – to be fair – the sums of money that some people are losing are more substantial than a few bucks you dropped in Safeway.
But that doesn’t mean that these pre-existing fears can’t be mitigated by precautions, just as you protect your cash. In fact, one of the great promises of cryptocurrency is that ‘lost bitcoins’ don’t HAVE to be part of normal life at all. Our introductory post on security details SEVEN ways that crypto is actually safer than cash or credit cards, if you have the diligence and caution to use it correctly.
Thirty years ago, it’s hard to imagine anyone in the USA (or most countries) being comfortable with their financial institution sharing their identities with the highest bidder – or simply forgetting to close the door to hackers. Now, it’s part and parcel of life.
We traded the false security of cash for the false security of the banking infrastructure a long time ago. Isn’t it worth at least investigating how blockchain technology can end the cycle of financial fear?
Oh, and one more way to avoid the ‘lost bitcoins’ phenomenon: avoid tequila transfers. They never end well.