Cryptocurrency is a digital asset that has no actual physical existence. When someone buys Bitcoin or invests in it they do not receive actual coins or pieces of paper money. All cryptocurrency is stored in wallets kept online or offline. It is a sad but true fact that millions of dollars worth of Bitcoin have been lost since the token was introduced in 2009. What happens to all that digital currency that disappears into the ether when people lose access to their Bitcoin wallets?
Wired Magazine Throws Away $100,000 of Bitcoin
Your interest in technology and cryptocurrency probably means that you are familiar with Wired magazine. Wired is published in a print version and also can be read online with a subscription. In 2013 the magazine was provided with a miner that was built by Butterfly Labs. A miner is a piece of computer equipment that allows individuals to solve mathematical equations that are used to confirm Bitcoin transactions. In 2013 there were still many people mining Bitcoin at home with a simple setup like the miner given to Wired.
The point of giving Wired a Bitcoin miner was to obtain a positive review, of course. A mention in Wired could mean lots of sales for a company like Butterfly Labs. The team at the magazine decided to get involved with the miner and learn as much as they could. When all was said and done the team managed to mine 13 Bitcoins.
At the time this was a significant amount of Bitcoin but in 2019 it is a small fortune. 13 Bitcoin would be worth about $130,000. The editors at Wired soon realized they had a big problem on their hands. What were they going to do with the Bitcoin they had mined?
Spending it or keeping it was not an option. The editors determined that holding on to the Bitcoin would affect how the magazine covered cryptocurrency in the future. A disclaimer would have to be added to every article stating that the magazine held a sizable amount of Bitcoin. The team did not want to restricted in such a way, so they decided to get rid of it.
Giving the Bitcoin away to charity was considered. This idea was shot down because the magazine would still receive a benefit from it in the form of tax deductions and publicity. Other solutions were also disregarded. The only acceptable course of action for Wired magazine was to destroy the private key of the wallet where the 13 Bitcoins were stored.
The key was ripped to pieces, Wired published a story about the whole affair, and 13 Bitcoins vanished into thin air never to be seen again.
How Bitcoin is Lost
The story of Wired and its lost Bitcoin is interesting. The magazine purposely lost their Bitcoin. It is far more common for Bitcoin to be lost on accident or through negligence. The simplest way for it to happen is for an individual to lose the private key to their Bitcoin wallet.
A private key for a Bitcoin wallet is 64 digits long. That means it is very unlikely that someone would commit it to memory. Most people will write it down somewhere, but there are some who won’t even do that. They just take it for granted that they will always have access to the key.
There are many people who read about Bitcoin or see it talked about on television. They become interested and create a wallet. They buy a small amount of Bitcoin and put it in the wallet. In a few months they lose interest in both Bitcoin and the wallet. Many of them never give it a second thought.
The reason for this could be that people have difficulty processing that Bitcoin has real value. They don’t see it as an actual asset with worth because they cannot hold it in their hands like cash. This causes them to be less diligent about keeping track of it. Because a large number of people only invest a minimal amount, they could care less when it vanishes.
Then there are the people who try to earn Bitcoin through faucets or other scams that promise Bitcoin in return for playing games or watching videos. No one ever earns a significant amount of Bitcoin in this way. After a few months of no real return the individual moves on from the faucet and loses interest. They may have obtained a very small amount of Bitcoin and had it transferred to a wallet. Just like that the Bitcoin is gone.
One man in London lost 7,500 Bitcoin when his laptop computer was thrown away. Today that Bitcoin would be worth about $75 million. Even very famous people are not immune to losing Bitcoin. Elon Musk has reportedly confessed that he also forgot how to access his crypto wallet.
Exactly How Much Bitcoin Has Been Lost?
There is a firm called Chainalysis that specializes in analyzing activity in cryptocurrency markets. The firm estimates the total loss of Bitcoin to be between 2.78 and 3.79 million. That equates to between 17 and 23 percent of all the Bitcoins that have been mined. The actual number of lost Bitcoin could be closer to 4 million.
The founder of Bitcoin, the anonymous Satoshi Nakamoto, is believed to have not touched his own stash of Bitcoin since around 2011. It is estimated that Satoshi possesses 1 million coins. That would make the value more than $10 Billion at the current market price. What kind of person or persons would not take the ultimate measures to protect such a fortune. Chainalysis believes that Nakamoto’s tokens are a part of the millions of Bitcoin that have been lost forever.
Over time the number of lost Bitcoin is expected to drop as individuals take greater care in the protection of their cryptocurrency. People are becoming more diligent in keeping track of their private keys given the potential for Bitcoin to keep rising in value.
Can the Lost Bitcoin Be Found?
Perhaps there is a digital Indiana Jones out there who is currently searching for the lost Bitcoin. Those who understand cryptocurrency would say this is a fool’s errand. Most would say that it is over the moment a private key to a Bitcoin wallet is lost.
Nevertheless, some people like the man in London are taking extreme measures to find their lost Bitcoin. He has vowed to search through five years of trash to find his missing laptop, a computer that with most certainty is not even capable of booting up by now.