What will happen to a wallet when the wallet company closes

doomloop

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Quote from: Ambatman on May 14, 2023, 03:58:46 PM

I know is nigh impossible for companies to last forever
So I wanted to know since most Bitcoin holder are HODL
What would happen to a wallet when the company hosting the wallet closes down?
Has any wallet company ever closed down before or experienced issue that affected holders Bitcoin?

Nothing happens to the wallet, it stays where it was, in the blockchain carrying the funds, it is only that you won't be able to access it if the company was hosting the private keys for you and you didn't have access to your private keys, in that case, your funds are lost forever for you and will always stay within that wallet unless the company, later on, decides to move them somewhere else and use them since they have the private keys to it

.

That is why it is essential to always use a noncustodial wallet like Electrum or a hardware wallet where only you have access to your private keys and in case something happens with the company, you can still import your wallet in another supported wallet and use the funds.

AakZaki

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Quote from: YUriy1991 on May 16, 2023, 04:43:55 AM

Nice question. Mt.Gox, A leading Exchange that went bankrupt in 2014 is one of them. Well, it is highly recommended to always use a reputable, well-established, recommended wallet that regularly backs up private keys or recovery phrases to mitigate the crucial risks caused by company shutdowns as mentioned by @sheenshane and I think it is very easy to understand where this is going .

Even a reputable wallet is not a guarantee of not going bankrupt. there will be a time when everyone has serious problems. Like several Exchanges in the past that stated that their company was bankrupt and had to be closed.
There will be a notification to withdraw their assets so that users don't lose these assets. certainly given a long enough time to be able to pull it.

indah rezqi

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I think many people especially newbie still think their bitcoins are stored in offline and online wallets like Electrum, HW or others. Basically a wallet only allows users to create keys, track balances and more. Bitcoin are not stored in wallets, they are stored in blockchain, but wallets give users access to sign transactions as they contain keys in them.

I think they need to study it here for more clarity: https://github.com/bitcoinbook/bitcoinbook/blob/develop/ch05.asciidoc

Quote

Bitcoin wallets contain keys, not coins. Each user has a wallet containing keys. Wallets are really keychains containing pairs of private/public keys (see [private_public_keys]). Users sign transactions with the keys, thereby proving they own the transaction outputs (their coins). The coins are stored on the blockchain in the form of transaction outputs (often noted as vout or txout).

So in essence, by only having the key or privatekey of your bitcoin address, you will always be able to sign transactions to move your bitcoin from one address to another. Without a wallet it's not a problem, but you must have the key to sign the transaction. That's what you need. CMIW.

Ultegra134

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Quote from: YUriy1991 on May 16, 2023, 04:43:55 AM

Nice question. Mt.Gox, A leading Exchange that went bankrupt in 2014 is one of them. Well, it is highly recommended to always use a reputable, well-established, recommended wallet that regularly backs up private keys or recovery phrases to mitigate the crucial risks caused by company shutdowns as mentioned by @sheenshane and I think it is very easy to understand where this is going .

Mt.Gox is an exchange, not a wallet service, but the point is the same. Any platform or service that doesn't provide you with your private keys is vulnerable and may be subject to loss of capital. I've never used an exchange that has shut down in the past, but I had an account on a wallet service that got reformed and then refused to restore my account, which had my old phone number for authentication. It took me weeks to finally recover my account after requesting a ton of KYC and then proceeding to immediately block my account with my first login. I even had the address associated with the account showing a balance of almost 0.01 BTC, if I remember correctly, which was lost for good. The only online service that provided you with the private keys was BitGo.

To summarize, use a noncustodial wallet, save your seed phrase and private keys somewhere safe, and avoid online services whenever possible.

Husna QA

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Quote from: Falconer on May 16, 2023, 12:02:46 PM

Quote from: Husna QA on May 16, 2023, 11:23:08 AM

Another backup alternative for Electrum is exporting the Private Keys for each wallet address.

A little extra, and keep that backup file somewhere safe.

I do such an added security method instead of just saving the seed, but only for the wallet I use (specific address) so it certainly won't be too much of a hassle to do so. They don't need to do it for all addresses, so only do it for the addresses in use.

When exporting private keys in Electrum, all private keys from addresses in the wallet will be displayed, which can be saved in CSV or JSON format.
Users can choose one or several private keys from that address to recover to another wallet according to their needs.

Since the Electrum seed phrase differs from the usual seed types, exporting the private key can be used for recovery purposes to another Bitcoin wallet if, for example, Electrum is closed by the developer.

coupable

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Quote from: Ambatman on May 14, 2023, 03:58:46 PM

I know is nigh impossible for companies to last forever
So I wanted to know since most Bitcoin holder are HODL
What would happen to a wallet when the company hosting the wallet closes down?
Has any wallet company ever closed down before or experienced issue that affected holders Bitcoin?

If you use an open source wallet and keep the seed words, it will not concern you to close the developer company, since the most that will happen is that the update will stop the application, but you cannot completely cancel it.
I understand very well your concerns to find answers to this hypothesis, since it is possible with closed-source wallets, including trading platforms that give the possibility of using the account to users as a private wallet. Therefore, it is advised to avoid using any type of closed source wallets.

Falconer

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Quote from: Husna QA on May 16, 2023, 11:23:08 AM

Another backup alternative for Electrum is exporting the Private Keys for each wallet address.

A little extra, and keep that backup file somewhere safe.

I do such an added security method instead of just saving the seed, but only for the wallet I use (specific address) so it certainly won't be too much of a hassle to do so. They don't need to do it for all addresses, so only do it for the addresses in use.

Husna QA

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Quote from: Charles-Tim on May 14, 2023, 04:00:56 PM

-snip-
Make sure the seed hrase is BIP39 which is supported on many other wallets. Or Electrum seed phrase which you can be be able to spend or transfer your coins if the developers are no more interested to go further with the wallet. There are ways you can still be able to spend your coins and you can import Electrum seed phrase on Bluewallet. -snip-

Because by default, Electrum uses their version of the seed (https://electrum.readthedocs.io/en/latest/seedphrase.html), so not all wallets can support the Electrum seed type. Only a few wallets can support this seed type, one of what I've tried is BlueWallet.

Another backup alternative for Electrum is exporting the Private Keys for each wallet address.

Franctoshi

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Quote from: Lucius on May 16, 2023, 09:32:23 AM

A part of those who invest in Bitcoin will still blame some wallets like Electrum in case they happen to lose their funds, especially if we remember that very cunning phishing attack that used a vulnerability inside the wallet itself to display a link to a fake wallet. However, in the end it is always much easier if you can blame someone else, and I believe that this is one of the reasons why many people still believe in custodial wallets and do not want to take responsibility.

I would rather prefer losing my funds in my custody, take the blame and learn from my mistake than entrusting my funds to custodial wallets where I can't even freely use my funds whenever, need pass various security checks and sometimes might denied access to my funds due to some glitches and hitches on the platform. For instance I have had this experience With Binance where I was on a running trade and the market had a sunden crash and I was being logged out of Binance automatically, this are some kind of ugly experience One can have with storing cryptos on a custodial wallet aside the risk of not your keys not your crypto.

Lucius

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Quote from: Porfirii on May 15, 2023, 08:04:53 AM

The eternal dilemma: on one hand, if you keep it in a third party's custodial service, then you have to trust on him, but you should know that one of our mottos is "don't trust, verify". On the other hand, if you custody yourself your keys, you are responsible for their destiny and you won't be able to blame on anyone if you lose them and your coins get lost forever.

A part of those who invest in Bitcoin will still blame some wallets like Electrum in case they happen to lose their funds, especially if we remember that very cunning phishing attack that used a vulnerability inside the wallet itself to display a link to a fake wallet. However, in the end it is always much easier if you can blame someone else, and I believe that this is one of the reasons why many people still believe in custodial wallets and do not want to take responsibility.

Quote from: hd49728 on May 15, 2023, 08:40:47 PM

~snip~
Bankrupt Crypto Exchange QuadrigaCX Will Start Interim Distribution for Some Users, EY Says (2023).

You will only can wait for luck if they shut down their service. Not all will have partial repayment, compensation like QuadrigaCX.

This is surprising news considering all that has been presented over the years and the Canadian authorities' conclusion that Cotten "gambled" around $250 million of client funds on various investments. The last part of the article mentions some 100 BTC from cold wallets that were transferred last year, but how is that possible if they claimed that only Cotten had access to those same cold wallets Huh

YUriy1991

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Nice question. Mt.Gox, A leading Exchange that went bankrupt in 2014 is one of them. Well, it is highly recommended to always use a reputable, well-established, recommended wallet that regularly backs up private keys or recovery phrases to mitigate the crucial risks caused by company shutdowns as mentioned by @sheenshane and I think it is very easy to understand where this is going .

Jatiluhung

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Quote from: Ambatman on May 14, 2023, 03:58:46 PM

I know is nigh impossible for companies to last forever
So I wanted to know since most Bitcoin holder are HODL
What would happen to a wallet when the company hosting the wallet closes down?
Has any wallet company ever closed down before or experienced issue that affected holders Bitcoin?

If the wallet supports open source and provides a seed phrase (BIP39). Then I think it will be fine. provided you have stored the Seed Phrase safely elsewhere. In the note that you put in the safe or whatever method you use to secure it.

But if you keep it in a custodial wallet, you will actually be in an insecure area from the start. because you have made the mistake of entrusting your assets to be stored and managed by a third party. So from the start you did not have full control over the wallet.

Gallar

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Quote from: Ambatman on May 14, 2023, 03:58:46 PM

I know is nigh impossible for companies to last forever
So I wanted to know since most Bitcoin holder are HODL
What would happen to a wallet when the company hosting the wallet closes down?
Has any wallet company ever closed down before or experienced issue that affected holders Bitcoin?

In the world of crypto investment, that's why you have to study science from the bottom. In order to know more overall about all systems related to crypto. One of them is about crypto storage wallets. If studied, wallets in the crypto world are divided into two types. There are custodial wallets and non-custodial wallets. These wallets have their own advantages and disadvantages. Because if you return to your question, it all depends on what type of wallet is used to store these crypto assets. If you store assets in a custodial wallet type, if the company goes bankrupt, it is certain that the crypto assets you have will not return. Because there have been many examples like the events that occurred last year. But when storing assets in a non-custodial type of wallet, it's definitely safe. Because if you use this type of wallet, you can definitely control all the crypto assets in that wallet.

And if you want to know about the bankruptcy of a wallet company or market, you can see the site below.

https://www.google.com/amp/s/voi.id/en/amp/235469

Outhue

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Good question OP, this is why using a open-source and non-custodial wallet to keep your coins is the best way, even if the wallet company is no more active you can either keep using the wallet or import your recovery seed into another wallet, it will work.

I have imported Trust wallet recovery seed into the Exodus wallet and I work perfectly, all my balance showed up and I still have the same wallet address.

In 2016 the first wallet I used was called Copay and as time goes by, Copay stopped working, they sold the company to another and the name was even changed, I still use my Copay for few months before I decide to switch and I import the recovery seed into Electrum and it works just as I hoped it will.

EL MOHA

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Quote from: Sophia22 on May 16, 2023, 12:26:41 AM

"Our cryptocurrency exchange services provide businesses with the tools and support they need to enter the exciting world of cryptocurrencies. Our team of experts will work with you to design, develop, and launch a secure, user-friendly, and highly functional cryptocurrency exchange. Whether you are looking to start a new business, or enhance your existing one, our cryptocurrency exchange services can help you achieve your goals. With cutting-edge technology, easy-to-use interface design, and 24/7 support, your cryptocurrency exchange will be a reliable platform for trading digital assets. Get in touch with us today to learn more about our cryptocurrency exchange services and how we can help you succeed in the cryptocurrency market."

this should be moved to the exchange board or service board. This thread is clearly a questionnaire thread and many members would not see your exchange’s advert this way

Sophia22

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"Our cryptocurrency exchange services provide businesses with the tools and support they need to enter the exciting world of cryptocurrencies. Our team of experts will work with you to design, develop, and launch a secure, user-friendly, and highly functional cryptocurrency exchange. Whether you are looking to start a new business, or enhance your existing one, our cryptocurrency exchange services can help you achieve your goals. With cutting-edge technology, easy-to-use interface design, and 24/7 support, your cryptocurrency exchange will be a reliable platform for trading digital assets. Get in touch with us today to learn more about our cryptocurrency exchange services and how we can help you succeed in the cryptocurrency market."

Luffygroove

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Eh, it kind of depends. If it's a non-custodial service (meaning you hold the private key), you can open it using other services. So, if the wallet company has your private keys, you've got to make sure you have a backup, or you might lose your bitcoin. So, make sure you've got a backup of your private keys stashed somewhere safe, okay? Yes, there are some wallet companies that shut down or have problems that mess with people's bitcoin. Like in 2014, the Mt. Gox exchange (which was also a wallet service) went bankrupt because they lost around 850,000 bitcoin that belonged to their users. Bummer. So, there was this one time when the Parity wallet (where a lot of Ethereum was kept) got messed up because of a bug in its smart contract code back in 2017. This caused them to lose around $280 million worth of Ethereum. Bummer. That's why we've got to know what kind of wallet we're using now so we can be ready.

hd49728

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Not your keys, not your coins!

Quote from: Lucius on May 15, 2023, 05:15:16 AM

We never trust companies that say we should keep our BTC in their custodial service, because that is exactly the opposite of what everyone should do. Any non-custodial crypto wallet that is also open source will be a good choice, whether it's about generating a backup through a seed or extracting a private key that you will then store safely, preferably in multiple copies.

Never trust companies, because they are only there for profit, proven countless times and will continue to be proven in the future.

We only have to care about ending of a wallet company if that company provides a custodial wallet and we as their wallet users, don't own private keys of our coins.

We will have to rely on that wallet company to get access to our coins. They have private keys and their activities, approve or reject our withdrawal request will decide that we will be able to access our coins or not (lose it).

They can turn to be a scam company by suddenly shut down their service without notice, or with a fake notice like our CEO is dead and we lose all our coins, we are sorry and it's the end for their users. Many fake announcements can be make if they are a scam wallet company.

QuadrigaCX can't pay $190M owned because CEO with password die (2019)

Bankrupt Crypto Exchange QuadrigaCX Will Start Interim Distribution for Some Users, EY Says (2023).

You will only can wait for luck if they shut down their service. Not all will have partial repayment, compensation like QuadrigaCX.

With non custodial wallets, we don't send our coins to any company, we own coins with keys.

mamesso

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Your concern has already been warned by Theymos in this topic Reminder: do not keep your money in online accounts.
Choose a wallet that you can control, occasionally you can stop here to see some recommendations for wallets that are suitable and safe to use. Saving assets in a custodial wallet is not completely yours anymore because you do not hold the Private key that can control it. Choose a wallet that has a seed that you can control, don't let your assets be controlled by a third party.

Porfirii

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I suppose that this is one of the most typical doubts when someone starts looking for info about blockchain and cryptocurrencies. The question is simple and the answer is simple too, but until you ask it it is not so obvious.

Quote from: Lucius on May 15, 2023, 05:15:16 AM

We never trust companies that say we should keep our BTC in their custodial service, because that is exactly the opposite of what everyone should do. Any non-custodial crypto wallet that is also open source will be a good choice, whether it's about generating a backup through a seed or extracting a private key that you will then store safely, preferably in multiple copies.

Never trust companies, because they are only there for profit, proven countless times and will continue to be proven in the future.

The eternal dilemma: on one hand, if you keep it in a third party's custodial service, then you have to trust on him, but you should know that one of our mottos is "don't trust, verify". On the other hand, if you custody yourself your keys, you are responsible for their destiny and you won't be able to blame on anyone if you lose them and your coins get lost forever.

At least, in the case mentioned (if the wallet company closes), you will be safe and able to introduce the seed in another wallet of your choice.

Topic: What will happen to a wallet when the wallet company closes (Read 318 times)