By now, everybody has heard about Stefan Thomas, the guy who only gets two more guesses at his password to recover his wallet containing over $200 Million in bitcoin.

Here’s the money quote from the NYT:

The problem is that 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.

“I would just lay in bed and think about it,” Mr. Thomas said. “Then I would go to the computer with some new strategy, and it wouldn’t work, and I would be desperate again.”

It’s excruciating just thinking about it. Regret can be more painful than loss itself.

According to the Times piece, roughly 20% of all the bitcoin ever mined has been lost to human error. That’s a huge number. People lose their passwords, and with it their private keys. They wipe out their hard drives. They accidentally throw out old computers.

Great responsibility comes along with decentralization, especially when the technology is new and the infrastructure buildout is still in its infancy.

Early adopters are like trapeze artists performing without a net.

We’re Conditioned To Behave Poorly With Passwords

Last week, we discussed the increase in the number of institutions and people investing in digital assets. As bitcoin gains traction, the number of non-technical people involved ramps up too.

Meanwhile, we’ve learned to be sloppy with digital credentials.

If we lose a password on a website run by a corporation, whether it’s Gmail or Schwab or the Wall Street Journal, we simply click the Lost Your Password? link and we get a new one.

This is a simple, wonderful user experience we take for granted, but terrible behavioral conditioning for personal security of decentralized assets. Losing passwords is no big deal and easily solved, so we’re not that careful.

With a bitcoin wallet, there is no Lost Your Keys? Link.

Solving the Lost Keys Problem

As I write this, the total value of all bitcoin that has been mined stands around $608B. So, going by the 20% estimate mentioned in the Times article, $122B in bitcoin has been lost.

That’s a big number that could grow considerably as the value of the digital asset continues to increase over time and as additional bitcoin are mined.

This helps to explain the demand for large financial institutions to get involved in custodian services for digital assets.

For example, Fidelity Digital Assets is a crypto custodian and has been set up as a division of Fidelity Investments. Our Osprey Bitcoin Trust has selected Fidelity Digital Assets as the custodian of its bitcoin.

Institutions like Fidelity are building services that will help solve the lost bitcoin problem and allow investment vehicles to serve the increasing demand from non-technical investors. Bitcoin purists may not like this, but bitcoin has moved beyond its original cypherpunk audience and is gaining widespread adoption as an investment.

Reliable custodians offer a practical solution to the digital asset password problem. This is one of the catalysts for expansion of the adoption of digital assets and we see it as a positive.

Phil Pearlman is the Chief Behavioral Officer at Osprey Funds.

This information should not be relied upon as investment advice, or a recommendation regarding any products, strategies, or any investment in particular. This information is strictly for illustrative, educational, or informational purposes and is subject to change. The author of this article owns bitcoin, directly and through the Osprey Bitcoin Trust.