The Hard Drive

In 2013, James Howells — an IT worker in Newport, Wales — was cleaning out his home office and accidentally threw away a hard drive.

On that hard drive was the wallet file containing the private keys to 8,000 Bitcoin he had mined in 2009. At the time, the Bitcoin was worth very little and he hadn’t thought about it in years.

He realised his mistake shortly after. By then, the hard drive was somewhere in the Newport City Council landfill site.

As Bitcoin’s price rose over the following years, the value of those 8,000 coins grew from nothing to thousands of dollars to millions to, eventually, hundreds of millions. As of 2024, those coins are worth over $500 million.

Howells has spent years trying to get permission to excavate the landfill. He has proposed elaborate plans involving AI-assisted sorting, environmental safeguards, and significant financial incentives for the council. Newport City Council has refused every request, citing environmental regulations, cost, and the disruption to the landfill’s operations.

The hard drive is in there. He knows roughly which section. The Bitcoin is on the blockchain — visible, unmoved, permanently associated with addresses he can identify. And there is nothing he can do about it.

Howells’s story is the most dramatic example of Bitcoin loss through poor custody — but the underlying cause is simple. He didn’t have a proper backup. When the device that held his private key was gone, so was the Bitcoin.

The seed phrase, backed up correctly, is the answer to the Howells problem. Write it down. Store it properly. Never rely on a single point of access.

Tomorrow: bridge to Part 7 — how Bitcoin actually works.

— The Daily Bit