On Wednesday (January 22), famous gold bug Peter Schiff finally admitted that he lost access to the bitcoin held in his Blockchain Wallet because he had misunderstood how this wallet works. However, not all the blame for this incident should be pointed to Schiff.

Schiff is the CEO of Euro Pacific Capital, a full-service, registered broker/dealer specializing in foreign markets and securities, and founder and Chairman of SchiffGold, a full-service, discount precious metals dealer. He is also a man who is extremely bullish on gold, bearish on the U.S. dollar, and highly skeptical about Bitcoin.

On 4 July 2019, Schiff revealed that he owned some Bitcoin (BTC), Ether (ETH), and Bitcoin Cash (BCH), and said that he was going to HODL his bitcoin no matter what happens to the Bitcoin price.

Then, last Sunday (January 19), Schiff took to Twitter to express his anger with Bitcoin after allegedly losing access to the crypto wallet that holds his bitcoin:

Although Schiff said at the time that the wallet app he was using — which we know know was the iOS version of Blockchain Wallet (made by Blockchain.com) — had “somehow” become “corrupted” and that is why his password — which he was sure of remembering correctly — was being rejected, most people in CryptoTwitter seemed to believe that this was just a case of a “boomer” who has simply forgotten his wallet’s password:

Eric Voorhees, Founder and CEO of ShapeShift, whom Schiff claims was the person who set up Schiff’s wallet in the first place, says that it is Schiff who is to blame (and not Bitcoin) for forgetting his password and not making a note of his wallet’s recovery phrase:

However, last night (January 22), three days after first reporting the loss of access to his entire Bitcoin holdings (which had mostly been gifted to him by members of the crypto community on Twitter), Schiff admitted that this situation was not due to a corrupt wallet but the fact that he had been confused about the concepts of PIN and password for his Blockchain Wallet; what made things worse was that he did not know/have neither the password nor the 12-word backup/recovery phrase: 

Having spent some time playing with the Blockchain Wallet, here is one possible explanation for what really happened. 

When you create a new Blockchain Wallet, you are asked to specify an email address (which acts as your username), a password (which is needed in case you ever logout or are logged out of your wallet), and a 4-digit PIN (which the wallet apps asks for — if you have not setup biometric authentication — whenever it is restarted, in order to “decrypt” your wallet). 

It is essential to note that the Blockchain Wallet does not force the user to record a 12-word or 24-word recovery/seed phrase at the time that the wallet is being created, i.e. this step is optional. After the wallet has been created, you need to go to the app’s menu and choose “Backup Funds”, at which point you are asked to write down each of the 12 words of the “backup phrase” the app assigns to your wallet.

So, if Schiff is telling the truth about never knowing the password of the backup phrase, then it looks like the person who created the wallet for him (i.e. Vooerhees) may have not told Schiff the wallet’s password and not told him to make a note of the backup phrase.

Therefore, we can certainly blame Schiff for not bothering to understand how his wallet works, but it is also true that developers of crypto wallets need to do more to improve wallet usability in order to prepare for the mainstream adoption of crypto.