Lost Bitcoins are Bitcoins that have been irretrievably lost or destroyed. This can happen in a number of ways: losing the private key to a wallet or sending them to an address that doesn’t exist. And once Bitcoins are lost, they cannot be recovered. Say goodbye! They are gone forever!
How Many Bitcoins Have Been Lost?
The total supply of Bitcoins is limited to 21 million, and it’s estimated that around 20% of all Bitcoins have been lost or about four million according to reports. This means that the actual supply of Bitcoins is lower than the maximum supply, which can have implications for the value of Bitcoin.
How Do We Know They Are Lost?
Estimating the number of lost Bitcoins is difficult because Bitcoin transactions are anonymous and irreversible. In fact, it’s really hard. But there are ways. Sort of.
One is to look at the number of Bitcoins that have not been moved for a long period of time. If they haven’t moved for a while, perhaps they are just “lost”? Or maybe just stored away as an investment. Yeah, HODLers.
Another method is to look at the number of Bitcoins that were mined in the early days of Bitcoin, when mining was easier and there were fewer miners. It’s likely that many of these early Bitcoins have been lost and just discarded.
Forks, inactive wallets are some other ways. Of course Bitcoin has not single entity in charge, so it’s really just a guess as to how many has been lost.
And again, it’s estimated that around four million Bitcoins have been lost thus far, and more to come as crypto usage becomes more widespread. But maybe, just maybe, down the road should the price pop these “inactive” accounts come back to life.
What’s The Impact?
So a few Bitcoins are lost here and there. It happens. So what? Well, there are consequences especially if it’s a lot!
Bitcoin scarcity
There are only 21 million Bitcoins that will ever exist, and as of now, just over 19.3 million have already been mined. This means that there are less than two million Bitcoins left to be mined. That’s it. And now more will ever be created once we reach the year 2140.
Effect on Bitcoin price
As the number of available Bitcoins decreases, the value of each Bitcoin increases. This is simple supply/demand. The lost Bitcoins add to this scarcity, as they reduce the available supply of Bitcoins even further. This can lead to an increase in the price of Bitcoin.
Inflationary pressure
Another impact of lost Bitcoins is that they create inflationary pressure on the remaining Bitcoins. As the supply of Bitcoins decreases, the demand for them may increase, which can lead to inflationary pressure on the remaining Bitcoins. This can result in higher prices and a decrease in purchasing power for those who hold the cryptocurrency.
Why Do People Lose Bitcoins?
There are lots of ways to lose Bitcoin. Unfortunately, it’s quite easy, look losing plain old cash.
Losing your private key
The private key is like a password that is used to access your Bitcoin wallet. If you lose your private key, you won’t be able to access your Bitcoin wallet, and your Bitcoins will be lost forever. This is because the private key is required to authorize any transactions from your Bitcoin wallet. So, it’s essential to keep your private key safe and secure.
Forgetting your wallet password
If you forget your wallet password, you won’t be able to access your wallet. It’s gone. So don’t lose it. This is because the password is required to unlock the wallet and authorize transactions and of you can’t access your wallet, your coins are gone.
Sending Bitcoins to the wrong address
When you send Bitcoins, you need to enter the recipient’s address correctly. If you enter the wrong address, the Bitcoins will be sent to the wrong wallet and cannot be retrieved. Unfortunately, once a transaction has been processed, it cannot be reversed.
Hardware failure
Bitcoin wallets can be stored on a computer’s hard drive, USB drive, or other digital devices. If this device fails or gets damaged, the Bitcoins stored on it will or can be lost. Hence, why they say to back up your wallet!
Malware or hacking
As you know Bitcoins are worth a lot, and because of that, there is a lot of money to be made trying to hack a few here and there. And Bitcoin wallets are vulnerable to malware and hacking. If your computer or phone is infected with malware, hackers can gain access to your wallet and steal your Bitcoins.
Self Destruction
Believe it or not, some people may actually intentionally destroy their coins by sending them to an address that they know is bogus. This is sometimes done as a way of permanently removing Bitcoins from circulation.
Some Famous Examples Of Lost Bitcoin!
Not that you really want to read this but here are a few:
James Howells
According to reports, in 2013 a man named James Howells accidentally threw away a hard drive that contained the private key to his Bitcoin wallet. A wallet that contained roughly 7,500 Bitcoins. (!!!!).
At the time, the Bitcoins were worth approximately $7.5 million. Today, that’s $225 million.
That hard drive, by the way, is now apparently buried in a landfill. And there’s no way to retrieve it. Talk about a bad dump.
Mt. Gox
Mt. Gox was a Bitcoin exchange that got hacked in 2014 resulting in the loss of 850,000 Bitcoins, worth approximately $450 million back then. The Bitcoins were stored in a hot wallet (a wallet connected to the internet). This made it easier for hackers to gain access to the Bitcoins. The incident led to the bankruptcy of Mt. Gox and the loss of many investors’ Bitcoins.
The “Pineapple Fund” donation
In 2018, an anonymous donor known as the “Pineapple Fund” donated 5,057 Bitcoins to the charity GiveDirectly. The donation was worth approximately $86 million. However, the donor later revealed that they had lost the private key to the wallet containing the Bitcoins and they were now irretrievable.
The man who forgot his password
On no… In 2021, a San Francisco-based programmer named Stefan Thomas revealed that he had lost the private key to a Bitcoin wallet containing 7,002 Bitcoins. Yeah, that was a cool $220 million.
Thomas had been given the Bitcoins as a reward for creating a video explaining how Bitcoin works. However, he forgot the password to the wallet and had only two attempts left to enter it correctly before the wallet would be permanently locked. Yikes.
The Ethereum DAO Hack
In 2016, a decentralized autonomous organization (DAO) called “The DAO” was created on the Ethereum blockchain. The DAO was essentially a venture capital fund that allowed investors to vote on which projects to fund. However, the DAO was hacked, and approximately 3.6 million Ether, worth approximately $50 million at the time, were stolen. The hack led to a hard fork of the Ethereum blockchain to recover the stolen Ether, which resulted in the creation of Ethereum Classic.
The Satoshi Stash
At the start of Bitcoin, founder Satoshi Nakamoto mined roughly one million coins spread out over multiple accounts. And reportedly those coins have never moved. Lost?
How to prevent losing Bitcoins?
If you have a lot of coins it’s important to keep them safe and secure. And if even you don’t have many, remember, their price could rocket up. So what to do?
Back up your wallet: It’s important to keep a backup of your Bitcoin wallet in a safe place. This will ensure that you have access to your Bitcoins even if your computer or phone is lost or stolen. If you have a lot, a physical hardware wallet is a good choice.
Keep your private keys safe: Private keys should be kept in a secure location, such as a hardware wallet or a piece of paper that is stored in a safe.
Double-check addresses: Sounds simple, but always double-check those Bitcoin addresses before sending Bitcoins to them. In fact, triple check!
Use multi-signature wallets: Multi-signature wallets require multiple private keys to access the Bitcoin wallet. That will help security.
So the moral of the the story is: BE CAREFUL. Like really money you hold in your hand, digital currency like Bitcoin can be gone in an instant. Not by tradition means — like someone stealing it or it just falls out of your wallet — but rather electronically.
With time, Bitcoin has grown and with it way to store it. So that’s good. In the early days, there were few secure ways to keep your Bitcoins from harm, and the with such a low value on them, there’s wasn’t a rush to market.
But now, things have changed for the better. So one could argue fewer people will lose coins as they are now mainstream and can truly be used as a currency. And looking in the future, as computing power continues to climb, could there be a way to mine some of those lost or inactive coins?