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Miracle Recovery: How One Man Restored His Lost Bitcoin Wallet and What It Means for Crypto Investors

Ruholamin Haqshanas
Last updated: | 6 min read
Miracle Recovery: How One Man Restored His Lost Bitcoin Wallet and What It Means for Crypto Investors

Security researchers have successfully cracked the password to recover over $3 million worth of Bitcoin that had been trapped in a crypto wallet for 11 years.

The wallet, which had been locked away since 2013, was inaccessible due to a forgotten password.

The owner hired electrical engineer Joe Grand, also known as ‘Kingpin,’ to hack into the encrypted file and recover his 43.6 BTC.

The recovery not only signifies a personal victory but also provides hope and insights for the broader cryptocurrency community, where lost and inaccessible wallets are a common challenge.

Cracking Time to Recover Lost Password

The lost password was generated by a random password generator called RoboForm.

It was a complex combination of 20 upper and lower case letters, along with numbers, designed to be exceedingly difficult to crack.

The wallet’s owner, who preferred to remain anonymous, explained in a video published by Grand that he had generated the password, copied it, and used it as the passphrase for the wallet.

He also encrypted it in a separate text file.

Unfortunately, the encrypted part of the owner’s computer that stored the password became corrupted, leading to its loss.

At the time, the Bitcoin was worth only a few thousand euros, which the owner described as “painful but OK.”

Over the next decade, the lost Bitcoin grew exponentially in value as the price of bitcoin surged by over 20,000 percent.

Faced with the newfound fortune, the owner reached out to Mr. Grand for help in recovering the funds.

Initially hesitant, Grand eventually agreed to take up the challenge and devised a novel method to hack the initial password generator.

Using a reverse engineering tool developed by the US National Security Agency (NSA), Grand disassembled the code of the password generator.

He discovered that the supposedly random passwords generated by RoboForm were not truly random.

In older versions of the software, if one could manipulate the system to believe it was the moment in 2013 when the password was generated, it would reproduce the same password.

With a rough estimate of when the password was originally created, Grand collaborated with his colleague Bruno to generate millions of potential passwords until they eventually cracked it.

It’s worth noting that the RoboForm password generator has since updated its platform to enhance the randomness of its tool, rendering the time-based hacking approach ineffective for passwords created after 2015.

Understanding Bitcoin Wallets

Bitcoin wallets are digital tools that allow users to store, send, and receive Bitcoin. These wallets come in various forms, including hardware wallets, software wallets, and paper wallets.

Hardware wallets are physical devices that store private keys offline, offering high security.

Software wallets, on the other hand, are applications installed on computers or mobile devices, providing convenience but requiring robust security measures.

Meanwhile, paper wallets are physical documents containing public and private keys, offering cold storage but vulnerable to physical damage or loss.

Wallets are crucial for storing digital assets securely. However, they come with their own set of challenges.

Common obstacles include forgotten passwords, lost recovery phrases, and corrupted storage devices.

According to the cryptocurrency data firm Chainalysis, around 20 percent of all Bitcoin in circulation — worth around $250 billion — appear to be in lost or otherwise stranded wallets.

Tools and Technologies for Wallet Recovery

Several tools and technologies are available to aid in wallet recovery, each offering unique approaches to regain access to lost or inaccessible cryptocurrency wallets.

Programs like BTCRecover utilize brute-force and dictionary attacks to systematically test potential passwords or seed phrases until the correct one is found.

BTCRecover is an open-source command-line tool that allows users to customize recovery parameters, making it a versatile solution for those who have lost their Bitcoin wallet passwords or seed phrases.

Furthermore, advanced decryption tools can be employed to unlock data that has been encrypted.

These tools use sophisticated algorithms to decrypt locked data, providing access to the wallet.

The decryption process often involves the use of specialized hardware and software to crack the encryption, ensuring that the data remains intact during the recovery process​.

Another recovery technique is forensic analysis. This technique involves examining and recovering data from damaged or corrupted storage devices.

Forensic analysis is crucial when a wallet file is corrupted or when data carriers are physically damaged.

By reconstructing old or defective data carriers, experts can retrieve the necessary information to restore access to the wallet.

Other Successful Cases of Bitcoin Wallet Recovery

The European man’s story is not unique as there have also been other notable cases where individuals have successfully recovered their lost Bitcoin wallets.

For instance, last year, Mike Stay, the CTO of Pyrofex, managed to help a Russian man recover $300,000 worth of Bitcoin that had been locked in an encrypted zip file.

The man, who had purchased around $10,000 worth of Bitcoin in 2016, had stored his private keys in a zip file and subsequently forgotten the password as the value of his Bitcoin soared.

The zip file used a legacy encryption method which posed a significant challenge.

However, the man had some useful details, such as the zip program and the exact version used, which helped narrow down the possibilities​.

Stay and his colleague Nash Foster utilized a combination of cryptanalytic techniques and high-performance computing resources, including Nvidia Tesla GPUs, to crack the encryption.

They developed a specific cryptanalysis code and employed a meet-in-the-middle attack, among other strategies, to expedite the decryption process.

After several attempts and overcoming a few technical hurdles, they successfully recovered the Bitcoin private keys, completing the task at a fraction of the initial cost estimate

Success Rates of Bitcoin Wallet Recoveries

The success rate of Bitcoin wallet recoveries varies widely depending on the circumstances.

The success rate for recovering wallets with forgotten passwords is relatively low, given the vast number of possible combinations.

However, for wallets with lost recovery phrases or corrupted storage, the chances improve significantly with the right tools and expertise.

“My overall success rate for recovering funds is about 50% when the user can remember at least some part of the missing information,” Dave Bitcoin, the pseudonymous co-founder of Wallet Recovery Services, said.

It is worth noting that the likelihood of recovering a lost Bitcoin wallet largely depends on the type of wallet and the nature of the loss.

Hardware wallets with forgotten passwords are particularly challenging, while software wallets with corrupted data might be more recoverable with forensic analysis.

Biggest Lost Bitcoin Wallets

The world of cryptocurrencies has witnessed several remarkable cases of lost Bitcoin wallets. Here are some of the most notable incidents:

  1. Satoshi Nakamoto’s Wallet: The mysterious creator of Bitcoin, Satoshi Nakamoto, possesses approximately one million Bitcoins. These Bitcoins have remained untouched since they were mined.
  2. Mt. Gox Hack: In one of the largest cryptocurrency exchange hacks in history, over 80,000 Bitcoins were stolen from the Mt. Gox exchange, which have never been moved.
  3. Stefan Thomas’s Forgotten Password: Programmer Stefan Thomas experienced a devastating loss when he forgot the password to a wallet containing 7,002 Bitcoins.
  4. James Howells’ Discarded Hard Drive: James Howells mistakenly discarded a hard drive that held the private keys to 8,000 Bitcoins. Despite extensive efforts, including searches through a landfill, the hard drive remains unrecovered.
  5. QuadrigaCX Exchange’s Lost Keys: The sudden death of Gerald Cotton, the CEO of the QuadrigaCX cryptocurrency exchange, resulted in the loss of private keys to wallets holding approximately $200 million worth of cryptocurrency.

The Bottom Line

The recovery of the lost Bitcoin wallet by the European man serves as a beacon of hope for many in the crypto community.

It underscores the importance of secure storage practices and the potential for recovery even in seemingly dire situations.

As the crypto industry continues to evolve, the development of advanced recovery tools and methods will play a crucial role in enhancing security and investor confidence.