How does Bitcoin get lost? How can you avoid losing your Bitcoin? Can lost Bitcoin be found or retrieved?
People lose things all the time. Keys, your parking spot at the mall, the plot to Lost after season two. But what about losing something digital, like cryptocurrency?
Photo by Jeff Kepler on Unsplash
And (much like the smoke-bear-demon in Lost) Bitcoin doesn?t exist in a physical form so you can?t drop it in the street or leave it behind somewhere. But you can still lose it, as many people have discovered. In this story, we?re going to look at how cryptocurrency gets lost, where it goes, and how you can avoid it happening to you.
How does Bitcoin get lost?
The total available supply of Bitcoin is capped at 21 million, with new ones released every day. It?s expected that we?ll reach that cap sometime around the year 2140, although it could be sooner.
If you lose a coin or note of your local currency, it doesn?t matter much to the economy as a whole because your government simply mints new money on a regular basis.
But seeing as the supply of Bitcoin is finite, any time someone loses any, that means the circulating supply decreases.
So even when we reach 21 million, the number available to buy, sell, store and use will be lower.
It?s not known exactly how many Bitcoin are currently lost, in part because the definition of ?lost? varies depending on who you ask, and some may be reclaimed in the future. Though going beyond the void retrieve it isn?t easy.
According to research by Blockchain analysis company, Chainalysis (which Luno works with), as of the end of 2017 almost 4 million Bitcoin could be considered lost. It?s unlikely the number hasn?t increased much since then, as the higher price encourages people to be more careful. So, as it stands, the total circulating supply is set to be around 17 million Bitcoin.
Stolen Bitcoin do not count as lost because the thieves have access to it.
There are a number of ways Bitcoin can get lost:
Lost or discarded devices
Bitcoin has been around for nearly a decade now. During that time, technology has changed a lot and the average person probably isn?t still cranking up Windows Vista to trade crypto. In some cases, people will lose their laptop or throw it away, forgetting that they have Bitcoin stored on it. Broken devices and fried motherboards also lead to losses.
This is because, in addition to being able to store your cryptocurrency on a platform like Luno, it?s also possible to keep it on your hard drive. In one well-known case, an IT worker named James Howells threw away a hard drive that contained 7500 Bitcoin he?d mined at virtually no cost in the early days. This fortune would be worth many millions today, but there was no way for Howells to recover it.
Forgetting about it
Yep, it is possible to buy or mine Bitcoin then forget you own it. This sounds like a caviar-and-champagne problem, but in the early days you could easily mine thousands of Bitcoin on a normal laptop and it cost almost nothing. That non-existent cost meant most people didn?t really see it as something that might ever have value, so many just forgot about it.
Unfortunately, if someone who owns cryptocurrency passes away without sharing their credentials with anyone, that Bitcoin is also lost for good (or for bad, as it were). It?s now recommended that those who are making a will and who own cryptocurrency consider including details to help their family access it if necessary.
Sending to a wrong address
Sending Bitcoin to an incorrect address is like mailing a letter to a sealed empty house where no one lives or ever will live. It may sound like Mary Shelley?s version of losing Bitcoin, and it?s just as bleak. It?s impossible for anyone to open the door and retrieve it. This can happen if you mistype an address and transactions cannot be reversed.
Forgotten private keys and passwords
Your private key gives access to your Bitcoin. If you lose this, it?s like forgetting the code for an unbreakable safe. Some people have written down their credentials, only to lose or accidentally throw away the piece of paper. Others committed them to memory, then later forgot it.
In addition, people may destroy their private key on purpose for various reasons. The creator of Bitcoin, Satoshi Nakamoto, is believed to have mined one million but has never touched them. Some believe Nakamoto destroyed the private key.
How can you avoid losing your Bitcoin?
Be diligent with transfers
Whenever you?re sending to a wallet address, be sure to double check the address is correct. It?s best to copy and paste it or to use a QR code.
Choose a storage method you trust
If you forget your private key, there?s no way to regain access. If safeguarding your private keys is too daunting for you, a platform like Luno could help. We take care of the security and look after your private key (essentially the password giving you access to your Bitcoin) for you. If you forget the password to your account, we can help you recover access.
Can lost Bitcoin be found or retrieved?
Whether lost Bitcoin can be found or not depends on how it was lost. Considering the quantity of missing cryptocurrency out there, people have begun offering services to help the Prodigal Bitcoin return. These include data recovery specialists and even hypnotists. But it?s never guaranteed that they can help.
If you lose a device with Bitcoin stored on a hard drive, there is currently no way to restore it unless you manage to find it again.
If a device has been destroyed (e.g. thrown into a landfill), sadly it?s impossible to get it back.
It?s certainly not a good idea to attempt to retrieve devices from landfill sites, as this is illegal in many countries, extremely dangerous, and the toxicity of the site will likely have destroyed it anyway. For broken devices, it depends on whether they?re fixable or not.
Have you ever lost any of your Bitcoin, or know someone who has? Did you manage to retrieve it? Let us know.