Bitcoins can disappear into thin air forever from the internet, just like gold bars get lost at sea or a $100 bill burning. According to research that was carried out by the Chainalysis, a digital forensic firm that conducts research on the bitcoin blockchain. The analysis indicated that 3.79M bitcoins are already lost forever based on their studies.
While other firms are speculating on the number lost bitcoins, the findings of Chainalysis are significant because their conclusions are based on the detailed empirical analysis of bitcoin’s blockchain. This is where all of the bitcoin’s transactions are being recorded. Their outcomes depend upon the segmentation of the existing bitcoin supply based on the age and transaction activity. There are several segments, but the firm used statistical sampling in order to determine the real value of bitcoins lost.
Bitcoin’s segment like the “Mined Coins” indicates the total number of bitcoins that have been mined in the year 2017. Similarly, the segment for “transactional” indicate the total number of bitcoins that have been spent during the last year (those that have been lost are also included in this segment). Likewise, the “strategic investors” section shows the list of all those who have held bitcoins for 1-2 years. However, this section shows a very negligible share of the losses.
More Bitcoins to be Lost in Future
In the future, more Bitcoins are expected to be lost. However, the rate at which they will be lost will be lower as compared to those that have been lost in the past. This is because they have become more valuable and the miners are expected to be more careful about keeping a record of them. In the meantime, there have been questions whether the findings of Chainalysis means that bitcoin is now more scarce than the miners assume. Also, there are questions whether the market has already priced the missing coins into the current currency’s value.
Concerning these questions, Mr. Kim Grauer, the senior analyst at Chainalysis said,
“That is a very complex question. On the one hand, direct calculations about market cap do not consider lost coins. Considering how highly speculative this field is, those market cap calculations may make it into economic models of the market that impact spending activity,” “Yet the market has adapted to the actual demand and supply available – just look at exchange behavior. Furthermore, it is well known monetary policy procedure to lower or increase fiat reserves to impact exchange rates. So the answer is yes and no.” he added.
The secrets of Satoshi and the Lost Bitcoins
The IRS and Europol are the primary clients of Chainalysis, and they have made a name for themselves in the world of bitcoin due to their abundant data and sophisticated study on the blockchain wallets. Even the law enforcement firms depend on the company for detailed insights into who owns the digital currency and how it is being transacted around.
The general methods of study that Chainalysis uses are a secret. However, a spokesperson shared some info about how the company is able to assess the number of bitcoins lost. One of the critical thing that he said was that there are a “forks” in the blockchain such as bitcoin cash. Such events can direct to the owner of the wallet that has been inactive for a long time to perform a transaction, which gives an opportunity for statistical analysis.
It is such kind of clues that help Chainalysis to find out the “holder” category. These are wallets that belong to people who joined bitcoin before it becomes popular. And these represent the most significant source of uncertainty as to whether the bitcoins are either lost or hoarded.
Satoshi – the Creator of Bitcoin
Concerning the question about what happened to Satoshi, the creator of bitcoin and who has not been heard from since 2011. According to the reports by Chainalysis, the wallet that is associated with Satoshi represents about 1M bitcoins. However, the company will give a more specific figure concerning the same. Furthermore, they also said that it is now not possible to mine 50 bitcoins using a laptop just like it was possible back then.
According to Chainalysis, the most surprising thing that they discovered concerning the lost Bitcoins is, “Firstly, we floated our findings to a few people, and they all had different reactions about how surprising the figure was. But what I found most surprising/interesting was how when you unpack what it means to be “lost” things get even more confusing.” Said Grauer.