Monday, November 27, 2017

21 million Bitcoins? New study confirms that as much as 25% of the already 16 million mined are gone forever

One of the more interesting aspects of cryptocurrencies is that they rely upon the individual owner to be solely responsible for their protection.  And by protection we mean control over their cryptocurrency wallets, as well as when they move them back and forth through exchanges during the process of buying and selling.

And unlike a bank or vaulting service that provides a modicum of insurance of your money and assets in the case of cyber theft, physical theft, or institutional error, if someone is negligent in their handling of their cryptocurrency wallets, not only are they out the Bitcoin they lost, but those cryptocurrencies are also lost forever from the entire balance of mined cryptocurrency.

In a new study out on Nov. 25, in the time it has taken to mine 16 of the total 21 million Bitcoin expected to ever be produced, approximately 25% have been lost forever through a myriad of reasons such as failed hard drives, lost wallet passwords, etc...

Chart courtesy of Fortune Magazine
Just as gold bars are lost at sea or $100 bills can burn, bitcoins can disappear from the Internet forever. When all 21 million bitcoins are mined by the year 2040, the actual amount available to trade or spend will be significantly lower. 
According to new research from Chainalysis, a digital forensics firm that studies the bitcoin blockchain, 3.79 million bitcoins are already gone for good based on a high estimate—and 2.78 million based on a low one. Those numbers imply 17% to 23% of existing bitcoins, which are today worth around $8,500 each, are lost. 
While others have speculated about the number of lost bitcoins, the Chainalysis findings are significant because they rely on a detailed empirical analysis of the blockchain, where all bitcoin transactions are recorded. – Fortune Magazine


What would happen if those 25%, presuming they were held by one or more parties, were released into the cryptoworld at once? Or what if big investors got jittery and realised bitcoins are not exactly handy for trading if and when they are priced out of the market? How would they take their profits? London Paul seems to think it's cause for concern...

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