How much of the Bitcoin Supply Can be Considered Lost Forever?

Bitcoin is a decentralized digital currency that operates on a peer-to-peer network. It was first created in 2008 by an unknown person using the pseudonym Satoshi Nakamoto, and has since become the largest cryptocurrency in terms of market capitalization. As of 2021, the total number of Bitcoin in circulation is approximately 18.62 million, out of a maximum supply of 21 million.

One of the unique features of Bitcoin is its scarcity - once the 21 million Bitcoin are mined, no more will be created. However, not all of the Bitcoin that have been mined are in circulation, as some may have been lost due to a variety of reasons.

Why are Bitcoin Lost?

There are several reasons why Bitcoin can become lost:

• Private Key Loss: The private key is the secret code used to access a Bitcoin wallet and is required to transfer the funds stored in it. If the private key is lost or destroyed, the Bitcoin in the wallet are lost forever.

• Forgotten Wallet: A user may forget the password or other credentials required to access a Bitcoin wallet, rendering the funds stored in it inaccessible.

• Hard Drive Failure: If the storage device containing a Bitcoin wallet is damaged or fails, the Bitcoin stored in it can become inaccessible.

• Death: If a person dies without passing on their private key or access to their wallet, the Bitcoin in it may become lost forever.

How Much Bitcoin is Lost?

It is difficult to estimate exactly how much Bitcoin has been lost, as the transactions are publicly recorded on the blockchain but the identity of the users is anonymous. However, some estimates suggest that anywhere from 2 to 4 million Bitcoin have been lost permanently.

As per a report by the blockchain intelligence firm Chainalysis, about 3.79 million Bitcoin, or roughly 20% of the total supply, are estimated to be lost forever. This is based on an analysis of the Bitcoin addresses that have been inactive for more than five years, as it is unlikely that the owners of these addresses still have access to their Bitcoin.

Additionally, research from the University of Cambridge’s Center for Alternative Finance has found that around 20-30% of all Bitcoin have not been moved in over five years, suggesting that they may be lost.

Conclusion

In conclusion, while the exact amount of lost Bitcoin is unknown, it is estimated to be anywhere from 2 to 4 million, or roughly 20% of the total supply. The loss of these Bitcoin has contributed to the scarcity of the cryptocurrency, and has helped to drive up its value. It is important for users to properly secure their private keys and access to their wallets, as once Bitcoin are lost, they are gone forever.