A story has been making the rounds today about a criminal in Germany that held over $60 million in Bitcoin before being arrested. Incredibly, the media still doesn’t understand what it means to “own” Bitcoin, claiming that the government “confiscated” the funds but “can’t unlock” them…
It’s a fundamental misunderstanding of Bitcoin’s underlying technology. Unlike other currencies (like cash or gold), one does not own Bitcoin simply by holding something in their material possession (in this case, a computer or a wallet). Instead, one owns Bitcoin when one has access to the Bitcoin by way of a private key.
So no, German prosecutors have in fact not “confiscated more than $60 million worth of Bitcoin.” Instead, they’ve confiscated a worthless piece of hardware.
The misunderstanding stems from the fact that Bitcoin is “stored” on a the public blockchain (a digital ledger that keeps track of all transactions), not on a personal hard drive or cryptocurrency wallet. Those devices were used to access the Bitcoin by the fraudster in this case, but the “password” that the media speaks of — which the prosecutors can’t access — is really the Bitcoin itself. It’s the private key associated with this criminal’s coins.
In this case, the criminal’s Bitcoin are literally stored in the criminal’s mind, and they refuse to give them up. As long as this fraudster is still alive and has functioning memory, their bitcoin will remain securely in their possession.
Obviously this has ramifications for a governments’ ability to properly punish criminal activity, but it’s also a radical new idea in money that provides security and true ownership to legal citizens. Just like this criminal can retain ownership of his Bitcoin despite being jailed for life, a person living under an oppressive regime can retain ownership of their Bitcoin in their mind no matter how much their government wishes to unfairly confiscate it.
It’s critical to understand the ramifications of this, and for that reason, it’s critical that the media understands what it means to own Bitcoin. Never in human history has money been truly trustless digital information, which clearly benefits criminals that would prefer not to part with their stash, but it also benefits law-abiding citizens who wish to truly own their wealth.