If you’re someone who grew up in the swinging sixties trying to get to grips with contraptions like typewriters and cassette tapes, ogling bikini posters of Raquel Welch and playing Spacewar on PDP-1, you’re definitely going to have a hard time getting your head around the concept of virtual currencies, devoid of physical representation or form.
People from that generation, trying not to use the B word, can’t get past this fundamental property of Bitcoin. I mean how could you even be sure that something you’re unable to see, touch and hold in your very hands even exists, much less trust this phantom currency? When you’ve thus formed a hard and fast opinion on Bitcoin, this predisposition then militates against everything you learn about it thereafter.
It wouldn’t be so bad if they just didn’t get it. We could try, without being even remotely condescending, disabusing them of their misconceived notions. But the problem with those who bemoan Bitcoin as being too complicated or insecure is that a lot of these folks are apt to pontificate on Bitcoin’s shortcomings whilst showing no willingness to exert even the slightest effort trying to understand how the cryptocurrency actually works.
To be clear, we’re not talking about any technical intricacies, that’s not necessary, but just non-technical knowledge of Bitcoin’s workings from an end user perspective, which is really not such a steep learning curve for someone already familiar with mobile banking and payments.
In November 2019, former Presidential Candidate and Republican Senator from Utah, Mitt Romney, raised concerns to the FBI and the US Department of Homeland Security over the threat posed by cryptocurrencies to national security,
“I don’t begin to understand how cryptocurrency works. I would think it is more difficult to carry out your work when we can’t follow the money because the money is hidden from us and wonder whether there should not be some kind of effort taken in our nation to deal with cryptocurrency.”
As someone who never made any effort to understand how cryptocurrency works, Romney wasn’t to know that only a few weeks before he made those remarks, the FBI would not have been able to take down one of the world’s largest child porn ring in South Korea if not for the transparency afforded by the Bitcoin blockchain.
Schiff’s Shifty Tales
Gold bug Peter Schiff, an obsessive Bitcoin bear, was in a similar quandary this week, only it wasn’t a national security issue. Instead, it had to do with his personal blockchain wallet security.
Exhibiting the scope of his understanding in a single tweet, Schiff claimed last Sunday to have lost all his bitcoins after his wallet “got corrupted somehow” and forgot his password. Yeah, that’s right. He didn’t forget it, his wallet did.
I just lost all the #Bitcoin I have ever owned. My wallet got corrupted somehow and my password is no longer valid. So now not only is my Bitcoin intrinsically worthless; it has no market value either. I knew owning Bitcoin was a bad idea, I just never realized it was this bad! pic.twitter.com/6SJvDJOZU6
— Peter Schiff (@PeterSchiff) January 19, 2020
So much fake news about how I forgot my wallet password. Can’t #Bitcoin pumpers be honest about anything? I was very clear that I didn’t forget my password. My wallet no longer recognizes my correct password. Plus what’s up with over 3K people liking that I lost my Bitcoin?
— Peter Schiff (@PeterSchiff) January 20, 2020
Now first of all, it would be remiss not to point out that Schiff’s argument against Bitcoin here is an object lesson in straw man fallacy. Several companies make Bitcoin wallets and passwords are ubiquitous. There’s growing effort from tech companies to do away with passwords altogether for the security risks they pose in a world of 5G mobile networks, IoT and, maybe soon enough, quantum computing.
Trying to discredit Bitcoin for one specific wallet’s password issue would be akin to labelling Schiff a clairvoyant for one accurate prediction among a hundred whiffs. It’s called law of averages, Peter.
Schiff wasn’t happy that over 3K people liked that he lost his bitcoins. Most of them weren’t revelling in schadenfreude. They probably liked the tweet for being funny. Twitter even featured it under the fun category, or at least they should have done.
After crypto twitter informed Schiff that it wasn’t possible for his wallet to have become corrupt, Schiff kept changing his story, making further spectacle of his ignorance. It wasn’t until late Wednesday night that he cottoned on to his mistake, confounding his blockchain wallet app’s PIN for his wallet password.
How does the blockchain wallet work? Did Peter really lose his bitcoins?
There’s a lot of conjecture over whether this was all just another lame FUD or if Peter really lost access to his wallet. So let’s clear that up lest anyone else make the same mistake. Peter’s earlier narrative was, to put it mildly, implausible.
The first thing to know about any Bitcoin wallet, whether it’s a mobile, desktop or hardware wallet, is that a wallet does not actually “store” your bitcoins. All bitcoins are on the blockchain. A wallet is used to store your private key which unlocks access to your bitcoins on the blockchain.
Hot wallets, which are mobile and desktop wallets, are inherently vulnerable due to their being often connected to the Internet. But hot wallets have come a long way. Different mobile wallet apps use different methods to provide as much security as possible. Most wallets encrypt wallet files and don’t allow screenshots to prevent middle men from snooping, some wallets use virtual keyboards to avert keyloggers, there are even wallets which provide advanced privacy options like coin mixing services.
Blockchain wallet app requires the user to create a wallet first on the blockchain website using an Email address and a password. The user can then scan a mobile app pairing QR code to log in through the mobile wallet app. The user is asked to create a 4-digit PIN to log in to the mobile app, which is required on every log in. Logging in through the web client requires the user’s unique Wallet ID, issued during wallet creation, and password. As an additional layer of security, the user can enable a 2FA using an authenticator app such as GAuth (Google Authenticator), Yubikey or SMS codes.
These layers of security only control access to the blockchain wallet. We’ve already learned that that Bitcoin wallets don’t actually store any bitcoins. Think of them as portals to the blockchain, just a route to access your bitcoins. If you’re having trouble accessing your wallet for whatever reason, the bitcoins can still be accessed through an alternate route.
To regain access to your bitcoins, all that’s required is the seed phrase or passphrase. This is not your password or PIN but a combination of words the wallet application asks you to “backup funds” when you create a new wallet, as shown below in an image from the blockchain website.
Schiff claims that his blockchain wallet was created for him by ShapeShift founder Erik Voorhees and that he believed his mobile wallet’s PIN to be his password since it was the only way he accessed his wallet. This revised story seems a lot more plausible, but Voorhees is unsure which wallet app it was that he created for Schiff.
An Apology is in order
Since he never backed up his 12-word seed phrase, Schiff was apparently unable to recover his funds. This goes back to the point about making an effort to understand the workings of something new before you dabble in. It’s unwise to try anything with no inclination to learn.
Schiff’s readiness to continually run down Bitcoin without even having an elementary grasp of how his Bitcoin wallet works exposes him as an ultracrepidarian, who, confronted with compelling evidence inconsistent with his own tenets, lashes out by flapping his gums whilst burying his head in the proverbial sand so he could pretend all else was a lie but his confirmation biased propaganda.
The Bitcoin community is waiting for an apology but they’re certainly not holding their breath. Schiff’s stomach has never found the humble pie particularly agreeable.
But whether Schiff finds it agreeable or not, Bitcoin is an inevitable monetary revolution. Being unable to physically destroy Bitcoin as the 19th century Luddites did machinery during the industrial revolution, people like Schiff resort to the feckless option of furiously tweeting at windmills.