What happens to lost bitcoins

[NsxV2rAt5E]

While reading the interesting tale of the guy who mines bitcoins and then destroys them:
https://bitcointalk.org/index.php?topic=26539
,

I figured out what happens to such destroyed bitcoins and all lost bitcoins:

Well, of course the value of the lost bitcoins is distributed to the remaining bitcoins.
That is one more interesting property of bitcoin.  One may lose a bitcoin, but its value is not lost to the community.

Does conventional cash have this property?
If I burn a number of dollar bills, would the value of the remaining dollars in circulation increase?

My guess is that if I burn a dollar bill, the value of that bill goes back to the U.S. government.
This seems more democratic than what happens to a destroyed bitcoin.
With bitcoins, the people who have more bitcoins benefit more from a lost bitcoin.
With dollars, it's the government who benefits, and the government belongs equally to each citizen (theoretically).

Don't advise me to try this out and see what happens.  I'll try it as a thought experiment.
Ok, I secretly burned a trillion dollar bills.  I lost a fortune.  But who wins?

[Shneebly]

Don't advise me to try this out and see what happens.  I'll try it as a thought experiment.
Ok, I secretly burned a trillion dollar bills.  I lost a fortune.  But who wins?

Nobody wins. The federal reserve will print out another trillion by the following morning.

But I think the answer you are looking for is that we all become a little richer as the currency becomes a little bit more rare. However, I am fairly sure that the post you were referring to is a troll.

[Larynth]

More importantly bitcoins are digital ledger entries. you loosing your key doesn't "destroy" the bitcoins it just makes them inaccessible. Eventually I'm sure some solution will be developed to "defrag" the ledger and free up bitcoins in "lost" entries.

[NsxV2rAt5E]

Nobody wins. The federal reserve will print out another trillion by the following morning.

Then the federal reserve wins.  They are not going to hand out the newly printed trillion to the masses for free.  They will use it to buy something (maybe buy back federal debt).

[haderach]

I'm not so sure they'll be able to free up the lost bitcoins. What heuristic can you use to determine it lost and not just being saved? Bitcoin is supposed to be anonymous afterall, so you shouldn't be able to tell that this address belongs to a person who died and will never use those coins.

One thing that will need to happen though is some way for the blockchain to be truncated. It is growing exponentially and it won't be long, a year or so and you'll have to spend $100 or more in storage space to have the chain. Not to mention personal pcs don't particularly like having dbs with that much data in them.

[Larynth]

There is a simple way to identify "lost" addresses, you change the address format then give everyone one year to move their bitcoins to a new address. Those still in old addresses after the year go back into the undistributed potential to be mined.

As to truncation that's simple, old non-valid ledger entries (ones that no longer contain bitcoins) get compressed. I would say we're a long way off from any inability to store the blockchain easily on a personal computer, I would argue most computers can hold it in RAM, hell most Android devices less than 2 years old can handle it on a Micro SD.

[NsxV2rAt5E]

There is a simple way to identify "lost" addresses, you change the address format then give everyone one year to move their bitcoins to a new address. Those still in old addresses after the year go back into the undistributed potential to be mined.

Who makes such centralized decisions?

[sauna]

It's an interesting idee, there are a number of ways that you can model it. Though I dont know if something like that is possible in the design of bitcoins. The pace of bitcoin rewards is pegged at ~10 minutes and the rewards decrease at an expected rate.

[bdamm]

I don't think lost bitcoins CAN be recovered, at all.  Even an address change won't "put them back in the pool".

This is still true even if you had some way to identify the difference between lost bitcoins and stale savings accounts (that could still be activated).

[haderach]

Your simple solution doesn't work like bdamm outlined. The blockchain is a ledger and unless you have the private key of the account you can't initiate the transaction to reclaim those keys. It is a design intent of bitcoin that currency will be lost, just like our real commodities and currencies are never 100% recycled.

[NsxV2rAt5E]

One thing that will need to happen though is some way for the blockchain to be truncated. It is growing exponentially and it won't be long, a year or so and you'll have to spend $100 or more in storage space to have the chain.

That was my next question, but doesn't it deserve a new topic?

[Larynth]

I said identifying them would be the easy part, as to how reclaiming them would be accomplished, if bitcoins hit 1k per I bet you someone will figure out a way. One thing you should bear in mind is that if the people maintaining the code, the blockchain, the mining pools, the major nodes etc all agree tomorrow that the lost bitcoins should be recicled, they will be. All you have to do is fork the blockchain with a new chain on which those entries do not exist and there are fewer bitcoins in circulation. everyone synchs to the new chain and we move on as a community. The real beauty in bitcoin isn't that there isn't anyone at the wheel it's that there is no one person or group of people who can take the wheel and steer it against the interests of the community. If we all agree (or at least the vast majority) that something needs to change it can, and will, that or bitcoin 2.0 will be launched and you will have some way of transfering your existing bitcoins over. The community has found a way to overcome every obstacle to it's progress.

Bottom line is we live in a Global economy, the days of governments being able to tax 60 and 70% of our income are over if bitcoin isn't the vehicle it's certainly the last nail in the coffin. The last guy out of the international banking machine be sure to turn off the lights.

[minerdave]

I think the coins stay lost unless someone finds them. I liken it to a gold-carrying ship sailing from Europe that sinks during the voyage. What happens to the lost gold? It stays lost unless someone finds it.

[AlexanderB]

Sooo, will old bitcoins become extra valuable because they're antique?

[Pam888]

It's lost for the person who lost it!

And it's a win for the person who find it (if possible to find it)!

[Larynth]

They can be found, but every address has two keys (as I understand it) an external key that allows you to see how many bitcoins are in the address but not transfer them, and the internal key needed to make the transfer. So you would need an asic crunching away trying to find the key long enough that you would probably just be better off mining to secure the blockchain.

[kojo23]

Lost wallet.dat are lost forever.
So keep it safe

[Bitcoinista]

Scarcity is what makes something valuable, the more scarce the more valuable.

When a bitcoin is destroyed, bitcoins become a little more scarce, and therefore worth a little more.

In terms of reclaiming 'lost' coins, this would be impossible as far as I know. How would the network differentiate between a lost coin or one that was being stored long term?

[Dehumanizer]

Actually, I was thinking about this yesterday, people tend to lose stuff and the more people will use bitcoins, the more people will be losing their wallets and theoretically at one point it can get to the situation where all bitcoins are mined and all are lost LOL  

[martinm]

Lost Bitcoins was one of many mentioned points of the ChaosComputerClub seminar about Bitcoins, its really worthy to watch and listen to that guys