The New Yorker recently published a profile about early bitcoin user James Howells, who mined about 7,500 BTC using his gaming computer in 2009, only to discard the hard drive storing his private keys while cleaning his home office. That trove, worth today approximately $383 million, is likely sitting in a dump in Newport, Wales.
Howells thinks he has a decent chance of recovering the hard drive. He’s worked to raise £5 million ($6.6 million) to finance an excavation. That project would dig up and sort through 40,000 tons of household waste, buried for nearly a decade. But the Newport government thinks it’s too dangerous and isn’t worth the cost.
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The story is familiar enough: There are plenty of tragic tales about people throwing out their old computers, forgetting passwords or getting hacked. Sometimes people regret spending bitcoin too soon. One South Carolina hypnotist even markets services around helping people recall forgotten private key pairs.
Sad though it may be for Howells, this is simply how bitcoin works. In creating a tamperproof, append-only distributed database, bitcoin founder Satoshi Nakamoto also created a monetary system that would be very hard to hack, censor or dismantle.
Howells told the New Yorker, if it were any other way, if he or anyone else were able to reverse the Bitcoin blockchain to recover lost coins, then so would nefarious actors – like governments or corporations.
Some bitcoin boosters and critics alike say the network will never become a widely adopted payments system without the ability to reverse transactions. Real life is messy – people make mistakes or change their mind. Having that fallback is good for business.
The amount of capital in this industry obscures the relatively simple aims Nakamoto set out to accomplish. A healthier view might be that crypto – admittedly a difficult thing to wrap your head around, let alone use – is a better fit for a small subgroup of sophisticated users. That sounds elitist. But changing bitcoin at its core isn’t crypto; it’s fintech.
On this subject, Nakamoto wrote about irretrievable coins as a “donation to everyone.” The more coins that are permanently taken out of circulation, the more valuable the rest become. Data analytics firm Chainalysis estimates that about a fifth of all coins mined to date (somewhere between 2.78 and 3.79 million) are lost.
Blockchain rollbacks have happened before, and will likely happen again. The version of Ethereum we all know and love is the result of a reimbursement plan for victims of the DAO hack. The issuers of U.S. dollar-pegged stablecoins tether and USDC routinely freeze funds. But it will almost, certainly never happen to bitcoin. And that’s its strength.
There’s a price tag, often a painful one, attached to lost coins. But bitcoin’s core principles, of censorship-resistance, of personal responsibility, are invaluable.
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