What to do in Case of Bitcoin Loss Caused by Hardware Failure
So called cryptocurrencies, especially Bitcoin, are all over the news. The enormous increase of more than 1000% in value over the last 12 months and then its 50% decline in the last 3 weeks, made headlines all over the world. Many governments officials, both in the western world as well as in Asia, are concerned and have warned private individuals not to participate in the bitcoin "gold rush." However, even with these concerns and the decline in value, somebody who has bought or mined bitcoins a couple of years ago has made a lot of money!
This is why many old bitcoin miners and early adopters who wanted to push blockchain technology years ago - and who forgot about having them - are now trying to recover their "money." Additionally, there have been a lot of cases where computer users have had all kinds of bad luck, like hard drive failures, controller issues, and encryption problems which have lead to bitcoin loss. While in the old days this was just a loss of some play money and worth buying a cheeseburger, we are now talking serious amounts of cash.
One interesting case that was not picked up by media as much as it should have, happened in August 2017. It clearly showed that having a functional backup is even more important for bitcoin holders as it is already necessary for all computer users with their normal data.
In a very exciting and informative post in the special bitcoin subgroup on Reddit, a user detailed the misery he had to endure: His mom´s house burned down with his computer inside. Even though he managed to grab his USB stick with the bitcoin wallet backup, this was – as was the computer with the built-in SSD drive - also hit hard by fire. In his post he stated that the bitcoin wallet saved on the computer stored an amount of 17 BTC. At the time of the loss the bitcoins were worth almost $50,000. Now they're listed even higher - at around $175,000. Since he and his mom had suffered serious financial loss, he now was requesting help on how to recover his bitcoins.
However, he made a big mistake: All of his bitcoin wallet backups were stored in the burned house nearby the destroyed computer – so they all were damaged by fire – and one of the bitcoin wallet backups was a paper one (which is normally a good idea, but not when your store it in a non fireproof environment). Obviously the paper burned immediately when hit by the flames.
What the Reddit post did not finally answer was if the person was successful in recovering his bitcoins. However, he is definitely not the only one. Crashed hard drives or unintentionally deleting the wallet obviously happen quite often.
So, in instances of bitcoin loss due to hardware problems, the best thing to do is to contact a data recovery service provider immediately. In many cases they are able to recover the wallet as if they would normally recover any other sensitive file.
However, one important piece of information they can not recover - the 12 or 17 word long password that secures and encrypts the wallet. At least this piece of paper should be kept in a secure place like a bank safe. Without this password neither you nor any data recovery expert in the world are able to access the wallet and your bitcoin addresses and private key stored within.
Tim Reckmann / pixelio.de