Could there be roughly 4 million less bitcoins in circulation than we think?
According to an article posted in Fortune this morning, there may not be as many coins in the already limited supply as most people think.
We all know that by 2040 there will be roughly 21 million coins mined from the original bitcoin, and at that point no more can be mined, at least as of today.
However, according to research by Chainalysis, a digital forensics firm that specializes in studying the bitcoin blockchain, when we do reach that 21 million supply limit, there will actually likely be significantly less coins available to trade or spend than even that 21 million number.
How much less supply are we talking about?
Well, according to their analysis they are already projecting that currently anywhere from 2.78 to 3.79 million bitcoins are lost forever. The rate that bitcoins are lost is likely to decrease going forward considering they are much more valuable than they were when they were first being mined.
People will likely keep track of them a lot better today than they did originally.
Which means that the number lost is expected to grow much slower as we get closer to our 21 million coin limit.
If those numbers stay exactly where they are currently, we are looking at 13% to 18% of the total supply likely lost forever. Currently those numbers account for 17% t0 23% of the existing supply.
How did they come up with those numbers?
The overall methodology used to figure out which coins belong in which class is confidential. Which is important for government agencies that it stay confidential because both the IRS and Europol rely on Chainalysis to figure out who might possibly own what in the blockchain world.
However, we can see from the charts above that they rely on segmenting the existing bitcoin supply based on it's age and transaction activity.
For some segments the company used statistical sampling to determine the amount lost.
Looking at the data it is apparent that the most losses came from coins mined 2-7 years ago, with the majority coming from those mined in 2009-2010.
There is one major caveat in all of this.
There is one major assumption in this data that may skew the results wildly in one direction or the other. That is the assumption that the coins likely belonging to the original creator (Satoshi Nakamoto), are gone for good and not coming back into circulation.
There is really no way of knowing that for sure, but the fact that the coins haven't moved from the time they were mined till now, despite them being worth almost $9 Billion today, is a pretty strong indicator that they may remain that way forever.
My thoughts:
Initially, I felt like this wasn't really telling me anything I didn't already knew. Just about every week I read about someone who has lost coins due to losing their password etc.
In most cases those coins are lost forever.
The longer the coins sit somewhere the stronger the likelihood that they are sitting there because they are not able to be moved.
Which is actually one of my dislikes about bitcoin and blockchain technology in general. It's great that everything is decentralized to an extent, but the aspect that there is no central authority to help in times when passwords are lost or forgotten presents a major hurdle for wide spread adoption of these things.
However, when you think about it, gold bars/coins were lost hundreds of years ago at sea as well as many other places, and that gold has likely been lost forever as well. Effectively taking it out of circulation.
When you consider that many regard bitcoin similar to digital gold and you look at it from that context, it makes much more sense how things like this can happen and should be expected.
It's not so much a flaw in the system like many might have you believe but instead just a feature. Another feature that is shared with gold.
The more I read and learn about bitcoin the more I am inclined to compare it to gold than a currency that can replace fiat someday. However, that isn't a knock against bitcoin at all, because if it takes just 5% of the current gold market we could be looking at prices of $25,000 based on 21 million bitcoins.
Not too shabby.
And, we just learned today that the 21 million number is likely to be significantly overstated... ;)
Stay informed my friends.
Sources:
http://fortune.com/2017/11/25/lost-bitcoins/
Image Sources:
http://fortune.com/2017/11/25/lost-bitcoins/
https://www.coindesk.com/information/who-is-satoshi-nakamoto/
Follow me: @jrcornel
Interesting analisis
I believe it, what a loss! And Bitcoin will pass $25,000 next year I think!
$20,000 late january 2018 is my guess.
this does not take into account fee locked addresses (ie addresses with so little btc that it will cost more in fees to move the btc than is on the address). That is a huge amount!
Also the last bitcoin is due to be mined in 2140 not 2040 and it won’t actually be the ladtbbutcoin mined it will just tend towards 0 mining rewards
I want to write the next great treasure hunt film, maybe like The Good, The Bad and The Ugly, only the treasure will be a Ledger nano S with 10,000 bitcoin on it! Or maybe Davinci Code but where the treasure is some search for Satoshi's lost fortune.
Really though, if we could crack the security on old hard drives with BTC on them, then there would be a real treasure hunt that might ensue.
very interesting post and info @jrcornel
i think the value will even climb higher because of the issue of limited supply and demand soaring daily especially in asia. Today bitcoin hit over $9k as i checked coinmarketcap! This goes to confirm your recent post of bitcoin reaching $10k mark by end of year. I feel it will even surpass the mark. Thanks for always updating us. I hope you do not mind as i mentioned you and your previous post in my recent blog post of today.
They should introduce a way to recover BTC account. i don,t know about that 2.78 to 3.79 million bitcoins are lost forever it,s insane if i loss my account and my BTC i,ll die .This post is amazing thanks for sharing
There is. Its called your private keys. Been there since day 1.
There should be a way to recover the lost bitcoin. If someone loses the password of the wallet he loses all the coins it just sucks. if you lose one coin you lose $8000 or above. i was thinking about this before you share your post what if i lost my passoward then how can i recover my coins. although BTC is the world largest Currency but i really don,t like it
It doesn't matter how many coins are lost. The price will rise accordingly to demand of the market and compensate the difference.
Well i dont think there should be a centralized Support to help recover passwords because that will defeat the purpose of decentralization actually.
However what we can do is educate masses to store their passwords on multiple devices and even write them on a notebook.
And if they are still unsure, write the passwords on a page and deposit it in a safety deposit box in a bank :p
It's interesting to think about and I also believe that a lot have been lost and it pisses me off so much when we are always losing "dust" to these exchanges and different services. That dust can really add up overtime.
Or the upgrades. I would like to use the new segwit wallet for BTC but its like why spend $30 in fees just move funds into the new wallet. I don't mind the exchanges as much because I voluntarily use their service. It will be cool to see what BarterDex does if they get an Automic Swap order book going in the coming months.