Biz & IT

How one free software project gained, lost, and found £300,000 in Bitcoin donations

Why don’t we look after our digital wallets and encryption keys like our real wallets and keys?

J.M. Porup – Apr 5, 2016 8:35 am | 12

Credit: BTC Keychain

When the Tahoe-LAFS free software project started taking Bitcoin donations way back in August 2010, they received more than 200 BTC within the first four months—enough to buy “a couple months of hosting, or some pizza, but not both,” co-founder Brian Warner wrote in a recent posting to the tahoe-dev mailing list. At the time those 200 BTC were worth about $50 or £35.

Then the price of Bitcoin began its meteoric rise, hitting $15 per BTC in January 2013. The Tahoe-LAFS team started to realise they were sitting on quite a stash. Bitcoin donations had continued to trickle in, and their pizza and hosting money—some 375 BTC—was now worth around $6,000 or £4,200.

Bitcoin’s wild ride, from below $15 per BTC at the end of 2012, through to its ridiculous peak in 2014, and then stabilising around $400. Credit: Bitcoin Charts

Losing your wallet sucks

“We put that donation page up there a long time ago when we first heard about Bitcoin,” Warner told Ars. “We didn’t really think about it that much, people were donating a dollar or two at a time.”

“With the exception of two very generous contributions ($617 in 2012, $432 in 2013), the mean value was just $7, and the median was $3,” Warner wrote on the tahoe-dev mailing list. “The total value of all 74 donations (2010 to the present) is $1568.07. I.e. if every donor bought BTC with dollars from their pocket the moment before they made the donation, the pockets gave up less than $1600.”

But then, in January 2013, at the height of that first spike in the price of Bitcoin, disaster struck: the Tahoe-LAFS team realised the laptop hard drive containing the bitcoind wallet that held the private keys to that address had been erased and reformatted.

The hunt for backups was on, but all they found were children’s cartoons. “Peter remembered making a few Time Machine backups of the drive in question, but we didn’t know where they were,” Warner said on the mailing list. “One likely backup was discovered to have been reformatted and filled with children’s cartoons. The drives were imaged anyways, and I wrote forensic tools to scan the unwritten sectors for bitcoind wallet-like values, but had no success. Peter searched his house top to bottom, looking through over 50 hard drives, trying to find the wallet.dat file. No luck.”

“It was like an antique sitting in a drawer,” Warner told Ars. “You don’t think it’s important, and then you throw it away without realising that baseball card or coin collection was going to be worth money some day.”

And then the price of Bitcoin started to explode…

The embarrassment of losing a few hundred BTC soon turned to chagrin. The price of Bitcoin continued to skyrocket, hitting its peak of $1147 per BTC ten months later in November 2013. That lost wallet was now worth about £300,000 or $430,000. “Ouch,” wrote Warner on the mailing list.

The price of Bitcoin fell, then rose, then fell again, stabilising at its current value of around $400 or £300 per BTC. Peter, the dev who lost the key, moved house twice. Tahoe-LAFS development continued unabated.

“The Tahoe Project was always a volunteer project, everyone was contributing their time unpaid anyway,” Tahoe-LAFS developer Zooko Wilcox told Ars. “We didn’t have any plans to do anything with that money, [that’s] one of the reasons we weren’t more careful … we weren’t intending to use it.”

Tahoe-LAFS (“Least-Authority File Store”) is a mature free software project that builds and maintains a zero-knowledge decentralised cloud storage system. Like many free software projects, users can download and deploy the code on their own, or pay the project’s for-profit affiliate, in this case Least Authority, to do it for them. Least Authority is also working on Zcash, a privacy-focused cryptocurrency in alpha.

Years passed.

Then, a few months ago, in January of 2016, Warner got an e-mail. From Peter. Who had found a backup of the private keys—“in a moving box,” Warner wrote, “buried underneath a pile of shoes.”

At today’s Bitcoin price, 375 BTC are worth about £110,000 or $150,000—a big chunk of change to find down the back of the digital sofa, that’s for sure. But beyond mere relief at recovering the funds, the episode, Warner told Ars, raises fundamental questions about how we securely store our data—questions that make him quick to deflect criticism of his colleague for the loss.

“Ultimately, how we treat things of value and recognise things of value is kind of the root cause,” he said. “We don’t have the right instincts to perceive value in bits of data.”

That disconnect, he said, is what causes a lot of security failures. Here’s Warner’s epiphany, in full, from the mailing list:

Purely-digital currencies are exciting, but they stretch our human intuitions about what qualifies as “valuable.” We’re used to wealth having certain physical attributes: expensive things tend to be heavy, shiny, intricate, fragile, pretty, or old. Even paper money has a particular colour, smell, and texture, and we’re really good at tracking it (quick: where is your wallet right now?).

But ECDSA private keys don’t trigger the same protective instincts that we’d apply to, say, a bar of gold. One sequence of 256 random bits looks just as worthless as any other. And the cold hard unforgeability of these keys means we can’t rely upon other humans to get our money back when we lose them.

Plus, we have no experience at all with things that grow in value by four orders of magnitude, without any attention, in just three years.

So we have a cryptocurrency-tool UX task in front of us: to avoid mistakes like the one we made, we must to either move these digital assets into solid-feeling physical containers, or retrain our perceptions to attach value to the key strings themselves.

By the same token, Warner argues that solving this challenge will improve computer security across the board, by providing a monetary incentive that will encourage ordinary users to actually care about security.

“The thing that I’m most excited about Bitcoin, and cryptocurrencies in general, is that it teaches people the value of keeping secrets and … end-point security,” Warner said. “That makes things much more real. That’s a good thing. It’s causing people to pay attention to that kind of data security … we’ve never had a motivator like this before.”

For his own part, Warner is feeling the motivation. To prevent a repeat of the “Bitcoin lost+found” experience, he spent a recent weekend engraving the new Tahoe-LAFS Bitcoin private key onto at least two stainless steel plates—strong enough, he hopes, to resist a fire.

And perhaps, more importantly, much more difficult to lose.

J.M. Porup is a freelance cybersecurity reporter who lives in Toronto. When he dies his epitaph will simply read “assume breach.” You can find him on Twitter at @toholdaquill.

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