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Linux to launch Foundation to support digital wallet development
The foundation apparently does not intend to create its own digital wallet, however. Its' goal is to make it easier for companies to create wallets for themselves.
The Linux Foundation, a global nonprofit organization that enables innovation within the blockchain ecosystem through access to open source technology, has announced plans to launch the OpenWallet Foundation (OWF).
The OWF is a collaborative effort between companies in the technology and public sector, as well as stakeholders within the blockchain ecosystem, to develop open-source software to support the interoperability of digital wallets; software designed to send, receive, store and monitor digital assets.
According to a press release issued on Sept. 13, the primary goal of the OWF is to build a multi-purpose open source engine that anyone with the technical understanding can use to build safe, secure, and privacy-protected interoperable wallets. The foundation also said it seeks to establish best practices for digital wallet technology.
Rather than creating a digital wallet itself, the foundation will focus on building an open-source software engine that other organizations, companies, and developers can use to create their own multi-use digital wallets. Jim Zemlin, the executive director of the Linux Foundation, shared:
“We are convinced that digital wallets will play a critical role for digital societies. Open software is the key to interoperability and security. We are delighted to host the OpenWallet Foundation and excited for its potential.”
Accenture’s David Treat, a member of the Foundation, stated:
“Universal digital wallet infrastructure will create the ability to carry tokenized identity, money, and objects from place to place in the digital world. Massive business model change is coming, and the winning digital business will be the one that earns trust to directly access the real data in our wallets to create much better digital experiences,”
Joining Linux Foundation in this endeavor are other renowned companies like CVS Health, The Open Identity Exchange, Okta, OpenID Foundation, Ping Identity, polypoly, Procivis AG, Transmute, and Trust Over IP Foundation.
GameStop doubles down on crypto amid a new partnership with FTX US
After launching an NFT marketplace and wallet with the help of Immutable X, GameStop is continuing its push into crypto following a partnership with FTX.
Gaming retailer GameStop is partnering with United States crypto exchange FTX US to bring more customers to crypto and work together on online marketing initiatives.
In a Sept. 7 statement, the gaming retailer noted that the new partnership will introduce GameStop’s customers into the FTX ecosystem, including its marketplaces for digital assets, while also seeing the retailer become FTX’s “preferred retail partner in the United States.”
The partnership will also see certain GameStop retail stores carrying FTX gift cards. As of Aug. 31, there are 2,970 GameStop stores across the United States.
In its Q2 earnings call, GameStop CEO Matt Furlong said the new deal is aimed at establishing something “unique” in the retail space.
The deal we just announced with FTX is a by-product of our commerce and blockchain team, working hand-in-hand together to establish something unique in the retail world.
GameStop did not disclose the financial terms of the partnership in its statement.
News of the new partnership came on the same day that GameStop released its financial results for the quarter that ended July 30, 2022.
Despite GameStop reporting a nearly 4% decline in net sales to $1.14 billion in the quarter, shares in GameStop managed to rise nearly 12% in after-hours trading following the news, reaching $26.84 per share.
GameStop has significantly ramped up its Web3 efforts this year after unveiling an NFT and Web3 gaming division in January, as well as the launch of its NFT marketplace on Jul. 11 in partnership with Ethereum (ETH) scaling solution Immutable X.
Furlong noted during the earnings call that the launch of its marketplace “supports GameStop’s pursuit of long-term growth in the cryptocurrency, NFT and Web3 gaming verticals” which they expect to be increasingly important for gamers and collectors.
The marketplace is a “non-custodial, Ethereum Layer 2-based marketplace” which allows users to connect their own digital asset wallets, like the recently launched GameStop Wallet.
Related: GameStop NFT daily fee revenue plunges under $4K as gloom infects markets
GameStop noted that sales attributable to its digital collectibles were $223.2 million in the quarter, representing a nearly 26% increase compared to the $177.2 million worth of sales in the prior year period.
According to DappRadar, the marketplace has seen a volume of $21.26 million traded on it since its launch. Activity on the marketplace has slowed dramatically since its launch, with only $922,350 worth of activity occurring on the marketplace within the last seven days.
Can the government track Bitcoin?
The law enforcers like the IRS and FBI track Bitcoin with blockchain data and collaborate with private companies in an attempt to trace criminals and taxes.
What happens with unreported cryptocurrency?
Not reporting Bitcoin despite the obligation to do so may have severe consequences for individuals’ lives and finances. The fine for making an incorrect declaration can be substantial and can even be considered a felony in certain circumstances.
Individuals may wonder whether centralized cryptocurrency exchanges actively report to the IRS. Centralized exchanges do issue tax forms to the IRS. Likewise, the IRS has issued so-called John Doe Summons to exchanges, including Coinbase, to request people’s information and catch those who try to cheat on their tax obligations.
But, such summonses are not the only law enforcement tool that the IRS uses on its quest to enforce Bitcoin taxes. Form 1040, for instance, specifically asks U.S. taxpayers whether they transacted with cryptocurrencies such as Bitcoin.
Some people may choose to avoid reporting their Bitcoin transactions, income and capital gains. When U.S. taxpayers do not report taxable cryptocurrency activity and face an IRS audit or investigative procedure, however, it may be considered tax evasion or fraud. Individuals may ultimately be obliged to pay penalties or even face criminal charges. Indeed, tax evasion is considered a felony. The penalty may extend to half a decade of prison and a fine of up to tens of thousands of dollars.
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How is Bitcoin taxed?
How to report Bitcoin on taxes and rules for Bitcoin taxation depend on the specific situation and someone’s country of fiscal residence. For instance, United States taxpayers must report cryptocurrency sales and other taxable events, and each of these transactions has different legal implications.
The fiat currency gained from cryptocurrency activities, also considered as realized gains, is taxed at different rates and can be considered capital or as income. Keep an eye out for the latest updates in terms of tax requirements and obligations.
Events may be taxable as capital gains when one sells Bitcoin for cash, when one converts BTC to another cryptocurrency or when one spends Bitcoin to purchase goods or services. According to the latest requirements, cryptocurrency capital gains in the US should be recorded by submitting Form 8949.
Bitcoin may also be taxed if it is considered income when someone receives a salary in BTC or receives Bitcoin for providing goods or services. Keep an eye on specific blockchain-related events because other incentives or rewards may also be taxable (for instance, staking rewards or obtaining new assets due to a hard fork or airdrop).
On the contrary, certain situations are not taxable, for instance, when one is simply holding Bitcoin passively or when BTC donations or gifts are transferred. Depending on the situation, there may still exist legal obligations or requirements to report such events to the IRS or an alternative qualified agency.
Do the authorities know when and where Bitcoin is bought?
Apart from data analysis done alone or in cooperation with private companies, authorities may request information from centralized exchanges. Due to regulation, centralized exchanges may also be obligated to share such information. However, not all cryptocurrency exchanges collaborate with authorities.
A centralized exchange is a cryptocurrency exchange that is run by a single entity, such as Coinbase. To become a licensed operator in a certain country or territory, centralized exchanges need to comply with regulations.
For instance, to decrease cryptocurrency anonymity and the illicit use of cryptocurrencies, most centralized exchanges have incorporated Know Your Customer (KYC) checks. KYC is meant to verify customers’ identities alongside helping authorities to analyze activity on the blockchain. In practice, individuals need to submit a range of documents and their data before they are allowed to trade, invest and transact.
After KYC has been conducted, exchanges may be requested or may be obligated to share that data with law enforcement agencies. Since the exchange has individuals’ personal data and transaction data, so may the government. By using information obtained from centralized exchanges, the IRS can identify unknown Bitcoin wallets using KYC checks and corresponding personal information.
Nonetheless, not all exchanges use KYC. For example, it is difficult to make decentralized exchanges (DEXs) comply with regulations because they lack a headquarter and are not run by a centralized company or a small group of individuals.
How does the government track Bitcoin?
Bitcoin’s blockchain technology is, in principle, anonymous but also traceable due to the transparency element. Bitcoin can thus be called “pseudo-anonymous.” Government agencies are hiring cryptocurrency experts to help them with BTCtracking and identity verification.
In practice, how can authorities like the police, the IRS or the FBI track Bitcoin? Since enforcers may not directly identify the parties involved in a Bitcoin transaction, they can try to observe the blockchain and analyze BTC movements and corresponding patterns. In this manner, they seek to profile, de-anonymize and identify those that are transacting.
So, why would governments do that and with whom do they collaborate? Importantly, most Bitcoin transactions are not associated with criminal activity. Yet, enforcers like the police or the FBI still aim to catch people or organizations that use cryptocurrencies such as Bitcoin for illicit purposes, such as money laundering or fraud. Likewise, an agency like the IRS wants to track BTC owners, traders and investors in order to raise taxes from capital gains or income.
Companies like Chainalysis provide services for blockchain monitoring and analytics. These companies analyze if certain BTC moving between wallets are, in some way, associated with criminal activity and they may collaborate with the FBI in helping investigators track certain cryptocurrency funds internationally.
Does the government know who owns Bitcoin?
At the basis of cryptocurrencies like Bitcoin (BTC) stands blockchain technology. A fundamental characteristic of blockchain technology is transparency, meaning that anyone, including the government, can observe all cryptocurrency transactions conducted via that blockchain.
Bitcoin transactions are publicly accessible because of the transparent nature of blockchain technology. Besides, the history of Bitcoin transactions is permanently stored on the Bitcoin blockchain, implying that it is not hard to observe BTC transactions. The government, in the form of law enforcement authorities, may thus watch what happens on the Bitcoin blockchain.
So, can authorities like the police, the Federal Bureau of Investigation (FBI) and the Internal Revenue Service (IRS) trace Bitcoin ownership? And, do authorities know who owns which Bitcoin? The traceability of BTC transactions depends on whether someone’s transaction activity on the Bitcoin blockchain can be linked to their identity.
Anyone can observe all cryptocurrency transactions of any Bitcoin wallet address. To find out where the Bitcoin is coming from and where they are being sent, authorities can analyze the BTC addresses that are used for transacting. In this manner, authorities get insights into what is happening and when.
Many Bitcoin users reveal their identity at some point (for instance, on centralized exchanges or through interactions with known wallets). Thus, BTC transactions do not always remain 100% anonymous and the government can trace Bitcoin ownership whenever (a series of) Bitcoin transactions can be linked to one’s identity. With that new knowledge, governments can enforce duties such as Bitcoin or cryptocurrency tax liabilities or fight criminal conduct like money laundering.
Are Bitcoin transactions anonymous and traceable?
Bitcoin transactions are easily traceable through blockchain explorers but do not directly reveal the identities behind Bitcoin wallet addresses.
Should I share my Bitcoin address publicly?
It is not a problem to share public keys, but make sure the private key cannot be found by third parties. Transactions can be sent to the public key, which is completely secure.
It is safe to share your Bitcoin address publicly. This way, it is possible to safely complete donations or payments. No cryptocurrencies can be stolen through a public address. The only way by which stealing crypto is possible is if someone has managed to get hold of the private keys.
Bitcoin wallets always make a difference between public keys and private keys. A public key can be compared to your email address. Anyone can send emails to it, but only the owner of the email address can read them. With a cryptocurrency address, this is no different since others can use this address to send crypto, and the owner of the address is the only one who can use the digital asset.
The private key is the password to enter the wallet. It is important that this unique code is kept in an offline place where no one can access it. Sharing personal data, such as the private keys and the wallet password, with others can cause the wallet in question to be emptied. Therefore, only share the public key if necessary and keep the other codes in a safe place.
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Can you have an anonymous Bitcoin wallet?
Anonymous Bitcoin wallets exist, but be careful while handling them. You can reveal your identity, which defeats the purpose of the wallet.
It is certainly possible to have an anonymous Bitcoin wallet. However, a wallet alone is not enough to ensure this anonymity. When someone makes several transactions, an identity can be linked to a wallet where this information is known. Due to the tightened KYC rules for exchanges, it seems to be increasingly challenging to conduct transactions in a completely anonymous way.
Nevertheless, there are Bitcoin wallets that allow you to operate completely anonymously. The Electrum wallet is an example of this, which can also be integrated with a hardware wallet. Before making the choice to use an anonymous wallet, it is useful to first consider how Bitcoin will get on this wallet. When BTC is sent from an exchange with KYC, the anonymity is already gone.
What are the challenges in tracking a Bitcoin address?
It can be difficult to track Bitcoin transactions when people use various wallets and Bitcoin mixers. These factors disrupt the search process and take up a lot of time.
Despite the fact that it is challenging for users of a Bitcoin wallet to conduct transactions completely anonymously, there are several ways to get close to anonymity. For example, it is possible to use a cryptocurrency mixer.
In this case, it is a Bitcoin mixer, which ensures that it is more difficult to make Bitcoin traceable. This is done by mixing BTC transactions from different people together in a pool, then sending the transactions to the intended addresses.
In addition, wallets can also be very difficult to monitor. If someone does not want their activities on the Bitcoin network to be traceable, it is possible to create a sort of smoke screen. By creating many crypto wallets and carrying out various transactions between these wallets, it can be more difficult for anyone to trace transactions and wallets.
Both challenges are difficult on their own, but combining them can make tracking Bitcoin addresses a lot more difficult. Tracking transactions and wallets will take an enormous amount of time and energy.
Can you search for a Bitcoin wallet address?
It is possible to search for a Bitcoin wallet address through a Bitcoin explorer. However, finding a crypto address does not mean that you also know the identity behind it.
When you don’t have any identifying information that goes with the Bitcoin wallet, it’s hard to search. Through a blockchain explorer, it is easy to find transactions and addresses, but it can take a lot of time to find out the identity behind a wallet address.
Because someone’s wallet address does not have to be anonymous but can be hard to find, a Bitcoin wallet address is called a pseudonym, an alias, which is different from someone’s actual name. The data is not linked to an identity, but it is still possible to trace someone’s identity or a pseudonym.
How are Bitcoin transactions traced?
With increasing legislation and surveillance, governments can trace fraudulent BTC transactions more easily by finding the identity behind a Bitcoin wallet address.
In recent years, millions in cryptocurrencies have been seized by various governments worldwide. Criminals saw the opportunities that blockchain technology has to offer and tried to buy cryptocurrencies such as Bitcoin as anonymously as possible.
Ultimately, this did not work out well for many fraudsters and it can be stated that Bitcoin transactions are not fully anonymous. These events have helped to tighten legislation in this area and intensify the search for fraudulent transactions.
When trading from Bitcoin wallets whose identity is not known, transactions can be traced quickly, but it can take time to find out the identity. When someone wants to exchange their cryptocurrencies for United States dollars, it already becomes a lot easier to trace the identity of the wallet owner and trace back the transactions.
What makes Bitcoin traceable?
Bitcoin transactions are traceable because Bitcoin’s blockchain is completely transparent and every transaction is publicly stored on a distributed ledger.
Since 2013, various studies have been looking into tracking Bitcoin transactions and their associated identities. Although it is possible to create a certain form of anonymity with cryptocurrencies, it is difficult to send transactions completely anonymously via the Bitcoin blockchain. Blockchains remain fully open and accessible to everyone.
Thanks to the transparency of the blockchain, it is possible to easily track money flows. If the identity behind a wallet address is known, then the transactions made can be traced back and traced in the future. All these transactions can be viewed in detail. In this way, it is possible to see which amount was sent, but also on which date and to which wallet.
Can you trace a Bitcoin transaction?
Through blockchain explorers, one can easily track Bitcoin transactions, but it is becoming increasingly difficult to conduct Bitcoin transactions anonymously.
It is certainly possible to trace a Bitcoin (BTC) transaction. Bitcoin explorers allow you to map activity on the Bitcoin blockchain. Thanks to this transparency, transactions are traceable and you can think of the blockchain as a kind of open database full of Bitcoin transactions.
Other cryptocurrencies like Ether (ETH) and Solana (SOL) also have their own blockchain explorers called Etherscan and SolScan. In all these explorers, you can find information about the transactions on the blockchain, such as how much crypto was sent and which addresses were involved in the transaction. Despite the transparency of the blockchain, many people think that you can still make Bitcoin transactions anonymously.
However, more and more countries are implementing Know Your Customer (KYC) rules, which require you to reveal your identity on centralized trading platforms. By disclosing your identity, it becomes a lot easier for the government to discover what transactions you have carried out and to see what is in your Bitcoin wallet.
To be able to trade on a central exchange, personal data will have to be supplied to the exchange. Bitcoin addresses can therefore be linked to personal data. Since the data of previous Bitcoin transactions is not deleted, it is always possible to view past transactions.
Meta announces Facebook and Instagram users can post NFTs from digital wallets
“This will enable people to connect their digital wallets once to either app in order to share their digital collectibles across both,” said Meta.
Facebook and Instagram users can both post nonfungible tokens, or NFTs, and digital collectibles to their accounts by linking their wallets.
In a Monday update to a May 10 blog post, Facebook’s parent company Meta said the social media platform’s roughly 2.9 billion users would have the ability to share digital collectibles and NFTs. The announcement followed an Aug. 4 update in which Meta said Instagram users across 100 countries could post digital collectibles minted on the Flow blockchain or from wallets supporting the Ethereum or Polygon blockchains to their accounts, estimated to be between 1 billion and 2 billion users as of the second quarter of 2022.
![](https://s3.cointelegraph.com/uploads/2022-08/24486819-4c5d-4ba9-9aac-033b812d5920.png)
“As we continue rolling out digital collectibles on Facebook and Instagram, we’ve started giving people the ability to post digital collectibles that they own across both Facebook and Instagram,” said Meta. “This will enable people to connect their digital wallets once to either app in order to share their digital collectibles across both.”
We’re introducing the ability to post digital collectibles across @facebook and @instagram. You can now connect your digital wallet to either app to share your #NFTs on both.
— Meta Newsroom (@MetaNewsroom) August 29, 2022
What NFT are you excited to share? https://t.co/wa2wkWfI7p pic.twitter.com/SlpwAuY02c
Connecting digital wallets to either Facebook or Instagram seems to be limited to the apps rather than through third-party browsers. However, expanding the reach of NFTs into each and every smartphone with one of Meta’s apps installed could result in additional earnings or adoption for the social media giant. In May, Meta also filed applications with the United States Patent and Trademark Office for its namesake to be used in a crypto payments platform called Meta Pay.
Related: FTC files lawsuit against Meta over attempted monopolization of metaverse
Though Meta abandoned launching its own stablecoin in February after facing pushback from regulators globally, CEO Mark Zuckerberg said there was a “massive opportunity” to make up to trillions of dollars in the digital asset space as it grows. The company reported a 1% drop in revenue year over year in the second quarter of 2022.
What is a seed phrase and why is it important?
It’s crucial to remember your seed phrase, which is a string of random words produced by your cryptocurrency wallet when you initially set it up.
How to keep your seed phrase safe
A crypto seed phrase in the wrong hands can do damage, so it is advisable to always ensure it is safe. The following are some tips for ensuring your seed phrase is secure.
- Never share your seed with anyone else: It’s extremely important that you never reveal your recovery phrase to anyone. Why? Because if someone else finds out your recovery phrase, they will be able to access — and therefore control — your crypto funds.
- Make a note of it on paper and keep it in a secure location: This is the most old-fashioned way of storing your recovery phrase, but it’s still a perfectly valid option. You can either write it down by hand or print it out — just make sure that you keep it in a safe place where only you can access it. A fireproof and waterproof safe would be ideal.
- Storing inside a Password Manager: A password manager is an encrypted digital vault that can store sensitive information like usernames, passwords, and recovery phrases. This way, you only have to remember one password (the password to your password manager) instead of dozens or hundreds of different ones. Some examples of password managers include Onepassword and Lastpass. Storing your recovery phrase in a password manager has several advantages, one of which is added security. Adding a secondary password — also known as a passphrase — users can create an even stronger and more secure backup.
If you want to be extra safe, store your recovery phrase in multiple locations. That way, even if one backup gets destroyed, you’ll still have another one intact.
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What happens if you lose a seed phrase?
Losing a seed phrase is really the worst-case scenario for a cryptocurrency owner. One cannot recover a wallet seed in case they lost or forgot it.
Giving your seed phrase to someone or entering it on a website has no practical benefit as it may lead to losing your cryptocurrency assets. Additionally, avoiding writing a recovery phrase on a refrigerator may help you protect against theft.
The best way of ensuring you don’t lose your seed phrase is by noting it down and keeping it safe. In addition, keep your seed phrase somewhere it cannot be destroyed by any element. But, can someone guess a seed phrase?
The seed phrase is generated randomly; not even the cryptocurrency user knows what word combination will be used to generate the seed phrase. Due to a seed phrase’s random characteristic, it is hard to guess a seed phrase. Something else that makes it challenging to know a seed phrase is that it consists of 12 to 24 words leaving no chances of getting all the words right.
Can a seed phrase be hacked?
In the crypto world, losing cryptocurrency is a nightmare for all cryptocurrency owners. Losing your seed phrase to an attacker means you can’t recover your crypto funds.
Being in a digital world, crypto heists are tirelessly working to reap what they didn’t plant. The worst part you would want a hacker venturing into is your cryptocurrency wallet. As seen earlier, a seed phrase is a master key to accessing a cryptocurrency wallet, which means that in the wrong hands, damage is inevitable.
However, by having a large number of words in a seed phrase, it is hard to hack it. In order to access a seed phrase, phishing is the main method used. One way scammers try to get a seed phrase is by sending emails pretending to be customer support and request for a seed phrase or private key.
Once the seed phrase lands in their hands, they can access a crypto wallet and steal everything in it. It is always advisable to keep your seed phrase private and never share it with anyone else.
Recovery phrase vs. private key
Despite being related to each other, the recovery phrase and private key are different. They both are used for securing cryptocurrency wallets.
A recovery phrase is a crypto wallet recovery password. The recovery phrase is used for the recovery of a cryptocurrency wallet in case the owner forgot their password. A private key, on the other hand, is used to point to a blockchain address hence securing transactions. A private key is used for transacting cryptocurrencies by proving ownership.
In short, a recovery phrase is a master key to all of your crypto accounts. These words are what give you access to all of the private keys stored in your original wallet. The goal is to have full control over your assets. Having this phrase allows you to still access your blockchain assets even if you lose or damage your physical hardware device. But, how does a seed recovery phrase work?
Simply put, users may access their crypto accounts from whatever wallet they choose — it’s like having a charger for every type of phone. Imagine the confusion if every wallet necessitated a different recovery phrase format. This would imply that your crypto assets would be entirely dependent on which sort of recovery phrase you’re using, leaving you no control over them.
How does a seed phrase look?
A seed phrase might be confusing and probably you might be wondering how a seed phrase looks and maybe how it is created. The seed phrase is generated by a cryptocurrency wallet and the user has no way of customizing it.
The words generated are derived from a list of 2048 words. So, how many words is a seed phrase? A seed phrase is made up of a long string consisting of a group of random words.
The words on a seed phrase are simplified so that the user can remember them, unlike if the seed phrase consisted of long numbers or special characters.
The recovery phrase consists of 12 to 24 words like energy, road or open. To avoid errors, these randomly generated words do not include pairs like “man” and “men” in the same seed phrase. Bitcoin improvement proposal-(BIP)-39 in 2013 introduced these types of phrases and established a standard for deterministic wallets. Here is an imaginary 12-word seed phrase: Cry, planet, Loose, Typical, Humankind, Toddler, Anxiety, Difficult, Happy, Never, Alternative, Remorse.
A seed phrase controls all the private keys associated with a deterministic wallet. BIP-39 proposal makes major wallets cross-compatible, allowing the users to load the recovery phrase to a new BIP-39-compatible wallet to access the funds when they are lost or if you want to switch wallets.
What is a seed phrase?
A recovery phrase (also called a seed phrase) is a group of random words generated by the cryptocurrency wallet that allows you to access the crypto stored within.
One can consider it as a wallet comparable to a password manager for crypto, and the recovery phrase to be similar to the master password. You’ll have access to all of the crypto linked with the wallet that created the phrase — even if you delete or lose it — as long as you remember your recovery phrase.
A seed phrase aids to recover a cryptocurrency wallet when a user forgets their password. The seed phrase can be said to be a crypto wallet’s master key. For example, if you had a hardware wallet and lost it or deleted your wallet from your computer, you can easily create a new wallet and use the seed phrase, which will recover your cryptocurrencies.
Millions of dollars in ETH lie unclaimed in presale wallets — but there’s a way to get them back
Did you know that over 500 Ethereum presale wallets are yet to be recovered… and collectively, they have a value of several billion dollars?
Out in the cryptosphere, there's a vast amount of wealth that's seemingly out of reach.
A long-running statistic suggests four million Bitcoin — almost 20% of the total supply — has been lost forever. Much of it was mined when the network was just beginning, with early adopters tearing their hair out after losing their private keys. One Welshman has endured a nine-year battle as he attempts to receive a hard drive containing 7,500 BTC from landfill.
But this isn't the only treasure trove that's worth exploring. For example, did you know that over 500 Ethereum presale wallets are yet to be recovered… and collectively, they have a value of several billion dollars?
The presale for ETH — which is now the world's second-largest cryptocurrency — took place back in the summer of 2014. At the time, 1 Bitcoin would buy you 2,000 Ether. Fast forward to now, and the exchange rate is much less generous: 1 BTC will only fetch 12 ETH. A whopping 8,893 people participated in this presale and were given tokens in the genesis block — but according to experts, hundreds of wallets remain untouched.
Some of these wallets contain tens of ETH — a figure that's worth tens of thousands of dollars today. Others have more than 10,000 ETH inside, meaning their owners are missing out on a life-changing $20 million.
All of this conjures up big questions: Are these wallets a lost cause? Will the upcoming merge — where Ethereum moves from a Proof-of-Work to a Proof-of-Stake blockchain — mean these funds are just irretrievable? And what's more, who in their right mind would lose access to their crypto after taking part in a presale?
Well, there are a plethora of factors that can lead to the private keys of presale wallets being lost. It could have been a problem with a browser, challenges with foreign language keyboard settings, or poor security practices. Let's not forget that crypto was shiny and new back then — and many early investors were figuring things out as they went along.
So… what should the people who own one of these presale wallets do? Give up, and dream of what could have been? Use this experience as a gripping story at dinner parties — regaling people of how you missed out on millions of dollars? Or fight back, and begin the painstaking process of reclaiming what's rightfully yours?
How to recover a presale wallet
It can be done. The first step is to head to Etherscan, a blockchain explorer, and check the balance of the address that you're struggling to retrieve. If there's crypto yet to be claimed, there's work to be done — and it's time to take a step back and reflect on what the password requirements would have been for your wallet.
This next bit is a little more challenging. You need to try and remember the passwords that you commonly used at the time. Software called Hashcat can be used to test a plethora of variations — alternating between uppercase and lowercase characters, and changing letters like a and i for special characters like @ and !. With the right GPU card, you'll have the opportunity to perform 200,000 password checks per second.
All of this may seem like a long shot — and there's still a risk that you'll end up empty handed, unable to find the elusive password to your Ether presale wallet. But this doesn't mean that you're out of options. Next, it's time to get the help of professionals who have a track record of cracking the code and reuniting owners with their crypto.
KeychainX says forgotten presale wallets often have specific parameters — and it has created custom-made software to successfully recover lost crypto.
The project told Cointelegraph: "Lost crypto wallets are a big headache for many crypto owners. KeychainX has helped over 200 people in the last 12 months to recover millions of lost Ether, Bitcoin and Dogecoin."
The proof is in the pudding
One Ethereum enthusiast contacted KeychainX after being part of the Ether presale — amassing 1,000 ETH for just $300. At the time of writing, this crypto sum would be worth a cool $2 million. There was just one problem: the customer believed the wallet was corrupt.
He was pretty sure of the password, but there were two main problems: firstly, he was half French, meaning there might be a problem with the decryption of foreign characters. Second, the password was 99 characters long. (And to top it all off, the password was of a sexual nature, meaning the project's specialists needed to find common phrases in both English and French that could be tested.)
KeychainX managed to figure out how to translate the special characters that had encrypted his wallet — treating them as they were Cyrillic. It was a process that took several weeks — and on top of all that, it took three days to track down the customer and give them the good news.
The project isn't just working to retrieve long lost crypto, but prevent the investors of tomorrow from ending up in a similar situation. It's received a patent in the U.S. and Japan for a keyless crypto wallet that uses geolocation data and biometrics to store private keys. And what's more, it's planning to launch an automatic crypto recovery site that will enable people to use their surplus GPU power to join a social recovery system.
Ethereum co-founder Vitalik Buterin recently shared his vision for social recovery at the Blockchain Futurist Conference in Canada — explaining how the world of Web3 could offer a more effective approach for retrieving accounts than Web2 ever could. As an example, users could nominate five recovery contacts — two of them institutions and one of them an employer, as well as their father and a friend. Three of these trusted sources could then come together to confirm that an account should be unlocked.
Losing crypto can be devastating — but projects like KeychainX are working to ensure far, far fewer people experience this in the future.
Learn more about KeychainX
Disclaimer. Cointelegraph does not endorse any content or product on this page. While we aim at providing you with all important information that we could obtain, readers should do their own research before taking any actions related to the company and carry full responsibility for their decisions, nor can this article be considered as investment advice.
FDIC-FTX spat is another reason for investors to self-custody their funds
Between the collapse of Celsius and the FDIC's warning to FTX, consumers should be awakening to the benefits of moving their funds off of centralized exchanges.
Searching for more evidence that self-custody of your cryptocurrency holdings beats a centralized manager? Look to the latest action by the Federal Deposit Insurance Corporation (FDIC).
The agency sent a letter to FTX Exchange this month — along with four other entities — that included a cease and desist order for “false and misleading statements.” Namely, it accused the exchange of falsely implying that user funds were FDIC-insured.
It could have turned into an ugly situation if customers expected — but did not receive — a certain level of protection in the event of catastrophic failure. It’s difficult to ascertain how heavily the guarantee factored into the adoption of FTX services, but the firm enjoyed a record-breaking year in 2021 with revenue growth of more than 1000%.
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Ultimately, the incident serves as an endorsement of self-custody, because it reminds us that exchanges can only protect user funds as far as their pockets allow them. Empowering consumers to hold their own funds on ideally cold wallets significantly reduces the chance their funds will be lost to a company's insolvency, like in the case of Celsius, or even to a hacker gaining access to wallets held by a central entity.
Self-Custody isn’t perfect, but it can be better than the alternative
Those who say self-custody is fraught with danger would be right. Retail investors cannot be expected on a widespread scale to properly manage and protect their funds in a wallet owned solely by them, and many in fact prefer the oversight from a seemingly too-big-to-fail central exchange.
Even experienced crypto investors and holders can send tokens to the wrong address by mistake, or even in some cases face issues with technical glitches on self-custody wallets. If mainstream adoption is the goal, this isn’t even close to being a safe way to exchange value.
Related: Deposits at non-bank entities, including crypto firms, are not insured — FDIC
It’s a catch-22 situation. Money isn’t inherently safe when it’s held by scarcely regulated central entities known for suffering hacks and always being vulnerable to the possibility of executives running away with user funds.
Cryptocurrencies, at their very core, are about independence and moving away from the financial establishment that has influenced monetary policy for a very long time. So, the industry is crying out for a solid self-custody solution that resolves the associated dangers.
Last month @Brett_FTX tweeted that you can deposit your paycheck into FTX, and that they were FDIC insured.
— Stephen Geiger (@Stephen_Geiger) August 19, 2022
I called BS and said they are either lying or holding clients money externally at other banks.
Brett said I was wrong.
FDIC just answered it… and Brett deleted tweets. https://t.co/QuiXQ8rDiA pic.twitter.com/xkgxP5r4Ez
There are crypto enthusiasts who do not wish to hold their funds exclusively on a central exchange. For them, the whole point is to move away from traditional finance (TradFi) and overt centralization.
This is a valid choice and should be respected. It should also be understood that mainstream adoption will likely only be plausible thanks to centralized entities able to provide security and guarantees on the funds held by their platforms.
The independence/security tradeoff
We have seen European Union regulators attempt to tie in self-custody with verifiable identities. This misses the point to some degree. Blockchain technologies are designed to bring elements of decentralization to the financial world and allow unfettered access to people around the globe.
Making it easy and user-friendly to set up a wallet within a wider network of self-custody wallets clearly brings the potential for a worldwide revolution in how we treat money. Those living in developing nations, and more specifically the more than one billion unbanked, can retain complete control over their funds without being at the mercy of a (CeFi) centralized financial institution.
Good, safe self-custody is the key to unlocking such possibilities with the result of significant real-world impact.
This entirely depends on the needs decided by users. It feels safer for many to trust their crypto funds with the custody of a centralized exchange (CEX). While independence can be worth the precautions of risk diversification — through hardware wallets, open-source software and multi-signature setups — the majority of regular people are probably vastly safer on Binance, FTX and other CEXs.
Related: FTX revenue reportedly grew 1000% in one year, leaked documents reveal
Centralized finance (CeFi) may be slowly turning into de facto TradFi. This is not necessarily a bad thing. If centralized exchanges can be insured like their traditional counterparts, then this massively reduces the risk of transacting with them.
Meanwhile, engaging with decentralized exchanges and smart contracts can also be a risky endeavor. Decentralized finance (DeFi) supporters hope it will become less so in time as the industry matures. Increased focus on user experience and safety should swiftly follow this maturation.
A great upside to DeFi is that adopters do not have to trust vague messaging from entities such as FTX. They're free from the risk of most centralized failures that could result in the loss of their funds.
The power to decide rests with the consumers and whether they trust regulators to protect them while they utilize a CeFi entity — which emulates TradFi — or decide to wait for a better, sorely needed self-custody solution.
Ultimately, there will be a demand for both DeFi and CeFi amid the rich tapestry of blockchain and crypto offerings. Rather than being forced to choose between two sub-optimal offerings, investors will have a panoply of options to consider.
Tom Tirman is the CEO of IQ Protocol, an NFT renting solution that allows games and other platforms to wrap digital assets and lend them out to users looking to play and earn. Before crypto, Tim graduated from a top technological university in Eastern Europe with a law degree and continued his studies at the Stockholm School of Economics. In his free time, he also spearheads PARSIQ, a web3 data aggregator.
The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
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