An Introduction to Bitcoin and the $220 Million Controversy
Bitcoin owners are getting richer as the cryptocurrency soars higher and higher, but what if lost passwords lock millionaires out of their Bitcoin fortunes?
Introduction to Bitcoin
Bitcoin was the first and, possibly, most successful decentralised digital currency to garner widespread acceptance. The underlying blockchain system allows users to make and receive bitcoin payments over a peer-to-peer (P2P) network. Satoshi Nakamoto, whose identity is still unknown, conceptualised it in the form of a whitepaper in October 2008. The initial transaction of 10 bitcoins was transferred by Nakamoto to the late Harold (Hal) Finney, a regular contributor to the Bitcoin community and a prominent cryptographer who created the reusable proof-of-work (PoW) method used in all Bitcoin transactions. This was the genesis of the Bitcoin network, which led to the rise of the digital currency ecosystem and the emergence of additional digital assets.
Bitcoin was founded with the goal of removing many of the issues that come with trading via financial intermediaries, such as high fees, slow processing times, and the inevitability of fraudulent transactions. Bitcoin’s growing adoption as a payment mechanism reflects shifting attitudes regarding traditional forms of money and incumbent financial institutions since it is built on the core concepts of consensus, transparency, and immutability (e.g., central governments and commercial banks).
Bitcoin has lately grown into the star of a burgeoning digital asset class. It is by far the largest network, accounting for more than half of the total market capitalization of all digital currencies. Furthermore, its characteristics have led to the establishment of a variety of use cases, including as a substitute for gold as a store of wealth and as a possible hedge against global financial crises.
Why is the price of Bitcoin rising?
Despite several factors that would ordinarily make investors nervous, such as US-China tensions, Brexit, and, of course, an international epidemic, Bitcoin saw a phenomenal surge in 2020. As pandemic worries spread, bitcoin fell to a year low on the daily charts of US$4,748 (£3,490) in the middle of March. By the end of the year, it had risen to just around US$30,000. Since then, it has surged to all-time highs above US$38,000, generating daily headlines and driving up the value of other cryptocurrencies.
A substantial influx of investors from large size organisations such as pension schemes, university endowment funds, and investment trusts is one explanation for the massive price surge. This was not the case during the previous bull market in 2017 when bitcoin’s price soared over 20-fold to nearly US$20,000 before crashing to the low US$3,000s a year later.
Individual retail investors dominated the cryptocurrency ecosystem in 2017, with many drawn to bitcoin’s scarcity and the fact that it operated outside of the global banking system. Investors were buying in “fear of missing out” (FOMO) during the 2017 bull market, which had all the hallmarks of a typical financial bubble.
Now, let’s talk about the matter at hand, the incident that has garnered the attention of the media professionals and finance stalwarts all across the globe…
Stefan Thomas has two guesses left to access the $220m bitcoin wallet
To further on Stefan Thomas’ case, he was awarded 7,002 bitcoins by an early Bitcoin enthusiast over a decade ago for creating an animated film titled “What is Bitcoin?”
Mr Thomas’ dilemma is that he misplaced the piece of paper on which he wrote down the password for his IronKey (described in detail below), which allows users 10 guesses before seizing and encrypting its contents permanently. He has attempted eight of his most often used password combinations since then but to no avail.
Mr Thomas has soured on the idea that people should be their own bank and keep their own money since then, as Bitcoin’s value has risen and fallen and he has been unable to obtain the currency. “Let me put it this way: Do you create your own shoes?” he said, referring to the concept of becoming your own bank.
As a result, the most serious problem is that Bitcoin has no firm to create or store passwords. The goal of Bitcoin, according to Satoshi Nakamoto, the virtual currency’s creator, was to allow anybody in the world to create a digital bank account and store money in a way that no government could stop or regulate.
So what is an IronKey exactly?
IronKey has received a lot of attention in recent days as a result of the case of Stefan Thomas, a German programmer who is at risk of losing $220 million in bitcoins because he forgot the password to the IronKey that carries the private key to his Digital Wallet.
IronKey is dubbed “The World’s Most Secure Flash Drive” for a reason: it would sooner die than give out information, owing to a number of built-in safeguards. It was created between 2005 and 2007 by Dave Jevans and Gil Spencer and is now distributed by Kingston Digital under the name “IronKey.”
The user’s information is kept safe in the flash memory, which is encrypted using military-grade AES-CBC mode. Password attacks safeguard the data on the disc. Any physical interference with the gadget will cause it to instantly begin its self-destruct procedure. If you enter the wrong password 10 times in a row, your data will be permanently lost and there will be no way to retrieve it. As a result, recovering data from an IronKey USB stick that has been misplaced is virtually impossible.
Despite various attempts to open it without messing with the data, no one has been able to dismantle it without losing the data. Various nations have authorised it for storing sensitive government and military material, in some cases to the level of Top Secret, because of its extensive security and encryption capabilities.
What does the future hold for bitcoin?
The adoption of Bitcoin in ordinary life has always had a chicken-and-egg problem: few people use or accept it because well, few people use or accept it. The future of cryptocurrency is still very much up in the air. Critics see nothing but risk, while supporters see nothing but boundless promise. However, there are some situations in which a cryptocurrency is a realistic option. People in nations with weak currencies, for example, may be better off investing in Bitcoin than buying local equities and bonds. The most utopian crypto scenarios, whether proponents recognise it or not, rely on the idea that crypto remains both fringe and popular at the same time. Though it will be a difficult trick to pull off, we may anticipate for it to grow in popularity in the near future.
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