Bitcoin User Loses $50,000 as Wallet and Backups Get Destroyed in Fire

By JP Buntinx August 5, 2017

Safely storing your bitcoins or other cryptocurrencies is a lot more difficult than you might assume. Keeping funds in a wallet of which only you control the private key is just one step along the way. Users also should make a proper wallet backup and keep it safe from harm. One Reddit user recently lost his hard drive wallet as well as both backups due to a fire. A lot can be learned from this unfortunate story.

FIRE DESTROYS CRYPTOCURRENCY HOLDINGS WITH EASE

The entire Reddit story is quite interesting, if heartbreaking. The user in question claims that an SSD on which a Bitcoin wallet had been stored caught fire. It appears the SSD itself was not where the fire originated; rather, another computer part was at fault. The images shared across social media involve a burnt regular hard disk drive as well. It seems a freak accident caused the computer to catch on fire, which may happen a lot more often than most people think.

As it happened, the user had backed up the wallet and made offline copies of the information needed to restore it. The recovery seed was written on a piece of paper –not necessarily the best idea, but still commendable — as well as stored on a USB drive. Both backup solutions were stored in close proximity to the hard drive containing the Bitcoin wallet address, which was the worst decision to make.

Indeed, both backup solutions were lost in the fire. That is the price some people ultimately pay for convenience despite going through the process of making wallet backups. When people back up their Bitcoin wallets, they should always keep at least one offline copy in a location that is not even close to their computer or laptop. Especially if that solution is paper-based, investing in fire-proof material to keep it safe is certainly worth considering. The same applies to USB drives, as fire can destroy those with relative ease as well.

Should such an unfortunate incident take place and wipe out all of one’s backups in the process, recovering files or the Bitcoin funds can be quite challenging. In fact, recovering data from a hard drive destroyed by fire is anything but easy. Assuming one can find a person or company willing to go through the trouble, the price one pays for such a service may actually be higher than the total Bitcoin account balance. In this case, the user lost around 17 BTC, worth about US$50,000.

Companies that specialize in hard disk data recovery do exist, though. Users are effectively handing over a drive storing valuable Bitcoin information to a third party which may or may not be able to recover it. Even if they can, there is no reason to assume they would not empty the wallet themselves. While very few companies would actually do that, it creates a trust issue for Bitcoin users. Recovering the data yourself is pretty much out of the question, leaving users with few other options.

It is commendable to see people taking the concept of creating a wallet backup seriously these days. The methods they use to achieve that goal may leave a lot to be desired, though. A paper-based solution or anything that is prone to external tampering should always be avoided. Keeping this information in the same location as the wallet itself is centralization in its own way. Keeping cryptocurrency wallet backups in a safe and secure location is a hassle, but as this incident shows, it is an absolute necessity.

Source: https://themerkle.com/bitcoin-user-loses-50000-as-wallet-and-backups-get-destroyed-in-fire/