Is Lost Cryptocurrency Still Valuable, and Can We Reclaim It?

At some point, too many people will have lost too much Bitcoin that they will meet to talk about it.

Later, they will opt to do something about it.

There can only be a (decreasing number) of bitcoins

Lost cryptocurrency is a unique beast, quite different from lost information for 2 reasons:

1. We can continue maintaining its value.

Right?

Is it really still valuable?

2. Other people know it is lost. They simply check the blockchain. Whereas with lost information, nobody else can tell except those who have lost that intel.

Take Bitcoin as an example.

We still say 'There can only be 21 million'.

But if this includes even lost bitcoins, then we are counting our losses as assets!

That is very strange.

Imagine if you were an accountant for a major company. The company deals in all sorts of assets, but sometimes writes some physical assets off as lost either due to theft, fire outbreak, or irreparable damage.

But to your shock, the manager insists that not only do you keep counting those assets, but also, count them as fully functional assets whose value is going up every year.

"But they are damaged", you might say.

"Yeah, but they are still our assets"

"What, how?"

"There is hope we can recover them exactly as they were before they were lost.

And then some".

It’s hard to fathom. It indeed feels like Alice in Wonderland, where cards talk, a piece of cake can make one bigger, or smaller, and a cat can disappear leaving only its grin behind.

Bitcoin and most crypto are the same.

The question is thus;

Is real value riding on all coins?

Even when some are lost?

Certainly, supply and demand economics might make all the coins feel equally valuable hence we would say that if Bitcoin is at $70,000 then the market cap is $1.47 trillion. But taking the figures as per this reddit post on lost bitcoins, if 6 million are lost then only 15 million coins are existing which are backed by a market cap of $1.05 trillion.

Less by $420 billion.

This does deflate our dreams and begs the question --> are we kidding ourselves?

The road to Zero bitcoins

By some estimates, 4% of 21,000,000 bitcoins continue to be lost every year.

How many shall be lost, going forward?

Let's assume this 4% holds true.

4% × 21,000,000 = 840,000 bitcoins.

This is very steep.

Well then, in 15 years, we shall lose 840,000 * 15 = 12,600,000

Add 6 million to this batch and circa 2039,

'There can only be 2,400,000 bitcoins'

When will they be finished?

Now, a little hope is in order.

The 4% cannot hold steady forever, so it would be wise to say it too will be a declining figure as we progress. Because as Bitcoins get more valuable, people will be more careful with their keys.

It is inevitable.

Taking it at face value though, we shall run out of bitcoins to trade within the next 18 years.

So Circa 2042.

I hope the naysayers will be back to tell us they told us so, or to plead guilty of doomism and explain why there are still many millions of Bitcoins being traded daily.

However, it certainly looks like way before the year 2137 when the last satoshi will be mined, we shall hit a big wall as per the coins lost vs the coins in the available supply.

When enough is enough, for lost Bitcoins

Assume at the time this shocking reality hits the Bitcoin community, we have only 4 million coins tradable around the world.

Assume even Michael Saylor shall have lost some of his keys/coins.

What then?

Well, the price of a single coin, feeling so much demand, will spike to about $10 million, and then it will dawn on everybody.

Bitcoin has a $40 trillion market capitalization and not a $210 trillion market capitalization.

Right now, this is an elephant 🐘 in the Bitcoin room, but it is still a baby and we are all happy to pet it and feed it with careless abandon.

Soon, however, it will become a giant.

A big fat frustration.

At $10 trillion per coin, the fees to move even a few sats will likely be thousands of dollars because;

a) the Bitcoin reward is smaller.

b) miners have also lost their coins.

c) losing coins to hackers will be most likely (hackers will be sniffing all over every wallet, waiting for the SSL to get some slight holes)

Everybody will be losing coins.

It will be wild.

But before I proceed?

Why do people lose keys hence coins?

Well, if you are using the key every time, sometimes changing it this way and that way to maintain your security (because AI powered cameras may be watching), it so happens that you are bound to make a mistake and lose the key.

Or else, be hacked (since you cannot fathom changing the key all the time).

Like smart people must have said, meat brains are not good at holding random numbers or random sequences of words.

Luke Dash Jnr, a seasoned cypherpunk, was hacked last year. He lost 200 bitcoins.

Elon Musk may have lost his Bitcon keys back in '20.

So, shit happens.

To hard fork those lost coins back, or not. That is the question

So here's the thing.

We wake up and Bitcoin is seizing up.

Crashing into its mass and threatening to take our financial dreams with it when it turns into a black hole of lost keys / burned coins.

We also wake up and realize that the debt spiral is still sucking us down with it, even as we hodl Bitcoin.

Climate is now a real issue and oh, AI is giving us headaches.

Too many addictive cat videos.

Too many coins are lost, the blocks are always full so confirmations take decades, the core software is too large, the fees are too high.

So we sit down, like AA group members, and decide that continuing to preach financial freedom yet the currency is fast tending towards technological obsolescence, is like being high on alcohol and thinking that one is blissful for other reasons.

We need to quit the 'lost coins are good for all' alcohol.

In short, it will be time for a hard fork.

The Hard Fork -->

Bitcoin ver. 2.0

Innovation comes full circle.

After factoring in the reality of available supply and not merely supply, we could let Satoshi Nakamoto's 2 million or so coins be our target practice and our saving grace.

One shot and bull’s eye. Trillions of dollars pour down from the Bitcoin piñata. Like manna from the heavens.

Right?

Alas, There shall only be 4 million bitcoins and the value of lost coins, if "re-supplied" to the blockchain, will quickly deflate the value of the 4 million coins existing.

Overall, lost coins would have helped the remaining coins get valuable to that point.

Say $10 million per BTC.

If you un-lose them by the most brute force of them all -- a hard fork -- you shock the demand economics and viola, have worth-less bitcoins than you started with.

Now whoever is holding their previously un-lost bitcoins cannot be happy about that. It begs the question, what would they do?

Refuse the hard fork outright.

Obviously.

Indeed, even if the value of the bitcoins would overall increase the market cap of the available supply, we can be damn sure it would reduce the value of each individual coin.

Supply and Demand.

Economics 101.

The Big Question:

Is this a financial revolution for the better, or for the worse?

For example, let's say we had 4 million coins left. We then redeem the coins in the wallets of those proven deceased without any heir. Say Satoshi Finney is that first choice.

At $10 million per coin, 4 million coins give up a market cap of 40 trillion USD.

Add 2 million coins to the available supply but have the price shocked from 10 million to only 7 million.

Total availability supply = 6 million.

6 million x 7 million USD = 42 trillion dollars.

It is a good financial explosion.

But to whom?

Who gets the money??

Who makes the ultimate sacrifice of accepting to end up with less money than before?

If rational and educated human beings cannot agree on simple (obvious) things like "Are fossil fuels necessary for economic progress or not?", how can they agree on how to share this pie?

It is a financial explosion, except the majority will not want it.

Satoshi may have solved the Byzantine General's problem.

Somebody needs to solve the "Goodness of the community over the Goodness of the individual" problem.

Of course, with my limited brains, I know most people are wary of a Marxist dystopia sliding in during this very crucial process.

E.g. The coins could instead be coded to go to a handful of powerful individuals, whereas before it seemed like they would go to people who deserved a financial turnaround.

Especially in the wake of what we see today with government debt ballooning, government operatives hoping to snatch some of this reclaimed BTC so as to help the government pay its gigantic debt is not an impossibility.

Talk about being stuck between a rock and a hard place.

Not the best kind of sandwich.