Australian man loses big because he backed up his bitcoin on a Chinese-made USB stick

If you bought bitcoins a few years ago, you’d be sitting fairly pretty right now.

According to recent stats, bitcoin has hit a new milestone of $US10,000.

Considering this gigantic rise, it would kind of suck to own it, but then lose it, right? I mean, it’s a digital currency, so how is that even be possible?

Well, I hate to say it, but it is. And Alex from Melbourne can prove it.

In late 2009, the tech enthusiast “mined” a few coins in a day “for fun”.

As he progressed, the bitcoin program grew to gigabytes in size: “It kept on ballooning so eventually I deleted it [and] backed up the small encrypted wallet file to keep on my USB stick.”

That “wallet” contained the unique cryptographic “keys” for thousands of bitcoins Alex had mined.

“The thinking was that it’s offline, not on my PC, so in case something bad happened to the PC — [if] it blew up, or [was] hacked — I still had a backup,” he said.

At the end of 2013, when bitcoin started to really rise, he remembered his wallet.

According to Alex, “[I plugged] the USB stick back in to try and access the file, but the stick died. It was one of those cheap made-in-China ones.”

Now that bitcoin has hit a new milestone of $US10,000, Alex has put his losses in the “thousands, plural”.

He also said that this was the “worst mistake of my life”.

He did learn one important lesson though:

“Never back up anything on a cheap Chinese-made desk or USB stick”.

Unfortunately, stories like this are more common than you think. Billions of dollars in bitcoin has been lost or stolen.

According to Blockchain Centre founder Martin Davidson, “‘It’s very easy to lose crypto…If you lose the private key, because of the mathematics involved and the strength of the cryptographic system, which is what makes it so safe, it’s impossible to ever get it back.

“What’s commonly happened is people have just deleted the file from their computer — the text document that holds the private key.”

Bitcoin is stored in a digital wallet that has a public address and a private key. If you lose the key, it’s impossible to access the wallet.

Because bitcoin used to be rather worthless, people weren’t very careful with their wallets. And many of them are worth millions now, but are permanently locked.

The vast majority of bitcoin are held by early adopters, including the mysterious creator of the currency who is thought to hold 1,000,000 icons.

Lachlan Brown