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In 2013, when it was still possible to extract bitcoins at home, WIRED was sent a small and elegant mine device manufactured by the now vanished Butterfly Labs. We turned on the car from the Roku area in our San Francisco offices and we allowed him to do his job. A small fortune was soon amassed, now worth around $ 100,000. So, we lost money. Forever.
Here's what happened to the 13 Bitcoins of WIRED and the millions of others who faced the same fate.
Stefan Antonowicz, then head of engineering at WIRED, created the miner. Robert McMillan, former senior writer for WIRED (who now works at The Wall Street newspaper), so he wrote about it. "When we received that Butterfly miner, we had a new ethical question: what do you do with the proceeds of a review device that essentially prints money?" says McMillan.
First, it is probably worth explaining how WIRED has amassed his six-digit Bitcoin fortune. While fiat currencies, such as the dollar, rely on banks and government regulators, Bitcoin operates on a peer-to-peer network monitored by an army of volunteer miners running specialized software. Every 10 minutes, all miners in the network run to solve a series of complex cryptographic mathematical problems. Winning computers receive a slice of 12.5 new bitcoins. (That number is halved every four years, it was 25 when we got our miner.) Usually, the fastest computers on the network solve problems first.
Over time, puzzles have become more difficult, leading to a kind of cyber-powered arms race. When Bitcoin was launched for the first time, it was possible to extract coins using an everyday computer. These days, you'll need specialized hardware far more powerful than the miner WIRED Butterfly Labs. Currently there are about 17 million bitcoins; by 2140, all 21 million planned Bitcoins will have been extracted. You can learn more about the process in our Bitcoin Guide.)
The WIRED miner essentially won the Bitcoin mathematical lottery a couple of times, allowing him to generate just over 13 coins in the net. So, the staff had to figure out what to do with them. "We had a long conversation over several weeks about what to do with the money," says Michael Calore, WIRED senior editor who has been on the magazine since 2006. Some staff members have said that Bitcoin should be donated, or set aside for a charitable purpose in the future. Others said it had to be permanently destroyed. What was of the agreement was that money should not simply sit there, because it could affect the way the magazine reported cryptocurrencies.
"I said we had to download it and donate the money to charity as soon as possible or we would not be able to cover Bitcoin," says Adam Rogers, WIRED's deputy editor. "We had to reveal it in every story." In the end, it was decided to destroy the private key, which unlocks the Bitcoin wallet and allows you to spend the funds.
"We talked about giving it to a journalism institution or putting it aside as a scholarship, but we decided that if we benefited, it would have colored our future bitcoin coverage," says Calore. "So we just destroyed the key, knowing full well that in the end it could be worth six or seven digits." McMillan then published a story announcing that the key had been torn to pieces.
Launch of the key
To manage bitcoins, at least two different keys are needed, one public and one private (the new security protocols allow you to add more private keys). Together, the combination of codes allows you to exchange Bitcoins without an intermediary such as a bank. You can search for the WIRED public key to send us money, and in theory, we could use our private key to access those funds, if we did not destroy it. It is extremely unlikely that we can successfully guess the code: it is 64 digits long and nobody remembers what it was.
There are no additional copies of the private key, at least according to the people who were present. "I did not make a copy of the paper, or I did not memorize the 64 characters," says Antonowicz, the technologist who created the miner. The good news is that if someone moved the coins, the transaction would be public, allowing WIRED to see where they traveled. In fact, you too can check the lost Bitcoins of WIRED here.
In theory, we might be able to recover the Bitcoin wallet from the hard disk where it was stored, but even this would not help much. "There may have been a way to recover the wallet in a forensic way – with the encrypted key – from my hard drive, but I destroyed that particular record years ago," says Antonowicz.
Furthermore, even if the wallet was risen, it is encrypted. Breaking that protection through brute force would require an unimaginable amount of time. There are three times as many possible combinations as there are atoms in the observable universe, according to the Antonowicz count.
"Originally I was going to say that the closest metaphor I have is that we dropped a car key somewhere in the Atlantic, but I think it's closer for me to say that we dropped the key from some it's between here and Alpha Centauri, "says Antonowicz.
Recovering our bitcoins is essentially like trying to recover a photo album on a lost computer. Except you not only got rid of the hard drive, you also protected the album in an encrypted folder with a 64-digit code you threw away.
However, we wanted to make sure there was absolutely no way to bring back the bitcoins. The editor-in-chief of WIRED, Nicholas Thompson, suggested that if we they were able to recover the funds, they could go towards hiring a full-time cryptocurrency reporter. I contacted the founder of Butterfly Labs, who did not answer. I also contacted Mark Frauenfelder, a writer and author of a WIRED article about how he has recovered $ 30,000 bitcoins. He agrees we're screwed.
"If you've lost your private keys, I think it's over," he says. I have also looked into a service that tries to break up cryptocurrency portfolios by pure brute force. But their services would not help, since we do not have access to the same hard drive. It really looks like WIRED done lose money forever. The good news is that we are far from alone.
Lost and Never Found
Chainalysis, a research company that analyzes the activity between different cryptocurrency markets, estimates that between 2.78 and 3.79 million, or between 17 and 23 percent of all bitcoins have been lost. This includes the portfolios believed to belong to Satoshi Nakamoto, the mysterious founder of Bitcoin who has not touched his estimated one million coins since 2011.
"The number of coins lost over time will fall," says Michael Gronager, CEO and co-founder of Chainalysis. He argues that it is because there is more awareness of the lasting value of Bitcoin, even if the price fluctuates wildly. He also says that even if Satoshi re-emerges, his business would not have a significant impact on the market because he would probably not spend a large sum of Bitcoins at the same time.
There are many ways you can lose Bitcoin. Like WIRED, you can simply lose track of your private key or your hard drive. One of the most famous cases is what happened to James Howells, an IT employee in London who lost 7,500 bitcoins, or about $ 56 million, when his laptop was thrown away in 2013. According to reports, he wants to dig through five years of trash to unearth the computer. This is the most common way to lose Bitcoin; Elon Musk also tweeted it forgot how to log in a portion of a coin.
You can also lose bitcoins by running bug code or by making software errors, even if these cases are more rare. For example, last year someone forgot to collect his mining reward and burned 12.5 coins. In another similar incident, someone may have accidentally mistaken a processing fee with the value of the transaction, resulting in the loss of nearly 300 coins. Once, someone even sent 2,600 coins to an incorrectly configured address, turning them into nonexistence. All these examples come from BlockSci, a tool developed at Princeton University for the analysis of Bitcoin blockchain.
It can be difficult to assess whether a given bitcoin is truly lost forever. "It's actually quite hard to say: a lot of what we do is look at the big picture," says Harry Kalodner, PhD of Princeton, who helped develop BlockSci. He says that part of the problem is that you can rarely determine if someone is simply holding onto their Bitcoin or if they have permanently lost access to it. Since Bitcoin is not controlled by any single authority, there is no one who can simply close your account.
So what could WIRED have done, we had to do everything again? Since 2013, Bitcoin has added a series of new, more sophisticated features. For one, we could have locked our coins up to a certain date. "A Bitcoin feature that has been added is that it now supports time-locked coins, which makes them completely non-expendable up to a certain point in the future," says Kalodner. Like, let's say, May 2018, when the chief editor could really use some money to hire another reporter.
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