Cryptocurrencies are very secure since they cannot be counterfeited, and their transactions are irreversible. These safety features mean that they are yours to hold and use from the moment they are in your account.
As people become more comfortable owning these digital assets, they often withhold them. Therefore, the loss of cryptocurrencies is always solely because of human error and not because of errors in the blockchain ledgers. According to some experts, about 20% of digital assets are lost because of forgotten passwords and lost private keys. Moreover, about 2.5% have a decent chance of recovery.
How do cryptocurrency owners lose their coins?
These are the most common ways cryptocurrency owners lose their crypto assets:
Losing Private Keys
Many cryptocurrency owners prefer to take custody of their digital assets without using the services of a wallet or trading firm. The danger of being your custodian is that you don’t have a way to reset your password through a verification method unless you have access to your seed phrase or private keys (this is a collection of up to 24 letters generated by the crypto wallet). It is also easy to lose these private keys if kept in hard drives or external storage devices. Using a mnemonic phrase as a backup can give you access to a wallet without the device.
Whoever has access to the codes for your cryptos can gain access to your coins. Therefore, it is imperative to protect your private keys from hackers. It is often safer to hold cryptocurrencies in custodian accounts like trading firms or wallets where security is more reliable.
Once a transaction takes place on the Bitcoin blockchain, it is almost impossible to reverse unless you know the crypto owner to request a refund. Therefore, always check address validity before proceeding with a transaction.
Trying to Fix Issues
Accidentally deleting a crypto file is not unheard of, which can easily be retrieved from the recycle bin. However, even if a file is not permanently deleted by clearing the recycle bin, it may be overwritten by other files. Therefore, scanning all deleted files is the best way to recover files in the recycle bin.
When faced with issues like reformatting or reinstalling wallets, you are highly unlikely to recover your information unless you have the know-how. The urge to fix the problem can lead to your losing your cryptos, so resist it and seek reliable assistance that you trust.
Passing On Without Estate Planning
Often cryptocurrency owners don’t reveal that they own some during their lifetime, and these are lost when they are deceased. Proper estate planning ensures that your beneficiaries can access your crypto-assets just like they can access your other holdings. Make sure your private keys are known to the intended recipient or are easy to recover.
Cost of Crypto Recovery
Not everyone has the confidence in their skills, and if you are one of those, not all hope of recovering your cryptos is lost. There is a growing industry of wallet hunters that use various tools to access your hard drive, find a deleted wallet, or help you find your key combinations or lost passwords. They do this for a fee, taking a percentage of the funds recovered. Choosing the right recovery services entails doing some research, ensuring that they have a good reputation. Then, if all else has failed, they are the best hope of recovering your lost tokens.
Red flags to watch for when using a recovery firm are charges for services before providing them, requests for bank account details, false testimonials, and no confirmed contact details.
As you can see from this report, recovery is not always possible. Therefore, the best solution is to ensure you keep your crypto funds safe and secure in a wallet and safeguard your private keys and passwords from hackers. First, however, you must ensure you can access these and the equipment they are kept on, with a mnemonic phrase as a backup if ever required.
The senior editor of Legal Scoops, Jacob Maslow, has founded several online newspapers including Daily Forex Report and Conservative Free Press