The Bitcoin bungler - a salutary tale

 
Bitcoin app

Here's a cautionary tale for anyone thinking of climbing aboard the Bitcoin bandwagon. You could lose your entire investment in a moment of carelessness. Then again, you would have to be as daft and forgetful as me.

Here's how it happened. Back in the spring I acquired some Bitcoins - well about half a Bitcoin - to carry out an experiment on behalf of Radio 4's PM programme. I wanted to see how easy it was to use the virtual currency to buy something real - in this case a pizza.

My mission succeeded, although I found it quite a tricky and cumbersome process. I first needed to set up a Bitcoin wallet on a mobile phone, then acquire some currency, paying for it on an exchange using a mobile money app. But having succeeded in getting my lunch delivered, I decided to top up my Bitcoin balance again, so that I still had 0.5 Btc in my mobile wallet.

A few months later I went to a conference about the currency, where I tried out the world's first Bitcoin ATM, putting in £10 and topping up my account to 0.7Btc. So now I had about £43 at that day's exchange rate. At the conference I winced sympathetically when an early adopter explained how he'd lost 7,000 Bitcoins (then $200,000) because he hadn't backed up his private key to his computer.

For months, I thought little about the small investment sitting in an app on my phone. Then I looked at the Bitcoin exchange rate - now pushing towards $900 in the latest extraordinary bubble - and realised it had turned into a rather big investment.

But then I remembered what I'd done with the phone containing the currency. Wanting to make sure it was somewhere I could get easier access, I'd transferred almost my entire Bitcoin holding to a new wallet on another phone that I was testing back in the summer.

Then, a few weeks ago, I offered this phone - supplied by the manufacturer - as a prize in a charity fundraising effort. And before handing it over to the winner I had of course restored it to factory settings, wiping all of my personal data and apps, including my Bitcoin Wallet.

So my Bitcoin holding - now worth upwards of £400 - had vanished into thin air. The record of the transaction sending 0.7 Btc to the wiped phone was still on the original handset, and when I tapped on the app up came a message: "If you lose your device you lose your Bitcoins. This means you need to back up your private keys!"

Of course, I had not done that. so my money had disappeared into the void - and as Bitcoin is by its nature an unregulated currency with no central bank or ombudsmen, there was nobody to whom I could appeal for advice or recompense.

A salutary tale then - but for me a worthwhile lesson in understanding the mechanics of a virtual currency. And I've two sources of comfort - first of all, the man at that conference who lost 7,000 Bitcoins is now down about $6m (£3.7m) by today's exchange rate. And secondly, there is every possibility that we will see that exchange rate plunge again in the coming weeks - so our respective Bitcoin bungles may not matter so much in the long run.

 
Rory Cellan-Jones, Technology correspondent Article written by Rory Cellan-Jones Rory Cellan-Jones Technology correspondent

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  • rate this
    +1

    Comment number 140.

    @ Andrew Swansea

    Thanks for taking the time to continue posting on this issue. I was very resistant concerning Bitcoin, but now realise that a good investment is simply one where the value is likely to be more at the point of withdrawal than the point of entry; the ‘value’ or ‘longevity’ is irrelevant… I need to give this further thought, but you have helped!
    :-)

  • rate this
    +1

    Comment number 139.

    Max Keiser has on so many occasions made the BBC financial experts look totally incompetent when discussing the current fiscal problems we are suffering. And as far as Bitcoin goes simply forget what the beeb has to say on the subject - refund my licence fee!!!

  • rate this
    +6

    Comment number 138.

    BBC, can't you sort out your forums, so these conversations are THREADED? Currently this is so stoneage, it amounts to stifling healthy debate... something the BBC should be promoting in still-stuffy UK. Or should we the community just make this for ourselves and forget the BBC? ... Reluctant, because you could still offer something of value.

  • rate this
    0

    Comment number 137.

    Not only have the world's richest been the biggest beneficiaries of monetary and fiscal policies since 2009, with the current global billionaires representing a 60% increase since 2009 according to UBS, but their consolidated worth has more than doubled from $3 trillion in 2009 to $6.5 trillion now. At same time, net worth of the "bottom 90%" of the world's not so lucky population, has declined.

  • rate this
    +1

    Comment number 136.

    @134

    You keep your tin of beans in your cupboard. Stock up when Lidl have an offer on.

    All the best!

 

Comments 5 of 140

 

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