What Happens To Lost Bitcoins?

[MixtapeMan]

Hi all.  Awesome forum and i am just getting into bitcoins.  Quick newbie question?

What happens to the bitcoins that are completely lost?

Lets say i have an instawallet and I forget the URL.  Are those Bitcoins gone from the pool forever?

Thanks for all the help and I will probably lots more questions like this.

[MixtapeMan]

little digging and I found my answer on the Wiki!

"Won't loss of wallets and the finite amount of Bitcoins create excessive deflation, destroying Bitcoin?
Worries about Bitcoin being destroyed by deflation are not entirely unfounded. Unlike most currencies, which experience inflation as their founding institutions create more and more units, Bitcoin will likely experience gradual deflation with the passage of time. Bitcoin is unique in that only a small amount of units will ever be produced (twenty-one million to be exact), this number has been known since the project's inception, and the units are created at a predicable rate.
Also, Bitcoin users are faced with a danger that doesn't threaten users of any other currency: if a Bitcoin user loses his wallet, his money is gone forever, unless he finds it again. And not just to him; it's gone completely out of circulation, rendered utterly inaccessible to anyone. As people will lose their wallets, the total number of Bitcoins will slowly decrease.
Therefore, Bitcoin seems to be faced with a unique problem. Whereas most currencies inflate over time, Bitcoin will mostly likely do the just the opposite. Time will see the irretrievable loss of an ever-increasing number of Bitcoins. An already small number will be permanently whittled down further and further. And as there become fewer and fewer Bitcoins, the laws of supply and demand suggest that their value will probably continually rise.
Thus Bitcoin is bound to once again stray into mysterious territory, because no one exactly knows what happens to a currency that grows continually more valuable. Economists generally agree that a low level of inflation is a good thing for a currency, but nobody is quite sure about what might happens to one that continually deflates. Although deflation could hardly be called a rare phenomenon, steady, constant deflation is unheard of. There may be a lot of speculation, no one has any hard data to back up their claims.
That being said, there is a mechanism in place to combat the obvious consequences. Extreme deflation would render most currencies highly impractical: if a single Canadian dollar could suddenly buy the holder a car, how would one go about buying bread or candy? Even pennies would fetch more than a person could carry. Bitcoin, however, offers a simple and stylish solution: infinite divisibility. Bitcoins can be divided up and trade into as small of pieces as one wants, so no matter how valuable Bitcoins become, one can trade them in practical quantities.
In fact, infinite divisibility should allow Bitcoins to function in cases of extreme wallet loss. Even if, in the far future, so many people have lost their wallets that only a single Bitcoin, or a fraction of one, remains, Bitcoin should continue to function just fine. No one can claim to be sure what is going to happen, but deflation may prove to present a smaller threat than many expect."

Awesome community and tons of good info so far.  Now off to study the implications of divisibility

[Kazimir]

Now off to study the implications of divisibility

Consider this: (quote comes from another thread, where somebody was worried that the limit of 21 million bitcoins that can ever exist, would be insufficient)

forget the "21 million". This number is completely arbitrary, it doesn't matter! Current bitcoin clients support up to 8 decimals, and this can be increased further whenever the need arises.

Would the total amount of gold available in the world ever become insufficient? No! Cause if there aren't enough kilograms, people would deal with grams, or milligrams, etc.
And unlike gold, which can only be divided up to individual atoms (which would be impossible to handle in practice), bitcoins can be divided with unlimited precision, and paying 2 nanoBTC is exactly as convenient as paying 2 BTC)

So, forget the 21 million limit. There might have been just as well 800 trillion coins, or just 5. By definition, there is an infinite amount of units available.

[TheDom]

To infinity and beyond! 2 posts to go and get out of noob playpen!

[miter_myles]

same here 

[Stephen Gornick]

Lets say i have an instawallet and I forget the URL.  Are those Bitcoins gone from the pool forever?

That's a different case than where you lose your hard drive with wallet.dat and have no backup or something like that.

With a hosted (shared) EWallet, the service still has the funds, just that you never access them.

InstaWallet has said that if they ever were to shut down they would make create brain wallets that used the InstaWallet address for the pass phrase and send the funds for each InstaWallet to its Brain Wallet equivalent.  So that the funds could eventually be spent.

So, if that were to happen, then yes -- those coins would likely never re-enter circulation again.

[Superbest]

Isn't it theoretically possible to crack the hash of existing bitcoins to "recover" (or rather forge) them?

[MixtapeMan]

So Stephen,

What your saying is:

-Set up Instawallet service:

-In 2 years go out of business:

-"enjoy" all bitcoins on outstanding / "lost" wallets that you now control exclusively:

Every time I think there is not another possible angle one comes.  Is there a directory to all possible bitcoin scams/angles?

[Stephen Gornick]

So Stephen,

What your saying is:

-Set up Instawallet service:

-In 2 years go out of business:

-"enjoy" all bitcoins on outstanding / "lost" wallets that you now control exclusively:

Well, thanks to being able to run the Bitcoin client yourself, or use BitAddress.org for instance, you don't need to store your coins with anyone else.

InstaWallet isn't made for long term storage of funds, but some people will use it that way.  And yes, others will have wiped their browser history and not have bookmarked Instawallet and they will never get access to those funds again.

Paymium (operator of Instawallet) offered this as a suggestion as to how they might possibly handle things if they were to close.  They have no terms of service on the site, so going that extra "brain wallet" step for those that don't withdraw is an extra service that they don't even need to do. 

You are asserting that they will simply spend the funds then themselves, and there is no reason to come to that conclusion.

They do state: "Please do not store more than some spare change here.".

As does the other instant wallet operator:

 - http://www.Easywallet.org

[Stephen Gornick]

Isn't it theoretically possible to crack the hash of existing bitcoins to "recover" (or rather forge) them?

I can't remember the exact statement but it was something like:

The odds of that happening are less than the odds that you will die from being struck by lightning after being hit by a meteor which occurred just after you had been bitten by a shark while you stood underneath the curl of an approaching Tsunami -- and all that happening 1,000 times in a row on the same day.

Ya, those kind of odds before you'ld be successful from putting all the computers in the world to work trying come up with the private key that hashes to an existing address, nonetheless one that has any funds on it,

[Ashley]

 
The answer too the question is : "By definition there are an infinite amount of units because of the divisibility
of the bitcoin"{in other words what is today a bitcoin could be in the future a minibitcoin or millibitcoin or whatever
you call it for deflation but if inflation happens than they would just call it a megabitcoin or macrobitcoin
or whatever }
so in this way inflation or deflation of the currency shouldn't hurt it much

And if all the bitcoins in the world are somehow lost, they will just start bitcoin all over again from scratch
with 21 million like the first time

so dont worry about bitcoin too much





Hi everybodie!!! (hehehe)

{[<(Guess wot? Its me again)>]}

[Meni Rosenfeld]

Isn't it theoretically possible to crack the hash of existing bitcoins to "recover" (or rather forge) them?

The odds of that happening are less than the odds that you will die from being struck by lightning after being hit by a meteor which occurred just after you had been bitten by a shark while you stood underneath the curl of an approaching Tsunami -- and all that happening 1,000 times in a row on the same day.

Easy there. There are only 160 bits in an address. I don't know what are the probabilities for these events but let's say lightning is 20 bits, meteor 30, shark 15 and tsunami 20, and that they're all independent - you've already used up 85 bits. Having that happen 1000 times puts you at 85000 bits which is way too much.

[DannyHamilton]

Isn't it theoretically possible to crack the hash of existing bitcoins to "recover" (or rather forge) them?

The odds of that happening are less than the odds that you will die from being struck by lightning after being hit by a meteor which occurred just after you had been bitten by a shark while you stood underneath the curl of an approaching Tsunami -- and all that happening 1,000 times in a row on the same day.

Easy there. There are only 160 bits in an address. I don't know what are the probabilities for these events but let's say lightning is 20 bits, meteor 30, shark 15 and tsunami 20, and that they're all independent - you've already used up 85 bits. Having that happen 1000 times puts you at 85000 bits which is way too much.

Isn't it only 10 more bits to multiply by 1000?

2^10 = 1024

So if the rest of your bit estimates are correct, then it only puts you at 96 bits which isn't nearly enough.

[Meni Rosenfeld]

Isn't it theoretically possible to crack the hash of existing bitcoins to "recover" (or rather forge) them?

The odds of that happening are less than the odds that you will die from being struck by lightning after being hit by a meteor which occurred just after you had been bitten by a shark while you stood underneath the curl of an approaching Tsunami -- and all that happening 1,000 times in a row on the same day.

Easy there. There are only 160 bits in an address. I don't know what are the probabilities for these events but let's say lightning is 20 bits, meteor 30, shark 15 and tsunami 20, and that they're all independent - you've already used up 85 bits. Having that happen 1000 times puts you at 85000 bits which is way too much.

Isn't it only 10 more bits to multiply by 1000?

2^10 = 1024

So if the rest of your bit estimates are correct, then it only puts you at 96 bits which isn't nearly enough.

No.

To conjunct with another event with probability 1/1000, that is multiply the odds against by 1000, is to add 10 bits.

To take the given event and to have it happen 1000 times, you take the odds to the 1000th power, meaning multiplying the number of bits by 1000.

[DasHousewife]

Argh, I have done exactly this. Accidentally transferred coins to a wallet I don't have access too :/

[brettantipop]

Maybe instalwallets business model is to swipe in and grab the unused BTC after "x" amount of time... Just a thought. 

[Monkey1]

Argh, I have done exactly this. Accidentally transferred coins to a wallet I don't have access too :/

Many thanks!

[usafinders]

As does the other instant wallet operator: