What Should I Do If I Forgot the Password of My Cryptocurrency Wallet? Part 1

What can I do if I forgot my password from the cryptocurrency wallet? Part 1

Rapid development of the cryptocurrency industry, the rapidly growing exchange rate of Bitcoin and other coins lead to an increased interest of people regarding the issue of wallet security. After all, it is known that if the password to the wallet was lost, then it would be almost impossible to get access to the funds that are on it. Unfortunately, lost BTC sometimes become the “dead weight” of the system. Let’s see, what could be done if suddenly such a situation arose.

Contents:
(please click the topic to scroll down to it)

  1. Cases of lost passwords
  2. How does the cryptocurrency wallet work?
    2.1. Online wallets
    2.2. Hot local wallets (PC, smartphone)
    2.3. Cold wallets

1. Cases of lost passwords

The total emission of Bitcoin is 21 million coins, at the moment 17,091 million pieces have already been mined. According to preliminary data, access to 4.3 million coins is lost forever. Considering even the current drawdown of the rate, this is approximately $ 28 billion. It’s impressive, is not it?

Due to the fact that there are several variations of cryptocurrency wallets (online wallets, hot wallets, cold wallets), there are a lot of scenarios of how you can lose access to them, the most widespread ones are:

  • hacker attack (refers to online wallets);
  • throwing out or losing access to an external carrier (a flash card or a hard disk);
  • losing access to the email which the wallet was registered with;
  • losing a sheet of paper with a password or making a typo when writing it down;
  • forgeting the access code of your wallet;
  • accident and so on.

2. How does the cryptocurrency wallet work?

One of the most frequently asked questions among beginning cryptocurrency investors is: “How to choose the right wallet?”. And it’s not as simple as it might seem at first glance. The fact is that there are several variations of wallets on the market, which are arranged in different ways. Before you put your hard earned money there, you need to understand how different cryptocurrency wallets work.

2.1. Online wallets

This is the most convenient option for storing digital coins. The owner can get access to his/her assets from anywhere in the world, the main thing is the presence of a device that is connected to the Internet. Online wallets do not need to be installed on a laptop or smartphone. With their help you can make any transaction as quickly as possible.

However, like everything else in the world, online wallets have the reverse side of the coin. The fact is that all the security phrases and keys which you can access the funds with on your wallet are stored in the cloud of the service. As a rule, developers of online wallets invest huge amounts of money in the security of their platforms, but, as practice shows, even the largest services can be hacked and passwords can be stolen.

For this reason, storing significant amounts in online services is not the most reasonable idea. Online wallets can be used as an additional solution, which will store a small number of coins for everyday expenses.

2.2. Hot local wallets (PC, smartphone)

Local wallets are programs that you need to install on your computer. They are heavy and light. The former need to be downloaded along with the entire database of the blockchain, which will be constantly updated, therefore, take up more and more space on the hard disk. It is worth noting that they occupy a really large amount of space (this is 60-100 gigabytes of information). But this inconvenience is more than covered by the level of security that they provide. All the necessary data is stored locally, not in cloud services.

A light version of local wallets does not require to download the whole blockchain. Similar options are fairly easy to use, they also have a high level of security, but are inferior to difficult options. The fact is that the missing information, which is necessary for the work of the wallet, is stored on third-party services, which are also subject to attacks and other external factors.

Cryptocurrency wallets for smartphones are mobile versions of light desktop solutions. They are great for people who often make transactions. But it should be remembered that mobile wallets also work with remote services, so you do not need to put all your money there either.

2.3. Cold wallets

This is the safest way to store your savings in cryptocurrencies. A cold wallet is a physical device, an external storage medium that was designed specifically for storing and protecting coins. In fact, before you start it you need to connect this flash drive to a computer or laptop and enter the pin code. The encryption keys are stored on the device and are not transmitted anywhere. The cold wallet is reliably protected from viruses, it is almost impossible to compromise. The most widespread are:

  • Ledger Nano S.
  • Ledger Blue.
  • Trezor.
  • Keepkey

Using cold wallets, you do not have to worry about your savings. Even if the device fails or is lost, access to the coins can be returned using a special code that is initialized on first use. It must be written and stored in a safe place, otherwise you risk losing all your coins if the device fails or is lost.

Very soon we will tell you about the algorithm for restoring the wallet. Follow the news!

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