Number of Bitcoins “lost forever”, is this an issue?
Back in 2013 I first heard about Bitcoin when the price suddenly went from 100 dollars to over a 1000 dollars. With the fear or missing out, I bought some Bitcoin (0.02), worth about 11.65 dollars at the time and put it in my wallet. After a couple of years my laptop crashed and I had some files restored, but off course completely forgot to also recover my private key. Early 2017 when the price of Bitcoin boomed again I remembered I bought some back in the day, but quickly realized the private key of the wallet was no longer in my possession. The Bitcoin stuck in the wallet is now worth 162 dollars, but unfortunately I will never be able to access this wallet again, or can I?
As you would figure, I am not the only one who lost some Bitcoin. When you Google “bitcoin lost” you find numerous of stories of people who have lost a significant amount of Bitcoins which are now even worth millions. You will find a story about a guy who accidently threw out the hard drive, containing about 7.500 Bitcoins minded with a laptop in the early days of Bitcoin. Stories about people trying to find back their computer on a junk yard or people trying to find their own private key by brute forcing it. With the recent attention in crypto probably more and more people realize that they have last access to their Bitcoin, and the thing is the number of Bitcoins “lost” will only increase, as there is no way to get back a private key. This is off course a huge downside to the decentralized protocol, in the current “fiat” system it would be pretty much impossible to lose access to a bank account.
A study from Chainalysis even claims 17 to 23% of existing Bitcoins can be considered lost. This number includes for example the original 1 million Satoshi coins and also coins that are out of circulation for a long time. In my opinion it is hard to claim that coins which have not been moved for a long time, are lost. But this study goes to show that the number off lost coins could potentially already be quite high. Now is this a problem for Bitcoin? Well considering there is a limited supply, and the number of lost coins can only increase as we mentioned before, over time this could become a problem. With the adoption of Bitcoin increasing, it would be disturbing that the number of usable coins is only decreasing.
Are there any solutions?
Luckily, there are some potential problem solvers. For example Quantum computers will offer the possibility to make an extremely high number of calculations and make it possible to perhaps brute force private keys to lost wallets, regaining access. But also the Lightning Network could be considered as a solution, as this off chain solution makes it possible to make micro payments, transferring only fractions of a Bitcoin. This way it is less relevant what the total number of circulating supply is. So maybe the number off lost Bitcoins can be neglected, but it is certainly something to keep mind.