_ Here's how it works: Anybody can ask a question Anybody can answer The best answers are voted up and rise to the top up vote down vote favorite 3 You run bitcoin as a service on your local computer.What happens if this computer is compromised?A corrupt/failed hard drive or theft leads to the machine being lost and unrecoverable, and my bitcoin details (addresses etc) are gone.Do my bitcoins disappear into the ether?What happens to my bitcoins if my wallet file is compromised/lost?shrinking-money-supply lost-bitcoins up vote down vote If a wallet file is truly lost with zero ability to recover it, then the coins it contained are lost forever.Think of it as cash left in a burning house.Be sure to periodically backup your wallet.dat file.It is best to also encrypt those backups lest they be compromised giving someone else access to your wallet.up vote down vote Your coins still exist, but your ability to use them is gone.

No one knows this, as they still appear to be perfectly valid.And, in fact, if you ever recovered your wallet somehow (say you discovered a backup on a USB key somewhere), you could then spend them.up vote down vote The Bitcoins never disappear, but if you lose your wallet, then you lack the keys necessary to actually use those Bitcoins.bitcoin core and torSo although the coins do not disappear, they are effectively removed from the economy since you cannot spend them.ethereum highest hashrateThis is why it is important to backup your wallet.bitcoin coin flipup vote 4 down vote Yes.This is because of the decentralized nature of Bitcoin.You are the master of your own private keys.With great freedom comes great responsibility.You have to come up with your own precautions.

up vote down vote If bitcoin continues without a solution to this little problem, it will be the undoing of the system.If enough people loose their wallets, bye-bye bitcoin.It's a ledger of transactions recording anonymous losses.Bitcoin is not as durable as everyone is claiming.If a paper dollar gets torn, the banks take it out of circulation and replace it.If it gets lost in a landfill, the money pool is expanding and it's no great loss.With Bitcoin, the only thing to do to compensate for a loss is to further divide the currency.I love the sound of buying something for a femto-bit.Browse other questions tagged shrinking-money-supply lost-bitcoins or ask your own question.For Dave Bitcoin, the alias of the software architect that hacks people’s cryptocurrrency passwords, the price surge of Ethereum’s blockchain token ether has generated a significant amount of work; work that wouldn’t have been steered his way without his focus on developing trust.And just to be clear, Dave Bitcoin hacks people’s passwords with their permission.

He runs the website Wallet Recovery Services, which recovers people’s lost or forgotten passwords by brute force decryption – that is, using a computer program to try millions of passwords in a short amount of time.He provides the service for bitcoin, litecoin and most other alternative cryptocurrency wallets, and in December, he began decrypting Ethereum pre-sale wallets."I love a challenge," said Dave Bitcoin, who’s pseudonym remains from the days when it was unclear if cryptocurrency was legal."Initially, back in mid-2013, I just wanted to understand the cryptography used by bitcoin and the formats of encryption in the wallets.I realized that I was able to potentially help people who have forgotten their wallet passwords, and it grew from there."Dave Bitcoin has worked with more than 1,000 people since he launched the service, most in need of password recovery but a few that wanted deleted wallet files recovered.His success rate is about 30%, but it’s a rate that varies drastically based on how much information a client gives.

Since January, Dave Bitcoin's Ethereum business has exploded, coinciding with the 1000% price increase.Today, about 50% of his business is decrypting Ethereum wallets, 40% is bitcoin related and the remaining 10% is recovering altcoin wallets, like litecoin or dogecoin.Dave Bitcoin charges 20% of the amount in the wallet, which is a risk since typically he doesn’t know how much is in the wallet before he decrypts it."I try to help everyone, even if the money involved in the wallets doesn’t really make financial sense," Dave Bitcoin said.This emphasis on customer service is necessary because he’s trying to build a trusted offering with a service that’s a bit intimidating.To start, consumers must hand over what they think their password could be.Since many consumers use the same or variations of the same password for multiple accounts, this can be worrisome.But after Dave unlocks a wallet and takes his cut, he sends an email explaining to clients that they should change or stop using any of the passwords they disclosed to him.

The software Dave uses is configurable but if the password is particularly unusual, a custom code is needed on a per-client basis to decrypt.Dave Bitcoin’s software runs on high-performance computers, generally Amazon Web Services (AWS) computers.Each computer node pulls a subset of the password candidates from a high-speed online database and processes them, executing the appropriate cryptographic primitive operations to examine the candidate passwords to determine the correct password.Dave uses both Linux and Windows nodes on AWS.“I can start up one node on AWS or 100 or more, just with the click of a button,” he said."But of course, running these computers does come at a financial cost, so I need to balance the cost of the decryption versus the likelihood of success."The software is also capable of using GPU cards for more common wallet types like those offered by Bitcoin Core, speeding up the recovery process.With several of his coded algorithms, the software can perform millions of decryption attempts per second.

"It is a fun process, and nothing is more enjoyable than helping someone recover their bitcoins or ether or altcoins," Dave said, but the financial reward hasn’t been enough for him to give up his day job as a software architect.After some research, Wallet Recovery Services seems the only offering for cryptocurrency recovery services.Perhaps due to a lack of other options, Dave Bitcoin has built up trust over the past several years.Stephanie Murphy, the host of the podcast "Let’s Talk Bitcoin" and Ludvig Oberg, co-founder of Swedish bitcoin exchange, Safello have used the service.And bitcoin wallet provider Blockchain redirects their clients looking for password recovery to Dave Bitcoin."My reputation is very important to me, and I act honestly with my clients at all times," he said."Trust is a fragile thing, and I am aware that I need to remain squeaky clean so that I do not lose the respect of the crypto-community."This hits at a core hurdle for bitcoin and other cryptocurrency startups interfacing with consumer’s money.

There have been numerous bitcoin companies, for instance Mt Gox, that have failed, taking consumer’s money with them, and other businesses that turned out to be scam operations running away with the money invested by customers.This has brought the heat from the Consumer Finance Protection Bureau (CFPB) onto the industry.The CFPB has been increasing oversight on bitcoin services for several years, issuing an advisory on the risks possed by virtual currency in August 2014.One of the risks mentioned is the absence of private key or password recovery options.But educational organization Consumer’s Research has actually advocated for bitcoin in this regard, saying bitcoin could boost consumer protections because the protocol makes it possible for people to take security into their own hands instead of relying on third parties.But it will be a challenge getting consumers to switch over to more accountable systems when they’re used to insurance and other protections.As Dave Bitcoin said and his service proves: "It is still early days in the cryptocurrency world."