Stefan Thomas (Stephen Thomas) is a German-born programmer who lives in San Francisco. Half a month ago, he lost a password. How much is this password worth? As of the current value is about 240 million US dollars!

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A few years ago, Mr. Thomas lost a piece of paper on which he wrote down the IronKey's password, which allowed him to make 10 guesses before permanently encrypting the contents, but, so far, he has made eight guesses. Tried with the most common password format, still to no avail.

Thomas said: "I lay in bed and thought about it for a while." "Then I adopted some new strategies to crack it on the computer, but it still didn't work. It was really desperate."

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About 20% of Bitcoins have a high probability of being lost

About 20 percent of the 18.5 million bitcoins in existence, currently worth about $140 billion, are likely to be in lost or stranded wallets, according to cryptocurrency data firm Chainalysis. Employees at Wallet Recovery Services, a business that helps retrieve lost digital private keys, say they receive 70 requests a day from people in need to recover their wealth, three times as many as a month ago.

Bitcoin holders who need to recover their wallet private keys say they have experienced numerous setbacks in the process. Many of them have owned these digital currencies since the inception of Bitcoin ten years ago, but no one at that time would have believed that these numbers would be worth money, and would have the sky-high prices they are now.

"Over the years, let's say, I've spent hundreds of hours trying to reopen these wallets of mine," says Los Angeles-based entrepreneur Brad Yasar, who owns several desktop computers that include In the early days of Bitcoin technology, he created and mined thousands of Bitcoins. While those bitcoins are now worth hundreds of millions of dollars, he lost the private key many years ago and put the hard drive storing the key’s password in a vacuum-sealed bag, never to be found again.

Brad Yasar said: "I don't want to be reminded every day that what I have now is only a small part of what I have lost. This feeling is so crushing."

This dilemma is a stark reminder that Bitcoin has an extraordinary technical foundation that sets it apart from common currencies, that it is risky, and that once a private key/mnemonic is lost, it can never be retrieved. This is different than using traditional bank accounts and online wallets. Banks such as Wells Fargo and other financial companies such as PayPal can provide people with the passwords of their accounts or reset lost passwords, but Bitcoin cannot.

Interviewee: Stefan Thomas (Stephen Thomas) Photographer: The New York Times

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make yourself your own bank

Satoshi Nakamoto's vision was made possible by the structure of Bitcoin, in which it is controlled by a network of computers that agree to follow software that encompasses all of the cryptocurrency's rules, including a complex algorithm that creates an address and associated private key , known only to the person who created the wallet; this software also allows the Bitcoin network to confirm the accuracy of the password to allow transactions without viewing or knowing the password itself. In short, the system enables anyone to create a Bitcoin wallet without registering with a financial institution or undergoing any kind of identity checks.

So, this makes Bitcoin popular among criminals who can use the money without revealing their identity. It also attracts people in countries like Venezuela, where an authoritarian government is known for raiding or shutting down traditional bank accounts.

However, the structure of the system does not account for how poor people are at remembering and protecting passwords.

“Even seasoned investors are completely incapable of doing any private key management,” said Diogo Monica, co-founder of a start-up called Anchorage, which helps companies handle cryptocurrency security. Mr Monica founded the company in 2017 after helping a hedge fund regain access to one of its bitcoin wallets.

Mr. Thomas, a programmer, said he was drawn to bitcoin partly because it is not controlled by a single country or company. In 2011, while he was living in Switzerland, an early bitcoin fanatic gave him 7,002 bitcoins as a reward for making an animated video, "What is bitcoin?", introducing many people to the technology.

That year, he lost the private key to the digital wallet that held his bitcoins. Since then, as the value of Bitcoin has skyrocketed and fallen, and he has no access to the money, Mr. Thomas has started pushing the idea that people should be their own bank and own their own money.

"It's the whole idea of ​​being your own bank," he explained. "The reason we have a bank is we don't want to have to deal with all the things that a bank does."

Other bitcoin believers are also aware of the difficulty of being their own bank. Some people outsource the work of holding bitcoin to startups and exchanges to ensure that private keys can be stored in people's virtual currency.

However, some of these services have also had trouble securing their keys, and many of the largest bitcoin exchanges over the years, including the once-famous exchange Mt. Gox, have also experienced security issues such as theft.

Gabriel Abed, 34, an entrepreneur from Barbados, lost about 800 bitcoins in 2011 when a colleague reformatted a laptop containing the private keys to his bitcoin wallet — now worth about $25 million.

Mr. Abed said this has not dampened his enthusiasm for bitcoin. He said that before bitcoin, he and his islanders did not have access to affordable digital financial products, such as credit cards and bank accounts, that Americans could easily use. In Barbados, where even getting a PayPal account is nearly impossible, the openness of Bitcoin allowed him to fully enter the world of digital finance for the first time, he said.

"The risk of being my own bank comes with the reward of being able to use my money freely and being a citizen of the world, and it's worth it," Mr Abed said.

For Mr. Abed and Mr. Thomas, any losses due to mishandling of private keys were partially mitigated by the huge gains they made on the bitcoin they managed to keep. The 800 bitcoins Mr Abed lost in 2011 are just a fraction of the coins he has bought and sold since, allowing him to recently buy a 100-acre piece of beachfront land in Barbados for more than $25 million.

Mr Thomas said he also managed to hold on to enough bitcoins - and memorize the passwords - to provide him with more wealth than he knew. In 2012, he joined Ripple, a cryptocurrency startup aimed at improving bitcoin. He was rewarded with XRP, Ripple's own native currency, which appreciated in value.

(As an aside, recently, Ripple has gotten into some legal troubles, partly because the founders had too much control over the creation and distribution of XRP tokens, so it was prosecuted by the US Securities and Exchange Commission SEC early, causing currency price fluctuations severe.)

As for his lost passwords and inaccessible bitcoins, Mr Thomas keeps the IronKey in a secure device, which he will not disclose, in case cryptographers come up with new ways to crack complex private keys. Keeping it at a great distance helps him try not to think about it, he said.

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In the new era, it is imminent to change our outdated perceptions and ideas

Indeed, since the birth of Bitcoin more than ten years ago, the price has increased tens of thousands of times. Many early users have lost huge wealth due to insufficient knowledge and other issues. Many people still know little about Bitcoin technology, and its definition is still a scam. , In the new era, it is time to change your old cognitions and concepts.

The digital currency bitcoin has been in the news for years. However, because it is completely digital and does not necessarily correspond to any existing fiat currency, it is not easy for newcomers to understand. Next we explain in detail what Bitcoin is based on, how it works, and its future in the global economy.

In layman's terms: Bitcoin is a digital currency. The concept may be more complex than you realize: it's not just a designated monetary value stored in a digital account, such as a bank account or line of credit. Bitcoin has no corresponding physical elements, such as coins or notes (although there are popular images of actual coins to illustrate). The value and verification of a single bitcoin is provided by a global peer-to-peer network.

Bitcoins are ultra-secure blocks of data that are considered money. Moving this data from one person or place to another and verifying transactions (i.e. spending money) requires computing power. Users, known as "miners," allow the system to use their computers to securely verify individual transactions. These users will be rewarded with new bitcoins for their contributions. These users can then spend their new bitcoins on goods and services, and the process repeats.

Advanced Explanation: Imagine it's BitTorrent, the peer-to-peer network you sure weren't using to download thousands of songs in the early 2000s. Instead of moving files from one place to another, the Bitcoin network generates and verifies blocks of information represented in a proprietary currency.

Bitcoin and its many derivatives are known as cryptocurrencies. The system uses cryptography (an extremely advanced form of cryptography known as a blockchain) to generate new "coins" and to verify the transfer of coins from one user to another. The encrypted sequence serves several purposes: to make transactions nearly impossible to forge; to make "banks" or "wallets" of coins easy to transfer as data; and to verify the transfer of bitcoin value from one person to another.

Before bitcoins can be spent, they must first be generated or "mined" by the system. While conventional currency needs to be minted or printed by governments, the mining aspect of Bitcoin is designed to make the system self-sustaining: people "mine" Bitcoin by providing processing power from their computers to the distributed network, resulting in new blocks containing all A distributed global record of data for transactions. The process of encoding and decoding these blocks requires a lot of processing power, and users who successfully generate new blocks (or more precisely, users who generate random numbers that the system accepts as new blocks) are rewarded. Amount of bitcoins, or fraction of transaction fees.

In this way, the process of transferring bitcoins from one user to another creates a demand for more processing power donated to the peer-to-peer network, which will generate new bitcoins that can be spent. It's a self-expanding, self-replicating system that generates wealth...or at least a cryptographic representation of the value that corresponds to wealth.

In layman's terms: Suppose you buy a Coke with your debit card at the supermarket. A transaction consists of three elements: your card (which corresponds to the bank account and funds), the bank itself which verifies the transaction and transfer of funds, and the store which accepts the funds from the bank and completes the sale. Broadly speaking, Bitcoin transactions have the same three components.

Each bitcoin user stores data representing the amount of his or her coins in a program called a "wallet," which includes a custom password and a connection to the bitcoin system. A user sends a transaction request (buy or sell) to another user, and both users agree. The peer-to-peer Bitcoin system verifies transactions across the global network, transfers value from one user to another, and inserts cryptographic checks and verifications at multiple levels. There is no centralized banking or credit system: a peer-to-peer network completes encrypted transactions with the help of Bitcoin miners.

High level explanation: The technical side of things is a little more complicated. Every new bitcoin transaction is recorded and verified onto a new block of data in the blockchain. (The two parties in the exchange are represented by nonces, and even though they are being verified, each transaction is essentially anonymous) Each block in the chain contains the password.

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First, Bitcoin is real money in a purely economic sense. It has value and can be traded for goods and services. It's unlikely you'll be able to pay bills or buy groceries entirely in bitcoin (although those services do exist and are growing), but you can buy a surprising amount of stuff online with a bitcoin wallet. Currently, the largest companies accepting bitcoin include online computer hardware retailer Newegg, digital video game seller Steam, social network Reddit, and more general retailers such as Overstock.com or Subway restaurants.

But as interesting and fast-moving as it is, Bitcoin is simply not a substitute for traditional government-issued money right now: Landlords probably won’t pay Bitcoin for rent checks. Even if you happen to have a few dozen bitcoins available and you want to use the profits you make from them to buy a new car, the car dealership probably doesn't have the infrastructure for it as payment (despite being a private seller). So if you have bitcoins and want to cash them out in your country's currency, or if you want to convert them to bitcoins to buy, sell or invest, you need a conversion service.

Broadly speaking, converting Bitcoin to a more standard currency like USD, GBP, JPY, or EUR is a lot like converting from one of these currencies to another while traveling. You start in one currency, state the amount you want, give the value in the first currency plus transaction fees, and collect that value in the converted currency. However, since Bitcoin has no cash component and cannot be accepted for regular credit or debit transactions, a dedicated market exchange needs to be found.

Coinbase is currently the most popular marketplace and exchange in the U.S. It offers buying and selling services for Bitcoin and other similar cryptocurrencies, as well as exchanging USD and other standard fiat currencies for Bitcoin, as well as buying Bitcoin for USD and 31 other fiat currencies currency. The company does not charge any fees for exchanges between cryptocurrencies, but exchanging bitcoins for dollars deposited into U.S. bank accounts will charge users a 1.49 percent transfer fee. So transferring $10,000 worth of bitcoins from your own wallet to a bank account is actually worth 1.74 bitcoins plus a transfer fee of $14.9 or .00259 bitcoins. This is a fairly standard transfer for most verified markets and exchanges.

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bitcoin is valuable

A few years ago, when the new bitcoin system came out, individual users quickly "hunted" for new bitcoins. Bitcoin mining software uses a local processor, or even an additional processor, such as a computer's graphics card, to calculate the hash of the next block in the blockchain. Even though the number of people using and "mining" Bitcoin is small, each user mining will randomly confirm the next block at a higher rate, rapidly generating new Bitcoins for their account.

But this generation's prosperity won't last. The Bitcoin system is designed to make each new block harder to find than the last, reducing the number of random bitcoins generated and distributed. This means that each of their mining jobs has to work harder and harder over time (figuratively speaking, this is the computer working harder, using more power, and therefore spending more regular funds). As the number of individual bitcoins increases, the number of bitcoins rewarded for a successful hash will decrease. In effect, "whole" bitcoins are no longer generated by a single user at once, but are rewarded with a portion of bitcoins (which are still valuable).

Initially, users created custom "mining rigs" that used clusters of relatively cheap off-the-shelf CPUs and GPUs to increase their chances of generating bitcoins. The system is now so popular and widely distributed that a single user can no longer simply buy a screamingly fast GPU and expect to earn enough bitcoins to cover their traditional currency's value. Custom-designed "miners" are now sold for this purpose, with software and hardware whose sole purpose is to provide maximum computing power to the peer-to-peer system, resulting in a greater chance of completing a block. More processing power, more hardware, more opportunities to get paid...but, at the same time, you're spending more and more real resources on hardware and electricity.

As a result, rather than trading or selling goods and services, those looking to earn traditional wealth in Bitcoin try to set up a mining system and run it continuously.

Custom designed bitcoin miners for sale commercially on Amazon. At the current rate of generation, it would take months of mining time to earn back the hardware value in the bitcoins generated, plus the cost of electricity to run it.

Currently, the number of bitcoins in existence is between 12 million and 13 million. As more stuff is produced, they will become harder to mine. The system has an upper limit: after 21 million bitcoins are generated, no more can be mined. Based on current trends, the last full bitcoin will be mined sometime in the 2040s, and the last part of the coin reward will last about 100 years. Once the cap is reached, the currency's value will fluctuate almost entirely based on supply and demand, although "miners" can still earn bitcoins by lending their processing power to the transaction system and collecting transaction fees.

Bitcoin is valuable, but that value changes rapidly, much faster than any currency in a stable economy, or even most stocks and bonds. Changes in bitcoin's value can also be huge: as a function of its total value, bitcoin fluctuates more than ten times faster than the dollar.

In 2010, each full bitcoin was worth less than 25 cents. In late November 2017, each bitcoin was worth over $11,000 (with a sharp drop to $9,000 almost immediately afterwards). Clearly, this is a huge growth rate and a huge opportunity for anyone who got in early - if the original Bitcoin miners stuck with Bitcoin long enough, they could be millionaires by now. However, these two bits of data don't tell the whole story: Bitcoin has experienced multiple dips and "crashes," initially during a turbulent period in late 2013 and early 2014. Every time the value recovers, but there is no guarantee that the current climb will continue, or the entire cryptocurrency market will not collapse.

The value of Bitcoin grows and fluctuates wildly, much higher than traditional currencies, stocks or commodities.

This makes Bitcoin a dubious method of investing. It's true that many people make a lot of regular wealth mining and trading bitcoin, but unless it's moved into more stable currencies or investments, that wealth is as volatile as the market itself. The ups and downs of the bitcoin market seem to be faster and more frequent than those of major stock markets and exchanges. The current high price of Bitcoin could be just the beginning before a bigger boom, or it could be a temporary "bubble" with an imminent crash followed by a recovery...or the entire Bitcoin market could crash tomorrow leaving millions with nothing but worthless encryption sequence. There is no way of knowing.

However, this does not mean that Bitcoin will no longer have a place in the future. Let's talk about some of the advantages and disadvantages of Bitcoin over traditional currencies.

Anonymity and Privacy

Bitcoin purchases between individual users are completely private: two people can exchange bitcoins or fractions of coins between wallets without exchanging names, email addresses, or any other information, which is quite possible. And since the peer-to-peer network uses a new hash for each transaction, it's more or less impossible to link concurrent purchases to a single user. The nature of the peer-to-peer encrypted network also makes it protected from the outside: no one else can see your personal receipts and transfer history without first accessing the wallet.

No transaction fees (temporarily)

Regular cashless purchases include transaction fees: Pay with a Visa credit card, and Visa will charge the merchant a few cents to verify the transaction. Of course, the cost of this fee is passed on to you in the form of higher prices for goods and services.

Currently, Bitcoin has no mandatory transaction fees. Individual users and merchants can submit their purchases to the peer-to-peer network and just wait for the next block to be validated. However, this process can take some time (and the more networks you use, the more time it takes). Therefore, in order to speed up transactions, many merchants and users have increased transaction fees to increase the priority of transactions in blocks, thereby rewarding users on the peer-to-peer network to complete the verification process faster.

With the global Bitcoin supply reaching the 21 million coin limit, transaction fees will become the main method for miners to earn Bitcoin. At this point, presumably most transactions include a small fee just to complete the purchase quickly.

No central administration or taxes

Because no country recognizes bitcoins as an official currency, it does not regulate itself to buy and sell bitcoins and use them to buy goods and services. So anything you buy with Bitcoin is not subject to standard sales tax or any other tax that would normally apply to that good or service. If you're rich enough and interested enough to specialize in a lot of Bitcoin, then it's a huge financial benefit.

Exempt from most currency laws, Bitcoin is effectively a barter system. Imagine the current bitcoin supply as a giant pile of potatoes: if you trade in 10,000 potatoes for a new TV, the government will not collect sales tax in the form of 800 potatoes. It simply cannot process any transactions not made in its native currency.

However, you should know that any regular income from bitcoin transactions will be handled in the usual way. So if you transfer $10,000 worth of bitcoins to a bank account through the bitcoin marketplace, you need to report it as tax income. Trading bitcoin also doesn’t void other standard tax requirements: Even if you buy a new car via bitcoin from a private seller, you still have to register the car with the government and pay taxes based on its market value.

So if Bitcoin is so good, why isn't everyone using it? Obviously, it also has some drawbacks, especially in current times.

possible government intervention

Anytime something new comes around and challenges the status quo, the government needs to get involved to make sure things stay the way they should be. The truth is, the U.S. government and other governments are looking into Bitcoin for a variety of reasons. Just in the last few days, the U.S. government has started seizing some accounts from the largest Bitcoin exchanges. There may be more in the future.

no monetary sovereignty

Perhaps Bitcoin's greatest weakness is that it is not a "recognized" sovereign currency, that is, it does not have the full backing of any governing body. While this can be seen as an advantage, the fact that Bitcoin is not legal tender and is only accepted based on the perceived value of other Bitcoin users makes it extremely vulnerable to instability. In short, if one day the large number of merchants who accept Bitcoin as a form of payment stop doing so, the value of Bitcoin will drop dramatically.

Bitcoin's current high value is a function of both the relative scarcity of Bitcoin itself and its popularity as an investment and wealth generator. If confidence in the bitcoin market drops suddenly and sharply, for example, if a major government declares the use of bitcoin illegal, or if one of the largest bitcoin exchanges is hacked and loses its entire stored value, then the currency's Value will collapse and investors will lose a lot of money.

The U.S. Treasury Department does not recognize bitcoin as a regular currency, but recognizes it as a commodity such as stocks and bonds. Likewise, the US Internal Revenue Service considers bitcoin properties and taxes them when claiming bitcoins. No other country has declared Bitcoin a recognized currency, but interactions with Bitcoin and other cryptocurrencies vary by location. Several countries are investigating Bitcoin as a growing commodity market, some have taken the same position as the US declared its asset, and some have explicitly banned its use for the transfer of goods or services.

lack of protection

The Bitcoin network has no built-in protection mechanisms when it comes to accidental loss or theft. For example, if you lose the hard drive on which your bitcoin wallet files are stored (think drive failure that is damaged or has no backup), the bitcoins held in that wallet are permanently lost to the entire economy. Interestingly, this aspect further exacerbates Bitcoin's limited supply.

Additionally, if your wallet file is stolen or stolen, and the bitcoins in it were spent by the thief before the legitimate owner, the double spending protection built into the network means there is no recourse for the legitimate owner. For example, unlike your credit card being stolen, you can call the bank and cancel the card, Bitcoin does not have this authority. The bitcoin network just knows that the bitcoins in the infected wallet file are valid and handles them accordingly. In fact, there is already malware specifically designed to steal bitcoins.

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limited concurrent transactions

The Bitcoin block system requires peer-to-peer connections and confirmations for verification. Because each block contains a finite record of transactions and an upper limit on the number of new transactions that can be written, there is a limit to how many people can buy and sell using the system at any given time. As more vendors and individuals conduct business using Bitcoin, the number of transactions per second increases and the peer-to-peer network becomes congested, with some operations without transaction fees taking hours to clear. While traditional payment systems such as credit cards can simply scale their connectivity and processing capacity to speed up processing, Bitcoin's peer-to-peer isolation prevents it from scaling with the global financial system.

black market appeal

A central tenet of the Bitcoin system design is that there is no single transaction processor. As a result, individual users cannot be locked out of the system. Combine this with the inherent anonymity of transactions and it can serve as an ideal medium of exchange for nefarious purposes.

Bitcoin has become the ideal vehicle for illicit trade in goods and services. The most prominent case of this is Silk Road, a dark web site that allows users to anonymously trade items such as drugs and fake identities, all purchased with Bitcoin due to their untraceable nature. The story of Silk Road’s illicit trade didn’t even stop after the U.S. Drug Enforcement Agency and the Department of Justice shut down the site and seized its digital assets in 2013. A Secret Service agent is accused of stealing more than $800,000 in bitcoin from investigators, with holders of the seized digital currency being auctioned off for the benefit of law enforcement agencies.

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Topics of Debate and Controversy

Finally, let's pamper some of the controversies surrounding Bitcoin. While these conversation threads are interesting, most of what's in this section is speculation and should be taken with a grain of salt—we think they're worth mentioning to get a fuller picture of the Bitcoin story.

mysterious developer

The main designer of the Bitcoin specification is a man named "Satoshi Nakamoto". Since Nakamoto doesn't associate "his" identity with publicly known people, the personal is put in quotes here. Satoshi Nakamoto could be an individual, or an internet user, or a group of people, but no one really knows. Once the work of designing the Bitcoin network is complete, the person or team basically disappears.

Multiple individuals and teams of developers have theorized to be the "real" Satoshi Nakamoto, none of them have been conclusive at the time of writing. Whether it's him, she, or them, Satoshi Nakamoto is estimated to own billions of dollars worth of Bitcoin at current market exchange rates.

Resistance from traditional investors

Many experts in the standard money market and investing world believe that Bitcoin is a poor choice of investment currency. Relative to investments such as stocks, bonds and standard commodities, bitcoin's extreme volatility makes larger institutions more wary. Furthermore, some investors and investigators believe that Bitcoin and other cryptocurrencies are either an outdated fad (an economic bubble) and therefore an extremely risky investment vehicle, or a fraud in itself, which is a disservice to Satoshi Nakamoto. favorable. Satoshi Nakamoto and other early investors.

On the other hand, some of these statements were made specifically to manipulate the value of Bitcoin: JP Morgan Chase was accused of publicly questioning the value of Bitcoin through CEO statements while simultaneously making investments. As mentioned above, when buying goods or services or investing in transactions, it is still necessary to use them carefully, invest prudently, and do a good job in risk management.

Part of the information in this article comes from: https://www.nytimes.com/, https://www.howtogeek.com/