According to some estimates, as much as 20% of the entire supply of bitcoin might be lost and irretrievable.
Oftentimes, it can be impossible to find or recover lost bitcoin. That’s why it’s important for users who choose to hold their own private keys, a 256-bit string of numbers, to have a backup seed phrase stored safely. The best way to deal with this problem might be to make sure it never happens in the first place.
That being said, there are some ways to try and recover an old bitcoin wallet. The best approach methods–and whether or not it will work–depends on how you lost the wallet. Read on for a guide that could help you find lost bitcoin in cases, when possible.
What Does It Mean for Bitcoin to be Lost?
The answer to the question “Can you find lost bitcoin?” depends on how you define lost.
Typically, people trying to find lost bitcoin have taken ownership of their private keys and then lost the keys, the wallet password, the seed phrase, or other tools that would help them recover an old bitcoin wallet.
Coins also get “lost” when they are sent to the wrong address. Sometimes people make the mistake of sending bitcoin (BTC) to a bitcoin cash (BCH) address, for example. This often results in permanent loss of funds. Because bitcoin is immutable, it’s impossible to reverse a wrong transaction. Fortunately, this has become rarer now that many wallets have a feature that checks the recipient’s address for validity before allowing a transaction to go through.
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Finally, you could lose your bitcoin by forgetting the password for a crypto exchange account. In most cases, however, the crypto exchange will let you create a new password. Similarly, if you lose a physical hardware wallet, you don’t necessarily need to recover your old bitcoin wallet. You can get a new wallet and restore their balances using your old backup seed phrase, a sequential list of random words used like a password.
What Happens if You Lose Your Bitcoin Wallet?
Recovering unclaimed bitcoin is not easy. There are many cautionary tales about people who have lost millions upon millions of dollars’ worth of bitcoin and still don’t have access to it. Many of them may never recover their coins.
Those who have been unfortunate enough to have lost bitcoin could still have some options available to them, though.
Recovering Private Keys
Some developers have created programs that help recover the private keys to a bitcoin wallet. That this only works in cases in which the loser has deleted some or all of their keys. A program usually can’t help those who have forgotten their passwords, PIN numbers, or backup seed phrases. But if the user mistakenly deleted files with the relevant information, they may be able to recover them. If a user has a portion of the private key, it may be possible to find the rest of the key.
These tools use brute force tactics and other algorithms to attempt to figure out the missing passwords.
Recommended: What is a Private Key in Cryptocurrency?
Recovering the Assets from a Lost Wallet
When you use a hardware wallet, your assets remain on the blockchain. You’re simply using the wallet to store your recovery seed. As long as you have the backup recovery seed, you can enter that into a new wallet and regain access to your crypto assets.
Prevent Lost Bitcoin by Safely Storing and Sending It
Bitcoin allows anyone to become their own bank. This has several advantages, but it also brings new risks. Mainly, the risk that users might not be able to recover an old bitcoin wallet to which they’ve lost the private keys.
Still, many people choose to store their private keys in a cold storage wallet in their personal possession because this can be a very secure, long-term method of holding coins. The one big tradeoff is that doing so puts 100% of the responsibility for securing those funds into the hands of the bitcoin holder.
The best way to prevent permanent loss of bitcoin is to make sure that you safely and securely store your coins in the first place and avoid mistakes when sending bitcoin.
Those who only hold small amounts of bitcoin might want to consider leaving it on a crypto exchange. While this makes the coin more vulnerable to hackers or theft, it also eliminates the possibility of losing coins to an abandoned bitcoin wallet.
That said, many bitcoin holders want to take possession of the private keys to their bitcoin using a hardware wallet or paper wallet. When doing so, there are several steps you can take to decrease the likelihood that you’ll lose the assets.
• First, when setting up a new hardware wallet, safely store the backup recovery seed phrase.
• Second, create a PIN or password that is either easy to remember or write it down and keep it somewhere safe.
• Third, keep your wallet somewhere that you won’t forget. Some people even elect to keep their hardware wallets on their person at all times, putting it on their keychains, for example.
You might also consider using a paid service that helps users hold their private keys using multi-signature wallets. For example, you might need their mobile phone and a hardware wallet to access your keys, while the service provider has another piece of the multisig key in case you lose one of your own pieces.
Making a mistake when sending a bitcoin transaction, whether from an exchange or from a private wallet, can result in total loss of funds. In this case, there’s zero opportunity to find lost bitcoin. Here’s how to prevent that from happening:
• Whenever possible, use a QR code. Sending coins to a QR code prevents mistakes in the address. Using a string of characters can result in the funds being lost if even one character is off.
• Always double-check to make sure the currency you’re sending matches the one received. For example, that bitcoin being sent is going to a bitcoin wallet. Many wallets and exchanges do this automatically, but it’s worth double checking.
• When sending larger transactions, send a small amount of coins first. After the transaction has at least one confirmation on the network, then send the rest of the transaction.
These simple steps will go a long way toward helping holders avoid sending erroneous crypto transactions.
No matter what type of cryptocurrency you’ve lost, it can be almost impossible to recover, and the easiest way to find lost bitcoin is to make sure it never gets lost in the first place. Doing so involves secure wallet set-up and back up while also being careful when sending transactions.
One way to invest in bitcoin without worrying about losing your wallet, is by purchasing crypto via the SoFi Invest® brokerage platform. SoFi Invest is not a crypto wallet, but it allows you to trade crypto in real-time through an easy-to-use app.
Photo credit: iStock/anilakkus
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