Ethereum Co-Founder Warns: Crypto Loss Is as Big a Risk as Theft

• In a recent post, Ethereum co-founder Vitalik Buterin urged the crypto industry to consider the rampant loss of assets in their robust wallet security solutions. 
• Previous reports have estimated that a huge portion of the Bitcoin circulating supply has been stuck in wallets with forgotten passwords. 

In the latest X post, Ethereum co-founder Vitalik Buterin has “shared the pains” of losing crypto assets through other means apart from theft. According to him, a lot of people are victims of this, but have chosen to remain silent since “there is no attacker to go after.” Additionally, he believes that the affected individuals who resort to blaming themselves are often too ashamed to talk about it. However, this happens daily.

Further explaining the factors that lead to this, Vitalik pointed out that losing cryptos mostly occurs through software bugs, lost devices, forgotten passwords, upgrading devices without backups, fire outbreaks, etc. To address this problem, Vitalik urged the industry to factor this into the “so-called” truly robust wallet security solutions that need to be built.

Source: Vitalik Buterin

Previous Research on Lost Cryptos

The issue of lost cryptos has been the centre of most research reports in the past couple of years. In 2023, blockchain analytics firm IntoTheBlock disclosed that 29% of Bitcoin’s total circulating supply was considered to be lost. Per the data, these assets have been “sitting” in wallets that have been inactive for more than five years.

In a different report by Glassnode, 7,781,224.168 BTC were reported to be lost. At the time of that report, Bitcoin was trading at $30,000. Mathematically, this positions the value at a little over $235 billion. A study we reported on in 2021 also highlighted that around $4.8 billion worth of Bitcoin (at that time) existed in wallets without passwords. Meanwhile, a survey conducted by CryptoVantage also hinted that 40% of crypto owners in the US had lost their wallet passwords.

One of the most recent research was conducted by the team at crypto exchange Coinsdrom. According to them, 3 to 4 million BTC (14% to 20% of the total supply) could be lost forever. Meanwhile, Chainalysis data suggests that a significant portion of the lost Bitcoin may belong to early adopters, miners, or individuals. As stated by researchers, between 2.78 million and 3.79 million BTC were either lost due to forgotten passwords, misplaced private keys, or hardware malfunction.

People who lost their Assets

One notable victim of this was Stefan Thomas, a programmer based in San Francisco who could not access his 7,002 Bitcoins. As detailed in our last news piece, Thomas could not remember the password to access the private keys of the wallet that contained the asset. Speaking of this experience, Thomas called this a “painful memory” and advised others to take lessons by testing their backups frequently to make sure they are still working properly.

In another report, a Norwegian man who received 4,100 Bitcoin from a friend for assisting him in mining the asset in 2009 lost it all after formatting his drive in 2013 while fixing his laptop. At that time, his Bitcoin was worth $7.8 million. Later in 2019, a CEO of a crypto exchange also hinted that he had lost the password for the Bitcoin cold wallets, as explained in our previous coverage.