[SODaniel]

While I don't disagree with the author I would say that the finite supply shines a light on an even more direct problem.

What happens to 'lost' coins? The BTC supply is not only finite but in fact dwindling over time, as inevitably the amount of currency is going to diminish due to digital loss.

I have personally lost a few BTC due to computer crashes, wallet file lost etc. (In the early days) and considering this the total supply of bitcoins will be diminishing over time at (maybe already?) higher rate then they can be mined.

I haven't taken the time to do ANY form of math on this but I can guarantee that already 10.000s if not 100.000s BTC are lost forever due to people simply not having access to them anymore and the data being destroyed.

Over years of loss this is probably more likely to kill the currency than anything else in my opinion.

[mtgx]

Then Bitcoin increases in value, and you keep dividing a Bitcoin more. Nothing really changes.

Does it really matter if you have 20 million Bitcoins that are worth $1 trillion or if you have 10 million Bitcoins that are worth as much? No, it doesn't. The 21 million number was pretty arbitrarily chosen to begin with.

This would be a problem if say half of available Bitcoins would be wiped out overnight - somehow. But the chances of that happening as getting lower and lower as more people start using Bitcoins, and the value gets spread out across many more people.

[SODaniel]

I agree that it's not a 'currency killer' in the short run BUT if we speculate that BTC reaches mainstream popularity and a total market value in the 100-1000s of BILLION USD the fact that an 'unknown' amount is in circulation makes for a very strange variable.

All of a sudden my old 1BTC wallet on my crashed laptop hard drive may be worth 100s of days of mining network wide, and even the speculation that a 'previously unknown' wallet containing 100BTC (there are a LOT of those sitting on old phones and hard drives already I promise) would have possibly disastrous effect on currency value etc.

All I am saying is that there are a LOT of factors to consider and BTC loss over time is a major one.

My argument being: A finite supply of a currency is one of the factors people REALLY need to think about when it comes to BTC. And I guess I am saying that it's a real problem vs. a currency with increasing difficulty and a non-finite supply.

[stevenrace]

But isn't even knowing some constraints about the money supply better than not knowing anything at all?

For instance, the M3 supply of USD isn't even tracked by central banks (not since 2006).

[mayneack]

That works for long as you keep more than you lose. If we get down to 1000000 btc at a reasonable value, what happens when I find my old thumb drive from 2011 that has 100k btc on it? That will be quite a shock to the btc economy.

I don't think this kills bitcoin, but this is part of the "lost coin" problem.

[ph0rque]

What happens if I find an old chest with a 100kg in gold/diamonds/unobtainium? I think this situation is quite a good analogy to your question, the consequences of which are readily known.

[SODaniel]

I think the 'point' here is that as opposed to chests with 100.000.000KG of gold there are actually 'lost' wallet files with enough BTC that it would 'rock' an economy with a currency cap in the future.

I am pretty sure if someone found a stash of gold worth $400.000.000.000 that WOULD actually effect gold prices. Also: Gold has 'real life' uses (production of components etc) and real world costs etc. attached to handling (weight, transport costs etc). None of which BTC has.

[dragonwriter]

> I am pretty sure if someone found a stash of gold worth $400.000.000.000 that WOULD actually effect gold prices.

Yes, it would. Spain essentially demonstrated this in the 16th Century, with the New World as the "stash".

[mayneack]

So I don't know how much gold it would take to rock the price, but I'm guessing it's enough as to be non-trivially "lost" however, any random flashdrive could contain any number of btc.

[thornkin]

The analogy to gold isn't gold that was once possessed that has been lost, it is gold that is newly discovered. A new find of a big gold vein, gold on an asteroid, etc. would be a similar shock to the system.

[pron]

I think that was precisely the point: coin loss is yet another deflationary pressure.

[gojomo]

Not sure this will kill the currency, but it will definitely lead to many fewer than ~21MM units being available. As average folks rather than computer wizards try to hold Bitcoin, many more bitcoins will be lost forever, because private key protection and backup is not a natural thing for humans!

In fact, protection and backup are at least a little at cross-purposes: better backup increases the possibilities for compromise.

So you will see adoption by some of the same kind of hoarders who, at death, are found to have millions in cash or gold hidden in their residence. (One vivid recent example: http://articles.latimes.com/2012/sep/17/nation/la-na-nn-cars... )

Except now with Bitcoin, their private keys and associated balances will be lost forever when they die. Or perhaps even earlier, when they go so batty they can't remember their 'brain wallet' seed.

Saw a great relevant tweet yesterday:

@lawremipsum: "There's always bitcoins on the banana stand hard drive." Alt-Future Arrested Development - https://twitter.com/lawremipsum/status/320970532260544512

[jerdfelt]

"Lost" bitcoins would just cause all of the other bitcoins to effectively increase in value. It's really only a problem for the person losing the bitcoins and a (small) positive for the rest of the bitcoin community.

It's conceivable that most lost coins will only be lost until the keys can be cracked. Bitcoin keys are extraordinarily difficult to crack right now, but at some distant point in the future, it's conceivable they could be cracked.

IIRC, there are some bitcoins that have been irretrievably lost because it was sent to an invalid key. It's a very small number however.

[SODaniel]

Nope. That's the problem. LOST bitcoin (as you cannot quantify the availability of anonymous data blocks) wouldn't effect anything. ONLY FOUND bitcoins would.

[scotty79]

The amount of bitcoins you have just describes what fraction of its wealth humanity owes you.

If you lost some BTC it doesn't destroy any value. It just means that you allowed humanity to forget that it owes you some of it's wealth. If you lost some BTC the fraction that humanity owes all other people who own bitcoins just increased.

[SteveArmstrong]

I think that's only true if it was known how many wallets were actually lost. As is, the fraction of worth captured in that wallet can never be re-distributed to other people who own bitcoins, because the wallet is never decommissioned, just dormant.

[scotty79]

Not quite. Losing your wallet doesn't destroy anything beside the proof that the rest of society owes you anything.

No actual worth is lost. You just lost the proof that you have a right to something useful or pleasant. It will be claimed by other people. Market will discover how much bitcoins were lost and bitcoin price will raise accordingly so other people holding bitcoin will be entitled to tiny bit more of the valuable things that society provides.

If you break your glass bowl it's a loss for the humanity. If you loose bitcoin wallet it's just a loss for you.

[thornkin]

That is only true if the loss is actually permanent. If the system comes to assume that there are only 10,000,000 coins in circulation, what happens if a substantial portion of the "lost" 11,000,000 shows back up? Now you just had a 50% inflation overnight...

Of course, the chance that huge amounts are lost together is quite low.

[scotty79]

I don't think you could double the amount of bitcoins overnight. And even if you could I doubt that it would lead to rapid inflation. Rather gradual as additional bitcoins spread throughout the economy.

[jamespitts]

The potential for destruction of bitcoins is actually reassuring to me. It painfully demonstrates that there is a limited supply of the digital "material" that makes bitcoin possible. It also encourages us to not hoard too much bitcoin, and to actually spend some of it from time to time.

[thelema314]

I expect this will cause little problem; if 1M bitcoins are lost, the system will just work as if there were only 20M bitcoins created instead of 21M bitcoins. Everything would be a little less expensive because bitcoins would each be worth about 5% more.

[SODaniel]

Nope. Since no one can ever satisfactory answer the question of the 'real' amount of BTC in circulation, this will only serve as a factor of uncertainty. Lost bitcoins affect nothing, FOUND bitcoins can affect everything.

[anonymoushn]

So, MV=PQ and all that. Lost bitcoins are functionally identical to any other bitcoins that aren't being spent. Burning dollar bills does not move the price of the dollar in a different way than keeping them in your pocket.

[TimSchumann]

Tens of Thousands of Bitcoins have been lost, easily.