How Much Bitcoin Has Been 'Lost' Forever?

Summary

• Bitcoin has a controlled supply, meaning that the amount of coins that can be mined are finite.
• The amount of Bitcoin actually in circulation is far lower than the amount of Bitcoin in existence, due to accidental loss or willful destruction.
• Of the 16 and a half million Bitcoin that have been mined so far, it is estimated that up to 25% have been lost for good.

Bitcoin has a controlled supply, meaning that amount of coins that can be created are finite. The Bitcoin protocol is designed in such a way that new Bitcoins are created at a decreasing and predictable rate. The number of new Bitcoins created each year is automatically halved over time until Bitcoin issuance halts completely with a total of 21 million Bitcoins in existence.

Projected Bitcoins Short Term

Date Reached	BTC/block	Year (estimate)	BTC in Circulation	BTC Increase from Prev. Entry	BTC % of Limit
2009-01-03	50.00	2009	0	~	0%
2010-04-22	50.00	2010	2,625,000	Infinite	12.500%
2011-01-28	50.00	2011	5,250,000	100.00%	25.000%
2011-12-14	50.00	2012	7,875,000	50.00%	37.500%
2012-11-28	25.00	2013	10,500,000	33.33%	50.000%
2013-10-09	25.00	2014	11,812,500	12.50%	56.250%
2014-08-11	25.00	2015	13,125,000	11.11%	62.500%
2015-07-29	25.00	2016	14,437,500	10.00%	68.750%
2016-07-09	12.50	2016	15,750,000	9.09%	75.000%
	12.50	2018	16,406,250	4.17%	78.125%
	12.50	2019	17,062,500	4.00%	81.250%
	12.50	2020	17,718,750	3.85%	84.375%
	6.25	2021	18,375,000	3.70%	87.500%
	6.25	2022	18,703,125	1.79%	89.063%
	6.25	2023	19,031,250	1.75%	90.625%
	6.25	2024	19,359,375	1.72%	92.188%

Click to enlarge

(Table Data Source: en.bitcoin.it)

As of June 20, 2017, Bitcoin has reached a total circulation amount of 16.4 million coins, which is about 78% of the total amount of Bitcoin that there ever will be in existence.

(Image Source: Blockchain.info)

The theoretical total number of Bitcoin, 21 million, should not be confused with the total spendable supply. The total spendable supply is always lower than the theoretical total supply, and is subject to accidental loss as well as willful destruction. As a side note, while the number of Bitcoin in existence will never exceed 21 million, the money supply of Bitcoin can exceed 21 million due to fractional-reserve banking.

So how much Bitcoin exactly has been lost? It's a pretty tough question considering there is no definitive metric for finding the answer. A good estimate is around 25% percent of all Bitcoin (4 million Bitcoins), according to an impressive, albeit slightly dated, analysis by John W. Ratcliff. His article, written June 18, 2014, arrives at the conclusion that 30% of all coins had been lost, equating to 25% of all coins when adjusted for the current amount of coins in circulation. The reason that Ratcliff's value can be adjusted for the current date is because the bulk of the lost Bitcoins originate from very early on in the history of Bitcoin, and as Bitcoin's value goes up, people lose their coins at a slower rate. This value of 25% includes the coins that Satoshi Nakamoto may or may not hold, a topic which I believe should be saved for another article. Either way though, considering Satoshi's possible courses of action, it is extremely likely that those coins will remain dead permanently.

Bitcoin can be lost due to irrecoverable passwords or private keys, forgotten wallets, hardware failure, or the death of the Bitcoin owner. And sometimes, people just plain mess up. There's no shortage of newbies from all eras flubbing their coins, for example by accidentally sending Bitcoin to a valid but unowned address, in which the Bitcoin would be transferred and then be as good as lost. Even veterans have made massive mistakes. Bitomat lost the private keys to 17,000 of their customers' coins. In general, it's extremely improbable and effectively impossible to recover lost coins. Lost Bitcoins still remain in the blockchain just like any other Bitcoin, but lost coins remain dormant forever because there is no way for anybody to find the private keys that would allow them to be spent again.

The vast majority of losses however, are from Bitcoin's earliest days, back when mining rewards were still 50 Bitcoins a block and Bitcoin was trading at less than a cent. Certainly, with Bitcoin worth so little, a lot of people frankly didn't care if they lost their keys to the Bitcoin that they mined or purchased, and some just plain forgot about them; Let me remind you of the poor sap who threw away his hard drive of 7500 Bitcoins. Or for example, those who began mining on their computer, didn't like what it was doing to it and deleted everything, a scenario more common than you'd expect. As Bitcoins are far more valuable now than in the early days, people tend to secure their private keys with more care.

Another avenue through which Bitcoin can be lost is through "burning". This can be done by setting up a wallet with no known private key. The wallet can still be seen online, complete with every transaction, but the funds will likely never be retrieved. There are some addresses out there where no known private key exists.

For example:

Bitoin Eater

Any coins sent to the above address will be lost forever. Same with this unspendable address:

Counterparty

That one was used for the Counterparty's proof-of-burn. People sent bitcoins to that address to prove that they were "burned" (i.e. destroyed) so that they could be rewarded with the equivalent amount of Counterparty (XCP) coins.

The fact that Bitcoin can be lost or destroyed may have been a problem if Bitcoins were not able to be made infinitely divisible, but since they can be, it is a non-issue. If necessary, Bitcoin can be forked to use more than 8 decimal places. If that's not sufficient, proof-of-burn could be used to seed an entirely new cryptocurrency. In fact, lost Bitcoins should theoretically cause an increase in the value of the currency, according to the laws of supply and demand.

Despite this, the notion that the loss or destruction of coins is helpful to Bitcoin doesn't make a lot of sense either. To the contrary, it may have contributed to a slower adoption to the mainstream. With Bitcoin it's possible to forfeit all of one's currency if precautions are not taken and one loses his or her private key. This is as opposed to say, fiat money in a bank, where identity can be used to verify the ownership of the money, and where the money is further insured by the government.

Analyst’s Disclosure: I am/we are long BTC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Comments

[Herbert Samuel Jennings]

This article posted, back in 2017... I have to ask whether the number has changed, meaningfully, since that time... I'm also curious whether there are BTC accounts which show signs of being long-term-inactive, and might be "otherwise-stranded", on the basis of long term inactivity. I cite the example of a friend, I know, who mined a decent chunk of BTC, years ago, but lost the private keys, even before BTC started to climb remotely near this price region. There has to be some kind of analysis, to get at just how much of existing BTC falls within the category of "presumed inaccessible", beyond simply burned BTC. That kind of analytic would be very helpful to people trying to price in the deflationary trend.

[Herbert Samuel Jennings]

@Herbert Samuel Jennings Here is a website which provides a piece of that puzzle... not sure whether it is extensive enough to really answer the question, though. Probably not.

bitinfocharts.com/...

[EdCa]

some one said one bitcoin could potentially be fraction in ONE MILLION parts / fraction
so one bitcoin can have a HUGE PRICE from 10k now up to 1M. . .
I think I will put some playing money to some coins

[surfer1]

@Bob_NH

Yes, that is the speculation of everyone else. Market Speculation.
Really no different than Federal Reserve Notes, they are not backed by gold anymore, yet day after day, the system lives off the back of its workers.

Bitcoin was a fraction of a penny 10 years ago. Now every1 reads everyday how much money ppl are making and they want in, GREED.
No 1 search on Google last week "buying bitcoin with your credit card"

[Bob_NH]

I have asked several people and nobody has ever answered the question of cashing in the Bitcoins. There are about 16 million bitcoins in circulation and the current price is about $15,000 per coin. That represents $240,000,000,000 (that is $240 BILLION).

When the holders of those 16 million bitcoins realize that there is nothing that guarantees that those coins can be converted to dollars or euros or sterling, they will go to all of the bitcoin exchanges to convert them to money that they can spend to buy a house or car or shares of Amazon or Facebook or JPMorgan stock.

Can anyone please explain the source of the real 240 billion $USDollars or equivalent yen or euros or sterling that can be deposited in brokerage and bank account? The bitcoin fantasy will collapse when owners of a few billion dollars worth of bitcoin try and fail to get real money that will show up in their bank and brokerage accounts.

[surfer1]

Martin, you have just described what Bitcoin will not ever be, which was part of its intent on purpose in the 1st place when it was created.

By definition it cant be devalued by a regulating fill in the blank agency globally.
If they could do that bitcoin would be equivalent to Fed Res Notes or funny money at the whim of the printing press and politics/control .

Not to say that Bitcoin won't/can't be morphed into something else in the future that the greed inc. will try and control/charge fees on/use to control.

But in an ironic way we now truly have the 1st example of a one world currency like it or not.
It doesn't have to be the dominating currency or the worlds 'only' currency, but nonetheless anyone with a pc globally can exchange merchandise globally as long as the market continues to give it a value.

[Proxy]

A little background on Fractional Reserve Banking / Lending from Mike Maloneys' "Hidden Secrets of Money".
The entire 7 part series is worth watching, but here we jump 6 min into part 4 :
http://bit.ly/2tZoe0Q

[grendelbane]

Why any one would want to borrow a deflationary currency?

But, if they do, then yes, fractional reserve banking would increase the amount of bitcoins in circulation. Just like it increased the amount of gold backed currency back in the day. Or silver, back when silver, not gold, was the standard.

Now, you can argue whether these bitcoins are real, (or whether the gold is real, or whether fiat is real).

Fractional reserve banking creates and destroys the amount of currency, no matter what tht currency is. If the Yap islanders had practiced fractional reserve banking, there would have been more people holding huge stone coins than there were huge stone coins in existence.

[Georg.F.A.]

if you are saying that there actually canot be FRB with a "physical-only" currency, I concur. Fractional Reserve Banking with a reserve factor below 100% (i.e. any fractional reserve banking that deserves the name) requires a form of money that can be arbitrarily created by the lending bank.

[askip3]

Just what we need...central banks creating fiat crypto

[Martin YK Li]

Fractional reserve banking is when banks loan out or invest with money that customers have deposited, while keeping just a fraction of that money in reserve (actually sitting in the bank vaults) in case of a bank run. This form of banking increases the money supply by a factor of x, where x is the money multiplier (http://bit.ly/2tPc0Ys).

Let's look at a small microcosm of the economy, for example, a society that consists only of you, me, and the bank. For the sake of example, let's say there are only $100 that exist in our small little society, and you own all $100. You decide to give the money to the bank for safekeeping, which doesn't change the amount of money in the system; There's still only $100. However, the bank decides to let me borrow $50 of that $100. Now I have $50 to spend, and you still have $100 sitting in the bank, so there is now effectively $150 in the money supply.

The actual number of Bitcoins in existence is capped at 21 million, but with fractional reserve banking, banks or exchanges can loan out Bitcoins the same way they would loan out money. It's as simple as a large bitcoin exchange lending out 10,000 bitcoins to an individual to start a business. The money supply would thus increase by 10,000 and we would instantly have fractional reserve banking. Fractional reserve banking was actually already implemented by CoinLenders.com, which is unfortunately now defunct. Seeing that the government does not regulate Bitcoin fractional reserve banking however, most consumers are wary of banking with exchanges that utilize fractional reserve banking, and most exchanges are aware of this sentiment as well. Poloniex for example makes it clear on its front page that it doesn't operate under fractional reserve banking.

[jhrace1]

Correct me if I'm wrong...fractional reserve banking creates actual currency.

I believe what you described is a derivative instrument and not the creation of actual bitcoin.

[Martin YK Li]

You're correct, it doesn't create new "real" bitcoins, but in the same sense, fractional reserve banking doesn't create "real" cash either. The physical amount of cash and the physical (if you want to call it that) amount of bitcoins stays the same in both cases, however that doesn't make the lent out cash/bitcoin any less spendable or in practice, any less "real".

[jhrace1]

Martin, I have to say that I believe you are incorrect. FRB does indeed create new real money.

What you describe with BTC will not create new real BTC.

This is a rather large and important distinction.

[jhrace1]

Hi Martin,

What did you when you said:

As a side note, while the number of bitcoins in existence will never exceed 21 million, the money supply of bitcoins can exceed 21 million due to fractional-reserve banking.

Thanks

[Martin YK Li]

Whoops, I meant to reply to your comment, but my response is below. Thanks for reading!