Sharing passwords is usually not a good idea, but sometimes you do need a backup plan in case something happens to you, like you die and take your passwords with you.
We’re often told not to share our passwords with anyone. People do often share their passwords with their spouse, as after all, spouses share a great deal of things between them, even their money.
There are always risks when you share passwords with anyone though, and when told not to share their passwords and other personal information with their spouse, they often will feel that this advice is too imposing. Couples sometimes don’t get along though and when that happens one’s personal assets can be placed at risk of seizure by the other person, like when people break up and the parties steal money from one another’s personal accounts because they have password or pin access.
Normally, we don’t really need to worry about what happens when someone dies and has not shared important passwords, as we can get around these challenges by having accounts unlocked by those who manage the central database where the information is stored. You have a key, someone else has a master key, and they can use theirs if needed.
Digital currency operates in a different world though, one that casts off central database management in favor of one based upon linking the computers of users together into what we call block chains. We could describe this as substituting the need for big brother by having the rank and file band together and run the show themselves.
Another way to understand this is that instead of having digital currency in a bank, it’s kept in a lot of safety deposit boxes and the key to each one is held by the owner and the owner only. If the owner loses their key to their box, there isn’t a way to get into it, it cannot be unlocked.
Cybercurrency Security is a Huge Issue
This is a feature that a lot of people like, perhaps mostly for the principle of it, as the traditional system isn’t exactly broken and works pretty well actually, even though everything can be improved. Block chain technology has the potential to improve a lot of things, even though it has had its struggles with trying to improve currency, especially security concerns.
Ironically, cybercurrencies are portrayed as being a more secure manner to store and exchange wealth, and its security end has attracted some of the world’s best minds. It has also attracted some of the world’s best criminal minds as well, and some of the heists we’ve seen so far make even the biggest hard currency thefts such as bank robberies and Brinks holdups look like shoplifting.
Up until recently, the theft known as the Mt. Gox hack was the largest so far, where almost $450 million was stolen back in the dawn of cryptocurrency in 2014. Perhaps it was just a matter of time before a bigger theft happened, and last week this came to pass when as much as $530 million in digital currency were taken from Tokyo based digital exchange Coincheck.
When we look to secure digital assets, since they exist in the digital realm only, their security is only as good as the computer programming used to protect it. While we go to great lengths to protect these assets from falling into the wrong hands, and we may think that this shouldn’t be too difficult given how well we can write security programs, previous experience with hackers should tell us that there are some pretty sharp people out there who can hack into pretty much any database, and we need to be aware of these risks.
Our best efforts at preventing hacking, even spending untold amounts of money on this, aren’t always enough, and you can bet that the people at Coincheck and other digital exchanges are very aware of what these risks are. With this much on the line, over half a billion dollars in this case for instance, it’s not that they aren’t looking to do what they can to prevent hacking, but sometimes our best efforts are not enough.
Cryptocurrency Can Be Made Too Secure Though
On the other side of the coin, these advanced security strategies and methods do have their potential downside, as we just saw with Canadian digital currency exchange company QuadrigaCX. As is common in the industry, the company had a considerable amount of digital currency held in what is called cold storage, off the grid so to speak in order to better protect these funds from being stolen by hackers.
Cold storage is an effective way to do this, but this sort of storage does require digital passkeys to get at it. QuadrigaCX’s founder Gerald Cotten held the passwords to $190 million worth of cybercurrency held in cold storage, and true to the advice we all get, he did not share them with anyone, including his wife.
There was one contingency that wasn’t planned for though, and definitely should have been, and this will serve as a very expensive lesson to other such companies. Cotton passed away last December, and these passwords went with him to the grave, leaving no one with the ability to gain access to this $190 million worth of digital assets.
In the weeks since, we have come to better understand what this all means, as attempts to access this money have completely failed, due to the way that cold storage is set up, being offline and requiring specific encrypted passwords and recovery processes, information only known to Gerald Cotton.
Since cold storage is designed specifically to prevent hacking, it’s not that some computer whiz can get on this task and break the security, and while it may be possible in theory to do that, we cannot count on this ever happening, and the money may be gone forever.
What we’ve really been waiting on over this time isn’t for someone to break the code and access the funds, it’s been to see if Cotton’s wife can find a place where her late husband may have hidden this information, and now it’s being made known that this has been to no avail.
Some of QuadrigaCX’s assets were also held in other crypto exchanges, and there is an ongoing effort by these other companies to return these assets to their rightful owners. Crypto exchanges hold people’s digital coins in trust, so it’s not just that the company took a hit from this, it was that other people’s money essentially got buried along with Cotten, a grim prospect.
You have to keep your digital currency somewhere, you can’t just put it in the bank or under the mattress. There were people touting the safety of digital currencies over banks, but especially after these two recent events with crypto exchanges, the bank might be looking a little better, perhaps a lot better.
Dead men tell no secrets, but sometimes they need to.