Bitcoin has been around for over a decade now, but there’s still so much we don’t know about the world’s largest cryptocurrency. One of the biggest mysteries surrounding Bitcoin is exactly how many coins have been permanently lost or destroyed.
Some estimates put the number of lost bitcoins in the millions, representing billions of dollars that can never be recovered. In this blog post, we’ll take a deep dive into the phenomenon of lost bitcoins.
Where did they go? Why are they inaccessible forever? And what does this mean for the future of Bitcoin as an investment and currency? There are no definitive answers, but piecing together the clues paints an intriguing picture.
Why Are Bitcoins Lost in the First Place?
There are a few main scenarios that can lead to bitcoins being lost forever:
- Lost private keys – Every bitcoin wallet has a private key (basically a long password) that allows the owner to access and spend funds. If this key is lost, misplaced, or forgotten, the funds in the wallet are gone for good. Given that private keys are often a string of 30+ random characters, it’s easy to see how some have been lost over the years.
- Death/incapacitation of key holders – Many early adopters of Bitcoin have passed away or become incapacitated over the years, taking the keys to their Bitcoin fortunes to the grave with them. There are millions of dollars worth of Bitcoin stored in wallets whose original owners cannot be found.
- Sent to wrong/invalid addresses – If someone accidentally sends Bitcoins to a wrong or invalid address, there is no way to get them back. The coins are lost in the vast sea of invalid addresses.
- Hardware failures/data corruption – The digital records of Bitcoin holdings are susceptible to data failures, storage corruption, hardware malfunctions, and other technical mishaps. Coins stored on a hard drive that stops working are likely lost for good.
- Lost/thrown out devices – Many people have discarded old computers, hard drives, and mobile devices without realizing they contained Bitcoin wallets with funds. There are countless lost coins still out there in the trash somewhere.
- Theft/hacks of exchanges – While centralized exchanges like Mt Gox and Bitfinex have improved security measures after major hacks over the years, billions of dollars worth of Bitcoin were stolen in those incidents, much of which will never be recovered.
Just How Many Bitcoins Are Really Lost?
Unfortunately, there is no definitive way to know exactly how many bitcoins have been lost over the years. But that hasn’t stopped experts from trying to estimate the astonishing figure.
- Researchers at Chainanalysis believe that around 3.7 million bitcoins are already gone for good, which would be close to 20% of the total supply that will ever exist (capped at 21 million). At today’s valuations, that represents over $60 billion worth of lost coins.
- Cryptocurrency hedge fund manager Chris Keshian estimated in late 2021 that 4 million to 5 million bitcoins are likely lost or unrecoverable. That’s a whopping $100 billion or more in lost value.
- A study by Unchained Capital concluded that around 2.78–3.79 million bitcoins are gone for good, basing its analysis on measurable losses throughout Bitcoin’s history.
- CZ, the CEO of crypto exchange Binance, predicted in early 2019 that about 30% of mined bitcoins have been lost, which would put the figure even higher at around 7 million lost coins.
The truth is likely somewhere in the middle, with conservative estimates ranging from 2 to 4 million lost bitcoins and more extreme projections going as high as 7 million or more. No matter the exact number, it’s safe to say that billions and billions of dollars worth of Bitcoin have been permanently lost in the history of the cryptocurrency.
The Impact of Lost Bitcoins
This massive amount of lost and inaccessible Bitcoin has major implications:
- Supply shock – With so many coins unable to be sold or traded, it decreases the circulating supply in the market. Limited supply can increase price.
- Market volatility – The lost coins represent a big unknown in the Bitcoin economy. If some of them are rediscovered and sold off, it could cause large price swings.
- Deflation – The Bitcoin network is designed to eventually cap the total number of coins at 21 million. If a large percentage of those are permanently gone, it increases the scarcity and deflationary nature of the remaining coins.
- Increased value of recoverable coins – With so many coins out of circulation forever, each Bitcoin still accessible becomes more valuable compared to assets with larger circulating supplies.
- Questions about the future – Such large losses so early in Bitcoin’s life bring uncertainty about how many coins will remain in the long run and whether Bitcoin will function as intended.
Could Lost Bitcoins Ever Be Recovered?
The sheer amount of lost Bitcoin raises a question – could some of these coins ever be recovered in the future?
A few possibilities exist:
- Improved wallet recovery methods – Better encryption cracking technology or clever ways of rediscovering lost private keys could bring some lost wallets back to life.
- Hard drive recovery – As storage tech improves, some bitcoins on old forgotten drives may be recoverable decades later.
- Mined from trash dumps – If we ever develop the ability to quickly mine landfills, lost hard drives with Bitcoin could produce a digital gold rush.
- Quantum computing – Advanced quantum tech may one day make easy work of bitcoin key encryption that is impossible to crack today.
- Archaeological rediscovery – Future civilizations may uncover lost Bitcoin troves from paper wallets buried in the 21st century equivalent of King Tut’s tomb.
Some believe lost bitcoins should be considered permanently gone. But technology has a way of making today’s unrecoverable into tomorrow’s low-hanging fruit. For now, lost bitcoins remain one of crypto’s most fascinating mysteries.
Final Thoughts
Bitcoin was built with economic incentives that make holding coins more attractive than spending them. This has led to a large percentage of mined coins being taken out of circulation.
Between forgotten and lost private keys, deaths of holders, and simple user error, estimates suggest anywhere from 2 million to 7 million bitcoins can no longer be accessed.
