Of the 21 million total supply of bitcoins, an estimated 4 million have been lost due to private key destruction. There’s an entire industry of crypto wallet recovery dedicated to recovering lost cryptocurrencies: but how does it actually work?
C. Edward Kelso recently answered that question at news.bitcoin.com in an article titled, “Bitcoin Lost: The Heroic and Maddening World of Crypto Recovery.” Kelso interviewed David Veksler of Walletrecovery.info, a man who’s built a business out of recovering “unrecoverable” cryptocurrencies.
“Fires. Seemingly unrecoverable hard drives. Mr. Veksler views the impossible as an interesting problem, a puzzle to crack. As more folks onboard into cryptocurrency, and as prices inch up, there is a lot at stake when things go wrong with a wallet holding precious digital coins.”
One of the best parts about cryptocurrency is that you’re fully in charge of your private keys. Unfortunately, this is also one of the worst parts: there’s no customer service line to call when something goes wrong. So how can you recover private keys that are designed to be unrecoverable? Let’s find out.
Recovering Wallets From Burned Laptops
One of Veksler’s first cases was from the family of an early bitcoin user who died in a farm accident. He had a bitcoin fortune, but his family couldn’t recover it. Veksler had to search through his entire digital life to find his bitcoin wallet backup. Several of the man’s laptops had been burned in a fire. Veksler had to extract data from the burned out shells of the laptop.
Creating Memes To Gain Wallet Access
In another interesting story, Veksler tells news.bitcoin.com about the time he used a meme generator to recover a private key – seriously.
“[The] customer forgot the password to his Doge wallet. All he remembered was that the password was a Doge meme. I wrote a Doge meme generator which created a database of every possible Doge meme (over 8 million). This wasn’t especially hard, just a fun project.”
Recovering Private Keys From A Corrupt Database
At the end of the day, most of Veksler’s cases involve recovering private keys from corrupt databases. Veksler specializes in reconstructing these corrupt databases:
“Most cryptocurrencies based on Bitcoin Core use a BerkeleyDB database to store the wallet data. Many of my cases involve recovering private keys from a corrupt database. Sometimes my existing tools can directly export the keys from the database file. My most difficult recovery involved an especially corrupt Litecoin database. I had to compile a custom build of the BerkeleyDB tools to reconstruct the wallet enough for it to be salvaged.”
Which Bitcoin Wallets Does Veksler Recommend Using?
Veksler believes that many lost cryptocurrency problems are related to wallet software. Some wallet software is too clunky for a non-technical user to use. When a non-technical user uses this wallet software, it leads to problems – like losing crypto fortunes.
“Without a doubt, hardware wallets are far more secure than any software wallet. Both the Trezor and Ledger Nano are superior in safety to any software-based wallet. Generally, both these are fairly secure and foolproof to use.”
Nevertheless, Veksler claims he’s worked with many customers who have lost funds using these hardware wallets.
One customer, for example, had printed out his seed words but was missing several due to incorrectly set page margins. Another customer typed his seed words into a notepad on his computer to print them out, then promptly had those seed words stolen due to a keylogger.
What Are The Most Common Private Key Theft Scams?
There are plenty of scammers trying to steal users’ private keys. Veksler has encountered a number of these scams over the years.
One of the most common scams involves fake mining contracts:
“Fake mining contracts: “mining contracts” which offered fantastic payouts, such as doubling your money in 10 hours. After sending the “mining company” Bitcoin, they would either disappear or usually ask for more money to unlock funds. Some “mining services” send a public address as proof of payment, or hold “mining profits” in a web wallet which cannot be withdrawn from.”
Other common scams include:
Malicious Wallet Software:
The wallet looks legitimate, but just steals the victim’s coins. Electrum Pro was a notorious example. Electrum.org was a real project and a real wallet, but Electrum.com hosted a malicious wallet called Electrum Pro that stole users’ bitcoins.
Fake Forking Services:
Some users have got caught depositing funds into a scammy, fraudulent exchange. These exchanges appear to be legitimate but make it impossible to withdraw funds after they’re deposited.
Wallets For Sale:
Some people sell wallets for 5% of the value, claiming the coins are locked. People buy these wallets because they believe they can crack the encryption or recover the funds in another way. However, scammers would use this strategy to sell empty wallets that appeared to have tokens in them. By taking advantage of a “watch-only” loophole, where the public address of the wallet appeared to show funds inside.
Ultimately, you can read the full interview with bitcoin recovery expert David Veksler at news.bitcoin.com.