Podcast Conversation with the Man Who Lost $400 Million in BitcoinJuly 8, 2021
Dr. Chris Brummer, a professor at Georgetown Law, has long been a respected name when analyzing the confluence of finance, technology, and policy. His annual conference centered on these topics has often been considered a highlight of the year for those interested in the fields. In October of last year, the conference went virtual — as the Fintech Beat Podcast. Since then, regular episode installments have explored some of the most fascinating issues in fintech, with an eye towards how they may have an impact on our everyday lives.
A recent episode hosted by Brummer was titled “An interview with the developer who owns $400 million in Bitcoin — but forgot his password.” It featured a conversation between the fintech expert and Coil CEO Stefan Thomas who, unfortunately, has gained some degree of infamy for his lost bitcoins. Over the course of the almost 30-minute-long episode, the two discuss some of the finer points of cryptocurrency storage, the financial industry, and some interesting philosophical issues.
The conversation began with an overview of who Stefan Thomas is and why he holds such a unique insight into the field of cryptocurrency. Though he currently serves as the CEO of Coil, he’s also been known for his role as the CTO of Ripple, a major player in the cryptocurrency space. The introduction also notes that Thomas is a German-born programmer now living in San Francisco. While these are all noteworthy points in themselves, the aspect of his persona that’s turned the most heads of late has been his ownership of 7200 Bitcoins — about $400 million at the time of recording — that he can’t access.
Brummer then noted that Thomas’s situation warrants a deeper exploration, since it’s not only a large amount of money, but it’s also indicative of one of the stumbling points in the field of cryptocurrency. He highlighted how Thomas’s story shines a light on the importance of custodianship and the fragility and centrality of keys.
The next topic discussed in the episode was Thomas’s journey into the world of cryptocurrency. The programmer noted that his background wasn’t actually in fintech, but rather web development. He would make websites for others as a freelancer and would often be frustrated by the difficulty of getting paid, something he felt the financial industry wasn’t set up well to accommodate. He found himself wondering if there could be a way to reinvent the way money was transferred between parties.
That’s what led Thomas to Bitcoin. He noted that when he first happened upon the technology, in 2010, it was quite a bit different than it is today. For starters, Thomas recounts, there was no website listing the price of the coin. Rather, users would just meet in forums and trade coins for goods and services. With no set price, it was up to the two parties to come to an agreement on the value of the coins. The guest also noted that he had bought a small number of coins at the time, to better understand how the technology functioned.
At that time, he didn’t really consider how to secure his coins, they were just unencrypted on his computer. But then he entered a competition to produce a Bitcoin video and was able to win the main prize. After paying out expenses, he came away with just over 7000 Bitcoins which he placed in a wallet and labeled “Bitcoin Marketing Fund.” Although he created two backup copies, a few months later he realized he had forgotten his passwords and both his primary wallet and his backup copies were now rendered useless.
Dr. Chris Brummer delved into this detail with his guest, asking if a sense of panic set in after he realized he was no longer able to access the coins. Mr. Thomas confirmed that his panic levels did rise pretty immediately. Not only that, but he felt embarrassed since he was also a proponent of Bitcoin security precautions and was often in the position of recommending security protocols to companies at that time. Eventually, he made peace with the idea that he would likely not get the coins back and set his mind on returning to work and contributing to the cryptocurrency community in other ways.
Brummer noted Thomas’s resilience of the guest and how that must have been a difficult transition to make. He also asked if Thomas had met other people who had experienced similar things. His guest noted that he had and that it actually happened in quite large amounts, with up to 20% of the Bitcoin supply said to be lost. He drew similarities to the manner in which cryptocurrency is like gold or cash, which is also susceptible to being lost. This, he also noted, was one of the issues that banks and other financial institutions were created to help solve.
This led to a discussion about how the ideas around centralized finance were changing in the cryptocurrency community. While the community was originally created to move away from centralized finance, it’s also uncovered some ways in which that centralization has been helpful. This has prompted a greater degree of nuance on the subject in recent times, allowing for a great breadth of ideas in the cryptocurrency world.
The host then noted how these changing mindsets are interesting in light of how Bitcoin was first formed and asked how the guest’s experience of the space had evolved over the years. Thomas noted that his understanding of his field had been impacted by several formative experiences. Certainly, the lost Bitcoins represented one such experience, but he also referred to experiences like working to update Bitcoin protocols which helped show him that the endeavor was not just pure math. Instead, it incorporated some politics and other nuances that he had expected to leave behind when moving away from centralized banks. He also touched on just how convoluted those banking systems were to understand, by highlighting the case of a consultant that made upwards of $20,000 per day just due to being able to understand how the entirety of the traditional financial system functioned.
Dr. Brummer turned the conversation in the end back to the guest’s lost bitcoins and asked if there was any hope left for recovering them. Mr. Thomas relayed how many people had reached out recently as his story was featured in more and more news sources, including the New York Times. While many people had reached out with sympathy, others had reached out to aid in his quest for recovering the coins. He says he’s now been connected with some professionals and organizations who may have the credentials required to recover his funds. He also noted that, though the peak price of his lost coins was above $400 million, at the time of their loss they were worth only about $148,000. A sizable loss to be sure, but not on the same scale as their current value.
Dr. Brummer closed out the episode commending his guest for his resilience and on his ability to come back stronger after a proverbial “punch to the gut”.
The Fintech Beat podcast appears weekly, every Tuesday, and is produced by CQ Roll Call, a nonpartisan publisher based in Washington, DC, owned by FiscalNote. Listen to the episode on Apple Podcasts or Spotify.