Recently, David Schwartz, Chief Technology Officer at FinTech firm Ripple and architect of the XRP Ledger, talked about his experience with the first “Bitcoin casino”.
Someone on the Quora platform had asked the following question:
“Is it true that a man has 240 million worth of Bitcoin but only has two password attempts left? How could this happen?“
This question was referring to an article (published on January 12) in the New York Times, which talked about how former Ripple CTO Stefan Thomas had just two guesses left to figure out the password for his IronKey cryptocurrency hardware wallet, which “contains the private keys to a digital wallet that holds 7,002 Bitcoin.”
According to this article, “Mr. Thomas years ago lost the paper where he wrote down the password for his IronKey, which gives users 10 guesses before it seizes up and encrypts its contents forever. He has since tried eight of his most commonly used password formulations — to no avail.”
Schwartz started his answer by confirming that the story about his former colleague’s hardware wallet was true:
“Stefan Thomas made a video a very long time ago and got paid in bitcoin. He jokingly put most of the bitcoin aside (about 6,500 bitcoin or so) back when bitcoin was much less than $5 each thinking he would cash them out “when they were worth a million dollars”. It was not until several years later that he realized that they were worth a million dollars.
“This story first came to the public’s attention when they were worth about $2 million. I was with Stefan at the time at a bitcoin conference in San Jose. We were explaining how the XRP Ledger worked to people and after each conversation, the person we were talking to would ask Stefan or I for our business card. When Stefan gave someone his business card, they would read his name, and say something like: ‘Thanks Stefan. Stefan Thomas. Where do I know that from. Oh, my God! …. I’m so sorry.
“Stefan still checks on the bitcoin on the blockchain to make sure they’re still there and nobody else has somehow found them. But last I heard, he still has not been able to recover the password. I’m sure you heard the stories of the various places he kept his wallet and the various problems he’s had getting to each of those places.“
Schwartz then shared another story about how Thomas had lost access to private keys for hundreds of Bitcoin wallets while testing the code for a Javascript library for Bitcoin:
“When Stefan was developing a Javascript library for bitcoin, he would frequently test with real bitcoin. This was at the time when bitcoin was worth a tiny fraction of a dollar, so he would create unspent outputs with ‘1.0’ bitcoin because that was the fastest and easiest number to type. He likely created hundreds of such accounts, none of which he retained the keys for because they were just for quick experiments. Each of those accounts is worth $38,000 or so today.“
Then came the most interesting part of Schwartz’s answer: his experience with the world’s first Bitcoin casino.
Apparently, back in early 2013, when Bitcoin was trading around $20, Schwartz came across a casino app/website that you would need to fund with bitcoins. So, he created an account, around eight bitcoins in it, and played for a while before finding it a bit boring and deciding to stop using it.
Then, around seven years later, when the price of Bitcoin reached around $10,000, he realized that he had never withdrawn his “leftover bitcoin” from this casino. Unfortunately, he could neither remember nor find any information about this casino.
Eventually, one day, he remembered the name of the casino, downloaded some client software for it, and to his amazement the “forgot my password” mechanism worked, and he was able to withdraw the 7.5 BTC that was in his account.