About 3.4 million BTC Have Been Lost or Forgotten

in bitcoin •  6 months ago

About 20 percent of the 17 million bitcoins have been lost, claims Chainalysis, a bitcoin blockchain research firm

Image source: pixabay - dima_goroziya

Just as how Gold could be used in equipment, buried underground, hidden as treasure, or kept safely in a vault, bitcoin can be lost or forgotten simply by destroying its private key. We are not talking about bitcoin wallet scams here, but users who have misplaced or disposed old computers years ago containing the bitcoin private key.

I was reading an article on WIRED.com titled: "How WIRED Lost $100,000 in Bitcoin" by Louise Matsakis, which reported how WIRED naively destroyed 13.34 BTCs in 2013. What was justified as an 'abstraction' five years ago became the world's most dominant cryptocurrency today. Wired.com definitely is a technology company who got unlucky or did not have that foresight. Read more of a summary here: newsBTC - JP Buntinx

Image source: pixabay - jarmoluk

Lost private keys - never found
While the 64 digit key may be any alphanumeric string, Wired is not the first case where keys have been lost. James Howells, a 32-year old IT specialist, who mined more than 7500 BTC back in 2009 could not find his hard drive in 2013 as he told New York Post - Michael Kaplan. Sometimes, education can't buy diligence.

“I mined more than 7,500 coins over one week’s time in 2009; there were just six of us doing it at the time, and it was like the early days of a gold rush. Four years later, I had two hard drives in a desk drawer. One was empty, and the other contained my bitcoin private keys. I meant to throw away the empty drive — and I accidentally threw away the one with the bitcoin information,” said Howells.
Source: CCN - Joseph Young

In other cases, private keys held on by the deceased were never revealed to anyone else, burying bitcoins together with them into the abyss of the unknown. The 64 digit code is almost unbreakable by brute force of computational guessing, thus leaving many who have lost them in total dispair. If cryptocurrency is to become a currency of the future, it needs to be better at protecting the accidental loss of these coins.

What does this mean for the rest of the bitcoin in circulation?
The current amount of bitcoin supply is in fact lower than 17 million, due to the above situations. Hence bitcoin is rarer than you have imagined and undervalued. An article on Medium by Antoine Le Calvez, creator of p2sh.info, discusses how bitcoin could be 'burned' by transferring them to bogus addresses but they could never be destroyed.

These missing bitcoins are definitively lost. Sending bitcoins to bogus addresses or spending them in unspendable outputs does not make them disappear, you can still see them in the blockchain. Not redeeming all the block reward makes bitcoins really disappear: there is no way to see them in the blockchain.

Source: Medium - Antoine Le Calvez

Maybe the safest way is to go back to the old times by writing down your private key in somewhere safe? newsBTC - Kai Sedgwick shows you how you can print out your bitcoin paper wallet. If that is what you prefer to do. Cheaper if you write it down with a pen and paper. Hardware wallets such as Trezor or Ledger could be the another good alternative.


Bitcoin printed wallets
Image source: https://bitcoinpaperwallet.com

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I also remember a case where a guy in england lost a lot of bitcoin by throwing away the harddrive. Now he was searching on the complete wast disposal site. It's almost impossible I guess. People should always have some backup phrase written down somewhere and locked down at the save place, like a bank safe deposit box.