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Chapter 1 · Why families lose bitcoin

The 3 Ways Families Lose Bitcoin (It's Not Hackers)

Prefer to watch? This chapter is also a short video (about 4½ minutes). The full text is below.

In one minute: Families don't lose bitcoin to hackers breaking the network. They lose it three ways: someone tricks them out of it (theft), nobody can open it (loss), or the only person who knew how dies (no plan). All three are about the key, and all three are preventable.

Most people worry about the wrong thing.

They worry that bitcoin will be "hacked," that the network will break, that someone will crack the math. That isn't how families lose it. In seventeen years, the bitcoin network itself has never been broken into. The money disappears in the space between the network and the people who own it: a kitchen drawer, a phone, a scrap of paper, a phone call from someone pretending to help.

There are only three ways it happens.

1. Someone takes it (theft)

Almost nobody "hacks" bitcoin. They talk you out of it.

In 2025, Americans reported losing $11.4 billion to cryptocurrency fraud to the FBI, a record and more than half of all internet-crime losses that year. People over 60 reported $4.3 billion of that. ¹ Those are only the cases people reported.

The tricks are old ones in new clothes: a "support agent" who needs your recovery words to "fix" your wallet, an email saying your account will be frozen unless you "verify" it, a fake app that looks exactly like the real one, a new friend online with a can't-lose investment. Every one of them ends the same way: you hand over the key, and the money leaves. Bitcoin has no bank to call and no button that reverses a payment.

The good news: theft is the easiest of the three to prevent. One rule stops most of it, and you'll learn it in Chapter 5.

2. Nobody can open it (loss)

The second way is quieter. The bitcoin is still there. It just can't be reached by anyone, ever.

• In 2013, a man in Wales threw away an old hard drive while clearing out his house. It held the keys to about 8,000 bitcoin. He spent more than a decade trying to dig it out of the town landfill, and gave up in 2025. ²
• A programmer in San Francisco stored the key to 7,002 bitcoin on an encrypted drive that erases itself after ten wrong passwords. He lost the paper with the password. When the New York Times wrote about him in 2021, he had two guesses left. ³

Those are the famous stories. The ordinary ones are a phone that fell in a lake, a laptop that died, a piece of paper in a house that burned.

The research firm Chainalysis estimated in 2020 that about 3.7 million bitcoin, roughly one in every five that existed at the time, were probably lost for good. ⁴ Not stolen. Just unreachable.

The good news: loss is a backup problem, and backups are cheap. Chapter 6 shows you how to make ones that survive fire, flood and forgetting.

3. The only person who knew dies (death without a plan)

This is the one this book exists for.

Picture it. (This family is made up; the situation isn't.) A husband has held some bitcoin for years. He's careful. He keeps the device in a drawer and the recovery words somewhere safe that only he knows about. He tells his wife, "Don't worry, it's all taken care of."

Then one day he's gone.

She finds a small device in the drawer. It asks for a PIN she doesn't know. She doesn't know if there are words written down somewhere, or where, or what they look like. She doesn't know which accounts exist, how much is in them, or who she can safely ask. She searches online and, within an hour, finds three "recovery services" happy to help for a fee, and at least one of them is a scam.

Everything he did to keep strangers out also keeps her out.

Being careful isn't enough. Careful without a plan is the same as lost. The fix isn't to be less careful. It's to make sure the right person can follow a clear set of steps, and the wrong person can't.

The pattern

Look at the three again:

Every one of them is about the key, not the bitcoin. That's what the next chapter is about: what you actually own when you "own bitcoin," and why it matters more than the price.

Talk about it

Take ten minutes, just the two of you.

1. If the one who holds the bitcoin couldn't speak tomorrow, what would the other one do first?
2. Do you both know roughly how much there is, and where?
3. Has either of you ever been asked for a password, code or "recovery words" by someone who called or emailed you first?

You don't need answers yet. You just need to notice which questions you couldn't answer.

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