(Disclaimer, this is not another article about keeping your keys safe.)
Late last year cryptocurrency analyst Timothy Peterson said the number of Bitcoin lost per day is 1500 and that the total number of available Bitcoin will be around 14 million once all 21 million is mined. Peterson’s number is a little a little higher than most conventional wisdom that claims the total number will be around 18.5 million, but, he is backed up by Cane Island Digital Research. The research firm states 4% of available Bitcoin is lost each year. Despite Bitcoin being designed with a limited supply of 21 million coins, Cane Island estimates that a maximum of only 14 million Bitcoin will ever circulate due to the rate at which coins are lost. Running across this older tweet did get me to thinking about the issue, though.
Now, my first reaction to this (as many others) is, if this rate continues, won’t Bitcoin essentially burn itself out in about 40 years (21 million coins divided by 1500 is about 14000 days, or 38.35 years.) Not an ideal track record for long a long term currency.
So, what does this mean. For one, I hope we don’t continue to lose Bitcoin at this current rate. This number also includes some early missteps before people realized what was going to happen. There are multiple stories of people losing millions and billions of Bitcoin because of lost keys. With more value associated to their wallets, I would think this loss of large amounts would slow down (hopefully end completely) the rate of careless losses. (I would think, in general, these early and very large losses helped to skyrocket the lost Bitcoin rate.) Though, we should still see the usual losses of sending crypto to the wrong address and burned addresses.
While some argue that these numbers are an exaggeration, there is no denying that Bitcoin is burning a percentage of itself out. In the short term, this may add value to the remaining Bitcoin (although, since we know pretty much what is happening, that may not be the case and this burn is already accounted for in the price,) but, at some point there is a downside. One, is the argument from government officials that this is not a legitimate currency if it can be lost as easily as it is. Just one more arrow in their quiver of downplaying crypto's presence. Next, I know many people will never touch crypto just because of the thought that they can lose it so easily, with no 800 number to call to get it back.
So, along with making it harder for Bitcoin to continue its run towards mainstream usability, this continual loss will also impact the cost of using it transactionally for everyone. If the total of 21,000,000 million bitcoin (once all are mined) is continually decreased, then the cost of transactions will continually increase as time goes on. Or not, this is from Investopedia in an article about once all Bitcoin is mined:
It's also important to keep in mind that the bitcoin network itself is likely to change significantly between now and then. Considering how much has happened to Bitcoin in just a decade, new protocols, new methods of recording and processing transactions, and any number of other factors may impact the mining process.
Maybe this burn/loss will be accounted for in the future, but as for now, it is more important than everyone just sitting around enjoying the fact others have lost millions, or feeling sorry for ourselves if we are the losers. Any thoughts on this?
Full disclosure, I left my actual wallet at the checkout of a Krogers grocery store 15 years ago and never got it back. I am still mad about it.