It is estimated that tens of billions of dollars worth of crypto have been lost since the advent of blockchain technology. Many of the coins have been lost due to human error after crypto users misplaced their wallets or wallet keys.
So, can lost crypto wallets and keys be recovered?
Is It Possible to Recover Lost Cryptocurrency?
Unfortunately, there are limited possibilities when it comes to recovering lost crypto wallets and keys. There are two common methods used to recover lost crypto coins.
1. Extracting Data from Hard Drives
There have been numerous cases of crypto users losing their cryptocurrency wallets and keys. Early crypto miners are among the most affected as many used their personal computers to mine and host their wallets and keys. At the time, many of them had no idea that crypto prices would skyrocket in the future.
It is impossible to tell just how many crypto wallets and keys have been lost due to users simply deleting them, but the number is deemed to be significant, with the number of permanently lost or destroyed Bitcoins estimated in the millions.
For those looking to regain access to previously stored wallets or keys on their computer hard drives, current data recovery technology can help to recreate deleted files, but there’s no guarantee you’ll recover a crypto wallet intact.
Data recovery software can help in the process, while there are also specialist companies that utilize more advanced techniques—but they are quite expensive.
2. Using Cryptohunters
Cryptohunter services can help in the recovery of lost or stolen keys. Most of them rely on massive processing power to brute-force the right key combination to a wallet. The firms usually require the user to remember part of the lost keys. Even small snippets of seed data significantly reduce the processing time.
It is important to note that most legitimate services ask for a percentage of the holdings as compensation. Illegitimate services are, however, likely to ask for money upfront with no guaranteed results.
That said, breaking into a crypto wallet without a partial code is theoretically feasible but practically close to impossible. Bitcoin wallets, for example, use an SHA-256 RIPEMD-160 hash Elliptical Curve Digital Signature Algorithm (ECDSA) public key.
Breaking down this level of encryption (without several bits of existing data) requires immense processing power that is in the realm of quantum computing technology. In a nutshell, it would, in most cases, be more profitable just to mine the coins using this kind of power instead of using it to hack wallets.
How to Avoid Losing Your Crypto Wallet and Keys
Preventing the loss of your crypto wallet or keys is the best way to prevent the loss of funds and related inconveniences. Here are three ways you can avoid losing your crypto keys.
1. Have a Secure Backup
If you are using a crypto non-custodial wallet, keeping the mnemonic recovery phrase in a secure location will help regain access if the keys get lost. The seed can be written down on a piece of paper and kept in a safe place.
Some people also opt to store their keys in image form on their computer or mobile phone. This is more convenient but riskier considering that systems can be hacked, giving hackers access to the seed phrase.
For such safeguarding methods, it is best to choose a device not connected to the internet.
2. Using a Custodial Wallet
A custodial wallet is preferred in cases where a wallet owner deems direct responsibility for the wallet keys as too risky.
When using a custodial wallet, a third party manages the wallet’s private keys. In most cases, custodial wallets are web-based and so are a lot more convenient than non-custodial wallets. They are usually managed by crypto exchanges.
When choosing the ideal custodial wallet, it is best to use a regulated exchange. US-regulated exchanges such as Coinbase are usually preferred because they ensure a proportion of stored assets against losses caused by a direct hack on the platform.
In the event that the password to a custodial wallet account is lost, recovery is simple and can be implemented via email. That said, it is best to reinforce the security of both the email connected to the wallet and the exchange account.
This can be done by implementing a strong and unique password. Furthermore, using both SMS and app-based two-factor authentication for the email address and the exchange account is also advised.
A YubiKey can be used to secure the account further, especially if you wish to thwart hacker schemes such as SIM-swapping. A SIM-swap attack enables hackers to bypass standard 2FA by tricking telecom networks into transferring SIM ownership to them.
Having control over the SIM allows them to unlock connected crypto accounts.
3. Use a Hardware Wallet
Crypto hardware wallets are ideal if you wish to have sole control over your crypto holdings. They usually require a pin to unlock the wallet once connected to a computer.
Because they rely on cryptographic hashing technology, they are secure against most hack attacks and malware. They also utilize a microcontroller for enhanced protection.
This feature prevents the transfer of the keys away from the device. In addition, because the keys are isolated from the internet, there is a very low risk of them being compromised.
That said, crypto hardware wallets are more expensive when compared to web or desktop-based crypto wallets. Some of them also have complex features that make them difficult to use for first-time users.
Popular hardware wallets at the moment include Trezor and Ledger.
Keep Your Cryptocurrency Wallet Keys Safe!
There are several ways to recover crypto keys and wallets, but most of them aren’t effective. Part of the reason is that crypto wallets are designed to be secure against hacker attacks using advanced decryption algorithms.
As such, the loss of a crypto wallet with significant holdings is a waking nightmare. It is best to prevent this from happening in the first place.
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