Topic: What will happen to a wallet when the wallet company closes - page 2. (Read 318 times)

Since most are focused on telling you about the risks when the company closes down, that shouldn't be your biggest fear at all!

If a company closes down just because it wants to end its business, there you might still have the chance to get your funds out till a certain date, usually a few months before the wallets become inaccessible!
But, that's a good ending scenario!

Using a wallet that you don't control will for sure not end only with a company closing down, it might end with
- the said company gets hacked - you lose your coins
- the said company getting "hacked" - you lose your coins
- the said company is bad at business, FTX style - you lose your coins
- your account gets hacked but the company denies it's their fault - you lose your coins
- you lose access to your login credentials - you lose your coins

So there are a hundred more bad ending scenarios other than just shutting down!

OP, the reason why you asked this question is because you think that Bitcoin is stored inside a wallet, so to add to what other users have said, i'd tell you that it is a misconception and it is not the truth, Bitcoin is not stored inside a wallet, but in the blockchain and it is your private key that you use to prove ownership of your funds. Id your Bitcoins are in a custodial wallet, you don't have the keys, so you can't prove ownership of the funds, thus if the company collapses, it does so with your funds.

Having said that, if you use a non-custodial wallet that gives you ownership of your funds/keys, as long as you have the keys, or the seed phrase that can recover the keys anytime, your funds are safe in your custody. Even if the wallet stops functioning, you'd basically just use your keys to spend it in another wallet, because your funds isn't stored inside any wallet, but on the blockchain.

A seed phrase generated by electrum isn't BIP39. Electrum uses its own algorithm for generating a seed phrase.
Of course, since electrum is open-source, there's  nothing to worry about if you have a seed phrase generated by it and you will be always able to derive your private keys from your seed phrase.

A custodial wallet e.g. Binance, Kucoin, Coinbase will not give you their private key and if their company shutdown, you don't have any way to recover your coins which you leave there.

A non custodial wallet which use BIP39 code without add anything e.g. Electrum, Bluewallet, Mycelium will let you to recover your coins, even the site was been shutdown, although it's highly unlikely.

The tricky part is a non custodial wallet, but it's a multisig wallet e.g. Muun wallet and Blockstream wallet, you can't recover your wallet in other wallet, only in their own site.

Yes there have been some wallet companies that have closed already. Just like Multibit: Multibit is Deprecated - Stop using it

If you're planning to keep your coins for a long time @OP, the best way to do it is to use a hardware wallet. It has a price but that price is certainly going to give you a peace of mind.

Although some wallets can be used and also good in keeping your coins as mentioned by some in here like Electrum.

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.

Are you referring to custodial wallets where you create an account on some website, and the company behind it holds Bitcoin for you? If yes, then it is important to remind that in such case you have no physical control over the coins, which means you kind of already lost them once handed over to random guys on the Internet! What you have is a promise to return coins on demand, but as with other similar promises it can well be broken for whatever reason, which usually results in you getting failed expectations regarding safety or possible income. If a company closes down, goes bankrupt, or turns out to be a malicious scheme created to play games with naive newcomers, you lose your coins for good as if you never possessed space inside the blockchain. As I said, the only time you can claim that coins are yours is when you have a corresponding private key to an address with those coins. On the other hand, if a wallet is non-custodial, hosted on a public repository on GitHub, and follows all cryptocurrency wallet specifications such as BIP39, you can be sure that if it stops functioning, you can take your private key or seed phrase and import it in some other wallet supporting the same standards. In this case, no matter what happens to people developing the wallet, you can always transfer to any place you like: you keep controlling your funds while choosing services to manage interactions with the blockchain.

Bitcoin Core, Electrum wallets have many wallet versions that were released in many years. You are fine if you store your bitcoin in old wallet versions.

If you have private key, your bitcoin is fine. Now and in future, if that wallet company is closed or the wallet software is abandoned for further development, you can move your bitcoin to a new wallet provides by another wallet software and company.

Not your keys, not your coins, that is to remind people that if they store their coins on exchange, they don't have private keys and if that exchange company closes or collapses or bankrupts, they will lose their coins.

With non custodial wallets and private keys, you are fine and don't have to care what happen with that wallet company.

Reminder: do not keep your money in online accounts

Most of them declared bankruptcy.
On this list, you will see a few list of bitcoin wallet companies listed and said close because of bankruptcy or forced to close by the government, especially in the US which strictly regulates crypto.

That is why choose a non-custodial and open-source wallet and try to differentiate what is Custodial vs. Non Custodial Wallets.  Choose the wallet where you hold the private keys to your wallet, which means you are the only one who can access your funds, and those wallets are generally considered to be more secure than custodial wallets because they don't rely on third-party services to store your private keys.

My answer to your last question is yes there is.
It's Mt. Gox, filed for bankruptcy in 2014 after losing a huge amount of Bitcoins due to a hack, and then people learn how to use a con-custodial wallet.

Hah! Tons. This is why most hodlers long ago learned never to use centralized exchanges. Bitcoin is a trustless medium of exchange - why would you trust a third party to hold your coins?

To name a few Mt. Gox, FTX have "lost"/stolen people's funds.
Coinbase and Binance have both had periods where they held peoples' funds and delayed/prevented withdrawals.

Rule of thumb: "Not your keys, not your coins." That means if you trust a third-party with your private Bitcoin wallet keys (or any other crypto), you no longer own those coins and have to trust that third party to A. never lose them B. Never steal them C. Never have them stolen.

There are many ways to safeguard your coins and keep them yourself. Research them.

This is why  you must always use a wallet which gives you the seed, a 12-24 words set.

You csn just import it in any other wallet, even of the original wallet stops working

If it's noncustodial, members who carefully stored their recovery seed phrases and/or Private keys would still be able to access and spend their funds using another available noncustodial wallet that allows importation of seeds or private keys.

If they didn't back up the seeds or private keys, the funds would be lost forever.

If they kept funds in a custodial wallet, they would lose the funds forever if the owners of the wallet didn't bother notifying the users to withdraw the funds.

Several times!!!

So far it is an open source noncustodial wallet, you can import your seed phrase or private key to spend your coins on another reputed open source noncustodial wallet.

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.

Do not use custodial wallet, do not hold your coins on exchanges because it is not your keys on those custodial platforms.

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?