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Author Topic: Does lack of coin recovery mean bitcoins fate is sealed?  (Read 6814 times)
dirtdevil
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June 11, 2011, 10:01:21 PM
 #1

Since my digital wallet is the record keeper for my bit coins and it's stored on my hard drive, if my hard drive dies or I forget my password, then my bitcoins are essentially...destroyed. Since the total bitcoins that will ever be made are 21M (to prevent inflation), wouldn't that mean that over time, the bitcoin economy will get smaller and smaller and pretty soon there won't be any more bit coins? Keep in mind I do understand that as bit coins are destroyed, the remaining bit coins will just go up in value and bit coins are divisible by 8 decimal places so you can slice a bitcoin up to be pretty small. But it is an issue.

Thats the only (and I do mean ONLY) upside to paper money because as physical dollars are destroyed over the years due to wear and tare and accidents, the goverment can print more to replace them. If we had a gold backed currently, then we would just mine more gold to replace the gold/dollars that are no longer in circulation. Granted, thats not how the goverments been using the printing press for the last 70 years but it does bring up a good point. If you can't re-create something that can't be re-created, how do you ensure it's survival?
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imperi
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June 11, 2011, 10:02:29 PM
 #2

What happens if a Spanish galleon full of gold sinks in transit in a storm? Is it the end of gold??
imperi
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June 11, 2011, 10:11:14 PM
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What happens if a Spanish galleon full of gold sinks in transit in a storm? Is it the end of gold??
http://en.wikipedia.org/wiki/Submarine

Gold didn't crash in the centuries before they had this sophisticated technology.
dirtdevil
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June 11, 2011, 10:14:45 PM
 #4

No but it's the end of that gold which would make the value of the remaining gold go up. But what if there where only 21M ounces of gold and another 3 ounce Spanish galleon sinks and then another and another. Over the years the price of the remaining gold will go through the roof until the last 3 ounces of gold sinks.

Thats what I mean. With gold and silver it's been mined for thousands of years and new deposits are still being discovered. But no matter how much of it you mind, you can never destroy gold by forgetting your password or crashing your hard drive. I guess my concern is the durability of bitcoins. Keep in mind, I 100% support bitcoins and I'm building a few sites that will take bitcoin donations, I'm just curious about this one aspect of them.

Here's an idea, is it possible to regenerate those coins that have died off based on the "public ledger"? Since the community can see the transactions in real time, and the bitcoin system is designed for 21M coins, couldn't the system figure out if coins have been destroyed (lack of transaction activity or missing private key) and re-gen them back into blocks for miners to possibly get? Just an idea.
ironwolf
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June 11, 2011, 10:17:43 PM
 #5

It's impossible to tell by looking at the block chain which coins have existent private keys, and which private keys have been destroyed or lost. So, no, there is no way to recover truly lost coins. On the plus side, you can't back up gold, and you can back up Bitcoins.
tymothy
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June 11, 2011, 10:22:48 PM
 #6

Since my digital wallet is the record keeper for my bit coins and it's stored on my hard drive, if my hard drive dies or I forget my password, then my bitcoins are essentially...destroyed. Since the total bitcoins that will ever be made are 21M (to prevent inflation), wouldn't that mean that over time, the bitcoin economy will get smaller and smaller and pretty soon there won't be any more bit coins? Keep in mind I do understand that as bit coins are destroyed, the remaining bit coins will just go up in value and bit coins are divisible by 8 decimal places so you can slice a bitcoin up to be pretty small. But it is an issue.

Thats the only (and I do mean ONLY) upside to paper money because as physical dollars are destroyed over the years due to wear and tare and accidents, the goverment can print more to replace them. If we had a gold backed currently, then we would just mine more gold to replace the gold/dollars that are no longer in circulation. Granted, thats not how the goverments been using the printing press for the last 70 years but it does bring up a good point. If you can't re-create something that can't be re-created, how do you ensure it's survival?

As far as I understand, the system can be updated to allow more than 8 decimal places. As long as multiple people have bitcoins and the earth is not destroyed, bitcoins will almost certainly continue to exist. Maybe a billion years from now only a millibit will exist, but this would still allow for an economy.
ron
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June 11, 2011, 10:25:55 PM
 #7

Bitcoin was 8 dollars 2 weeks ago. People really need to chill out. Everyone bugging is adding to the problem. Do you want to grow bitcoin as a currency or make a few quick bucks off a bubble?

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AnonymousBat
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June 11, 2011, 10:31:42 PM
 #8

What happens if a Spanish galleon full of gold sinks in transit in a storm? Is it the end of gold??

Gold inflates 2-3% a year. The only difference is that it requires lots of work.
Columbus
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June 11, 2011, 10:33:53 PM
 #9

People have to realize that the number of coins is not the same as the size of the economy. Bitcoins are divisible down to eight decimals (currently, that could be changed in future clients) so as coins are lost, the remaining coins go up in value. The economy still has the same amount of value moving around, it is just with a slightly smaller number of chips.

http://media.giantbomb.com/uploads/8/80155/1378872-1376752_1249214_what_the_fuck_am_i_reading_super_super_super.png
Rob P.
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June 11, 2011, 10:36:15 PM
 #10

Yeah, but gold's limit isn't artificial and it has actual substance.

No, it's natural.  It is still a limited resource and follows the EXACT SAME availability curve as bitcoins.
Lots available and coming into the market at first, then it gets harder and harder to find, and more expensive to find, until it eventually flatlines and only trickles into the market.

There will be a point at which no more gold can be found.  The only difference is that we can predict when this will happen with bitcoins and we cannot predict when it will happen with Gold.

So, if no one knew that there was a limit on the number of bitcoins, would we still be having this conversation?

Oh yea, that limit will not be reached for another 22 years.  Why don't we get there and see where we are, rather than predicting we're not going to make it because someday we'll be there.

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dirtdevil
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June 11, 2011, 10:38:06 PM
 #11

But you can't destroy gold, you can hide it, melt it, make stuff out of it but gold is delete key proof. If some old lady didn't backup her hard drive and looses 5 bitcoins in a crash she's screwed. So lets say bitcoin went super huge and millions of people are accepting it world wide. But every day, some where in the world, an old ladies hard drive crashes, a students hard drive got 1 too many bad sectors, someones computer got hacked and there harddrive was formated and in the process, 100 bitcoins are destroyed every day around the world due to pure stupidity. That would mean every year the bitcoin economy shrinks by 36,600 coins. With no way to "reprint" those coins back into the economy, eventually the remaining bitcoins would get hyper inflated and die due to not enough money to go around.

If there is no way to reprint dead bitcoins then it just can't be done. But is there a smart way around it so stupid people don't hurt the bitcoin economy yet prevent inflation past the 21M? I know there are bitbanks, bitbucks, escrows and insurance (coming soon) but all of those are for smart people, not little old ladies who use the recycle bin to store there important documents.
tymothy
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June 11, 2011, 10:40:38 PM
 #12

There is no problem. If someone loses a fraction of bitcoins, the remaining amount becomes more valuable and business continues. Presumably people will backup their bitcoins if they're so valuable. The currency can be reconfigured if in a billion years all but 0.0000001 bitcoins remain.
Klestin
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June 11, 2011, 10:41:24 PM
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Perhaps a bit of perspective.  Using all the (currently) available decimal places allows for a maximum of 2,100,000,000,000,000 "coins".  If we assume half are lost, we're down to "only" a little over 1 quadrillion.  Should suffice, eh?  I expect that number greatly exceeds the USD value of all paper bills (in every currency) in the world.
dirtdevil
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June 11, 2011, 10:49:05 PM
 #14

How can the number of decimal places change? I thought no one person or group could control bitcoins? If thats the case then whats stopping greedy person or group from hyperinflating bitcoins now? Some greedy programmer changing the 8 decimal places to 80. Does changing the decimal places require some kind of intervention from the mining community or something?
tymothy
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June 11, 2011, 10:51:26 PM
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How can the number of decimal places change? I thought no one person or group could control bitcoins? If thats the case then whats stopping greedy person or group from hyperinflating bitcoins now? Some greedy programmer changing the 8 decimal places to 80. Does changing the decimal places require some kind of intervention from the mining community or something?


...
.01 bitcoins = .0100000000000000000000000000000000000 bitcoins = .0100000000... bitcoins. There's no inflation.
ixne
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June 11, 2011, 10:52:17 PM
 #16

But you can't destroy gold, you can hide it, melt it, make stuff out of it but gold is delete key proof.

That's good news.  Next time I lose a physical commodity I'll just tell the economy that it still exists in some form, albeit inaccessible to me, and that I'm good for it.  The economy will be pleased to hear that.

I guess you can say that bitcoins are "delete key proof" too, in that you could spend a few billion years brute-forcing the private key and recover them. Win!
dirtdevil
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June 11, 2011, 11:01:16 PM
 #17

Ah, ok. It's starting to make sense now. So do bitcoins have to be recognized as legal tendar in order to sue someone over them?
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June 11, 2011, 11:01:36 PM
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But you can't destroy gold, you can hide it, melt it, make stuff out of it but gold is delete key proof. If some old lady didn't backup her hard drive and looses 5 bitcoins in a crash she's screwed. So lets say bitcoin went super huge and millions of people are accepting it world wide. But every day, some where in the world, an old ladies hard drive crashes, a students hard drive got 1 too many bad sectors, someones computer got hacked and there harddrive was formated and in the process, 100 bitcoins are destroyed every day around the world due to pure stupidity. That would mean every year the bitcoin economy shrinks by 36,600 coins. With no way to "reprint" those coins back into the economy, eventually the remaining bitcoins would get hyper inflated and die due to not enough money to go around.

If there is no way to reprint dead bitcoins then it just can't be done. But is there a smart way around it so stupid people don't hurt the bitcoin economy yet prevent inflation past the 21M? I know there are bitbanks, bitbucks, escrows and insurance (coming soon) but all of those are for smart people, not little old ladies who use the recycle bin to store there important documents.

You do realize that using your own math scenario, it would take 287 YEARS to lose half of the total number of bitcoins right? Even taking into account the fact that USD is not a limited resource, do you know how much difference there is between a USD today and 200 years ago? (which is only 2/3 of the time we're talking about). And that is ignoring the idea that we'd be seeing lots of backup/encryption services for peoples wallets (you can infinitely replicate your wallet if you wish) if the service did take off.
dirtdevil
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June 11, 2011, 11:07:40 PM
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Wow, I never thought of it like that. That makes way more sense since it took the bankers 70 years to inflate our currently to 99% of it's original value. A couple old ladies and stupid students would need 4 times that long to deflate bitcoins by 50%. Thanks for clearing that up.
Rob P.
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June 12, 2011, 03:51:08 PM
 #20

But you can't destroy gold, you can hide it, melt it, make stuff out of it but gold is delete key proof.

You can't destroy bitcoins either.  You can only lose them.  Ask the Spanish if they ever lost gold...

If there is no way to reprint dead bitcoins then it just can't be done. But is there a smart way around it so stupid people don't hurt the bitcoin economy yet prevent inflation past the 21M? I know there are bitbanks, bitbucks, escrows and insurance (coming soon) but all of those are for smart people, not little old ladies who use the recycle bin to store there important documents.

You don't need to reprint bitcoins, they still exist, they are simply lost to the person who owned them.  This is no different from gold.  It's also no different from paper currency.  Paper currency wears out, is reprinted, and put back into circulation.  In a perfect world, worn out currency is found at the US Treasury and taken out of circulation, and newly printed money put back out in its place.

However, if you have $1000 in cash and it is all lost in a house fire and there are no pieces left unburned, and you don't have insurance, then you've lost that money and it is removed from the economy.  When the US Treasury prints more money, they don't send it to you to replace the currency you lost in a fire.  Same with bitcoins.  You lose them, they're gone, to you.

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