Proposed solution to "lost coins"

[deathcode]

If you think this is a good idea (it isn't) why not just use Freicoin?

I don't think that it's a good idea, just an idea. Lots of people think it's a bad idea but won't explain why exactly.

Thanks for pointing me to the altcoin that has implemented this so I can take a closer look.

I think they've done a good job explaining that what you are proposing is outright theft. Since the beginning we have told people, as long as you hold the private keys your bitcoins are safe. Your proposal would make that a lie. When I dropped out of the bitcoin community in 2010, I still had some bitcoins left in my wallet. I expected that when/if I returned, my coins would be there. When I came back, they were there, if they were gone I would assume they had been stolen.

Telling people something is their property and then taking it away later, is theft.

On top of that. Changing a fundamental part of the design of the bitcoin is something that will not going to have the consensus of the people. No matter what the bitcoin developers want to do. If they re design bitcoin to implement your idea then expect bitcoin to plummet.
Your idea is basically like trying to change the amount of bitcoins that will ever be created. Imagine if the bitcoin developers decide to change that number to 42 million, suddenly the rules of the game are changed. Like another person said. It's a bait and switch scenario.
Changes like adding decimal places are non disruptive, your proposed change is a significant change in the architecture and in the way bitcoin works and its stored.
Banks in the bitcoin world are basically online wallets.

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[nikkisnowe]

Why would you think that recovering lost coins is necessary?  A number of posts have explained why this is a bad idea.  I was wondering why anyone thinks it's necessary.

[JoelKatz]

Why would you think that recovering lost coins is necessary?  A number of posts have explained why this is a bad idea.  I was wondering why anyone thinks it's necessary.

There are usually two reasons people advocate recovering lost coins:

First, it makes the currency supply more predictable. Otherwise, the number of "lost coins" is unknown. The price of the currency might reflect the thinking that a million coins are lost and then one day they come into circulation, causing a price drop. The risk of this happening has to be hedged by every risk-sensitive user of the currency, imposing costs and inefficiency.

Second, it maintains the mining reward. When the block reward drops to zero, there is no incentive to mine a block right after someone else has mined one. All the good transaction fees will be taken. The ability for miners to claim a small amount from a pool of lost coins would maintain a more stable and predictable mining reward helping to ensure there is sufficient mining to secure the currency without sharp changes in hash rate that could cause excessive variation in the time between blocks.

[Tehfiend]

Since the beginning we have told people, as long as you hold the private keys your bitcoins are safe. Your proposal would make that a lie.

I disagree, that statement would still be true. If you hold the private keys, your bitcoins would still be safe as long as you touched them every X # of years. Think about a miner who hasn't been paying attention to the recent changes to the protocol and uses an old client past May 15th. Would he feel lied too when a block he mines does not actually generate BTC like "he's been told"? Most would not agree and say it's the miners responsibility to stay informed of these changes which the devs have given ample notice of. Obviously X wouldn't be 1 year causing you to lose the coins in your example. Say X is 20, 50, or 100 years? If an address has not been touched in 100 years I think it would be safe to say they are no longer "possessed" by anybody and therefore would not be "stolen".

On top of that. Changing a fundamental part of the design of the bitcoin is something that will not going to have the consensus of the people. No matter what the bitcoin developers want to do. If they re design bitcoin to implement your idea then expect bitcoin to plummet.
Your idea is basically like trying to change the amount of bitcoins that will ever be created. Imagine if the bitcoin developers decide to change that number to 42 million, suddenly the rules of the game are changed. Like another person said. It's a bait and switch scenario.
Changes like adding decimal places are non disruptive, your proposed change is a significant change in the architecture and in the way bitcoin works and its stored.
Banks in the bitcoin world are basically online wallets.

The consensus is not needed from "the people" but only from a majority of the miners. I can imagine miners having a lot of incentive to form a consensus in 100 years to unlock lost coins which will generate more profit for them without breaking the 21 million limitation. Any changes like this would be done with great caution and after a lot of study and discussion (which is why I'm here!).

I think we must have a different definition of what a bank is. If I put some cash into a safe in my closet, that does not make my closet a bank. Banks can provide valuable services that will always be needed despite the problems many are causing today. A bank does not have to be the type of centralized government controlled bank that creates fiat money out of thin air. If your 100 year old grandma has your inheritance stored in BTC, would you trust her to keep her wallet backed up properly? She might find a bank useful to secure her BTC which could be insured. What if you wanted to borrow or lend BTC? Again, what about buyer protection? Vendors might want instant confirmation like credit cards currently offer. Merchants will also want to outsource security. Banks will be forced to evolve along side BTC providing these useful services while shedding the problems that centralized government controlled banks are currently experiencing.

/$0.02

[Tehfiend]

Why would you think that recovering lost coins is necessary?  A number of posts have explained why this is a bad idea.  I was wondering why anyone thinks it's necessary.

I posted my reasoning earlier in this thread:

I'm not worried per say but I do think there could be a supply problem way down the road. For example right now there are around 1.18 trillion USD in circulation world wide. That is 118 trillion pennies. There is a maximum of 2,100 trillion satoshies. That's less than 1800% of current pennies. USD circulation has increased by around 170% in the last decade. That means it is possible in 100+ years we will not have enough satoshies to go around.

I believe BTC will continue to be lost over the years and could increase the speed at which the supply of coins is no longer adequate. Remember I'm talking LOOOOONG term.

[e4xit]

Tehfiend, you seem to have overlooked that bitcoins are infinitely divisible...

If the day comes when 1 Satoshi is a couple of pennies (/cents) the protocol can be modified to increase the number of decimal places, and suddenly, picobits (naming committee-dependent) are formed, each worth $100!!!

Basically, stealing people's money, no matter how long it has been sitting in their account untouched/unmoved is theft, as others have pointed out. This must be distinguished from coins being lost.

Coins that are lost, simply contribute to the deflationary nature of bitcoin, which happens to be one of the most popular aspects of using the coin for both currency (increasing purchasing power over time) and for savings (high potential to make money if converting back to other, inflationary, fiat currencies).

As has been mentioned, this has been discussed so many times it's unreal, please use google search/forum seach to find other dicussions and read them first next time...

Here is one (yes it's a sarcastic google searcher for you hyperlink skeptics)
http://lmgtfy.com/?q=bitcoins+lost+coins

[farlack]

How do you differentiate between a stale address and someone saving the coins for a long time?
Sorry, but it's a terrible idea. If someone was stupid enough to lose his/her coins he/she didn't deserve them in the first place.
there's absolutely no excuse to lose coins having google drive, skydrive, box, dropbox, mega, private cloud, external disks, $4 flash drives, paper wallet, etc, etc, etc, etc....

Wrong me, like most people I'm sure when they first started bitcoins when they were less than $15, bitcoins was a joke, mere speculation. Everyone has lost coins.. Now valued at hundreds of dollars that no one gave two shits about because it was only $15 and you had a lesson learned.

[TalkingAntColony]

Bitcoins are infinitely divisible. Just update protocol to store value in a 128 bit integer instead of the current 64 bit integer. That would satisfy the decimal place need for a loooong time. When you bring back lost coins, you dilute the aggregate value of everyone's bitcoins, similar to what happens when the Fed prints USD.

Simple thought experiment:

4 people each hold 1 BTC. One is a miner. This is all that is thought to be remaining (no none has seen any other BTC move for many years).
BTC price is $10/BTC.
Let's say you "recycle" 1 BTC. This value goes to the miner.
Now, there is 5 BTC total, which, until the price changes, means a market cap of $50 (was $40).
Because the supply has increased without an increase in demand, the price will drop. When the market corrects itself, the price would ideally drop to $8/BTC, to get back to the $40 market cap.
Effectively, the three non-miners lost 20% of their stored value, while the value the miner holds went up 60%.
If you distribute the lost coins equally among the participants, everyone's value (share of the market cap) remains equal, but then this is no different from moving the decimal place (aka a useless action).

We could lose all but 1 satoshi, and with 128 bit integers still have something like 20 more decimal places to use.

[CasinoBit]

CommuCoin, you buy any amount of this cryptocurrency and then it is distributed evenly between the network according to everyones need.

[opticbit]

the way to recover lost coins is called...

vanitygen.

it only takes a few thousand years, or 10minutes if you happen to be lucky with extremely large values of 2.

[b¡tco¡n]

My objections:

1. Lost coins cause no problem for bitcoin as a whole, so why fix something that ain't broken?

2. Redistributing the coins uniformly has no real effect if you think about it. Redistributing the coins non-uniformly (e.g. only to miners) would be unfair.

3. Yes it is theft.

4. No one really owns land. Check your history books.

[Thursday]

horrible idea

[b¡tco¡n]

the way to recover lost coins is called...

vanitygen.

it only takes a few thousand years, or 10minutes if you happen to be lucky with extremely large values of 2.

It would take a unimaginable mathematical or technological breakthrough, or the life of this universe, and then some.

[LeTanque]

the way to recover lost coins is called...

vanitygen.

it only takes a few thousand years, or 10minutes if you happen to be lucky with extremely large values of 2.

It would take a unimaginable mathematical or technological breakthrough, or the life of this universe, and then some.

Or like, you know, quantum computing.

[robamichael]

Unless you are worried that eventually the smallest value (1 Satoshi which is 0.00000001 BTC) will be to large for the economy, then old coins are effectively already recycled.  If 5% of coins are taken out of circulation, then it increases the value of the rest.

Even in that situation, there probably would be some update to the spec to allow even smaller values.  Ofc, that might cause similar discussions as the max block size ones.

Why this quote has gone unnoticed so far is beyond me - this is exactly the nail in the coffin to the "recycling" proposal.

If you recycled all the frozen coins to all the new addresses, you would effectively be decreasing the purchasing power of each unit of bitcoin by an amount equal to the percentage of bitcoins being "recycled" (stolen) compared against the entire bitcoin money supply.

"Recycle" (steal) or not, and the result is the same. Of course, if the coins were mistakenly taken from a participating, yet dormant user, you have done great harm to that user's personal stake.

And even if we assume absolutely zero mistakes with sources of the "recycled" coins, the distribution of said coins would be an entirely different reason for debate. Which is the fairest method of redistribution? If you send everybody a nominal amount, some users' wealth will grow disproportionately to others.

A nominal distribution would be equivalent to taxing savers and empowering consumers, a skewed market.

Nominal Redistribution = skewed market
Proportional Redistribution = no effect on purchasing power
Redistribution of any kind = chance of unintended theft

Lastly, I move to start updating the Wiki with these common types of arguments.

[Tehfiend]

If you recycled all the frozen coins to all the new addresses, you would effectively be decreasing the purchasing power of each unit of bitcoin by an amount equal to the percentage of bitcoins being "recycled" (stolen) compared against the entire bitcoin money supply.

While I do agree there is no need to recycle, I don't understand this argument. First, I wasn't proposing recycling stale coins to all new addresses which is really not even possible. I was proposing to reward them to miners just like all BTC are initially distributed but that's beside the point. Second, the "purchasing power" would already be increased when the coins were "lost" so by recycling them you would simply be restoring them the the value initially intended by Satoshi's design. That's where this thought originally came from. I assumed it was designed with a 21 million limit for a reason and thought the unpredictable amount of lost coins would undermine the intention behind that design. Upon deeper thought, it's obvious Satoshi would have thought of this and was obviously not concerned since he would have also come up with this not-so-clever idea which is why I no longer feel this is necessary.

[JoelKatz]

Why this quote has gone unnoticed so far is beyond me - this is exactly the nail in the coffin to the "recycling" proposal.

If you recycled all the frozen coins to all the new addresses, you would effectively be decreasing the purchasing power of each unit of bitcoin by an amount equal to the percentage of bitcoins being "recycled" (stolen) compared against the entire bitcoin money supply.

"Recycle" (steal) or not, and the result is the same. Of course, if the coins were mistakenly taken from a participating, yet dormant user, you have done great harm to that user's personal stake.

The issue is that if you don't recycle coins, the supply of currency is much less predictable. "Zombie coins" that haven't been in circulation for fifty years may be lost or they may be spent at any time. This creates currency risk that people have to hedge against. Hedging has costs.

If you recycle coins, everyone knows hat those coins are back in circulation. There is no uncertainty that accumulates about more and more coins over time. In fact, if the value of the coins goes up, the amount of uncertainty will likely decrease. I'm sure a lot more people discarded wallets with 10,000 bitcoins in them in the early days than do so today. If you assume Bitcoins continue to gain value over the long term, those possibly lost early coins represent more and more currency value that may or may not be in circulation.

A recycling scheme would mean at some point that risk would be removed.

[gmaxwell]

A recycling scheme would mean at some point that risk would be removed.

You don't have to recycle for that, you can just take them out of circulation with certainty. This avoids the economic distortion of transferring wealth to whomever your recycling gives the coins to...  so don't conflate recycling with being sure what the supply is, they're separate issues.

[robamichael]

I'm sure a lot more people discarded wallets with 10,000 bitcoins in them in the early days than do so today. If you assume Bitcoins continue to gain value over the long term, those possibly lost early coins represent more and more currency value that may or may not be in circulation.

Of course. But as bitcoins rise in value, so will the incentive to unlock these sleeping coins increase.

If the Bitcoin experiment succeeds, there will come a time for price stabilization after there is adoption. Since our hypothetical is that dormant users at some point decide to access their coins, aside from the increasingly unlikely instances of long forgotten and now remembered passwords, some cause must act as a trigger for bitcoiners to re-access their coins.

The most likely trigger to awaken the dormant users will be the price. I suspect that as the adoption of bitcoin plays out, the bull market of bitcoin will begin to wane. On its way up, more and more past users will reenter the market, and there will be less sleeping coins to worry about.

Stabilization will only occur after adoption, and because adoption is necessarily linked to awareness, the decreasing risk of zombie coins will be one factor contributing to a less volatile Bitcoin.

Hedging has costs.

The amount of hedging necessary post-adoption would be very small.

[CIYAM]

For a "solution" there would need to be a "problem" - yet as you are seeing from most replies few here actually see this as a problem (if some bitcoins get destroyed and the remainder are worth a bit more then most holders would in fact be happier and if transactions end up being generally in mBTC then just switch your client to display them as such).

As has been pointed out there already exists at least one alt-coin that perhaps does what you want and you are of course free to create your own - but trying to get such a fundamental rule changed in Bitcoin is simply not going to be accepted (and as also pointed out there is generally a new thread with the same sort of idea that appears every few months).