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Author Topic: Can bitcoins be lost?  (Read 2639 times)
XonX
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June 24, 2011, 10:40:43 PM
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Hi everyone. I have been thinking about BTC a lot lately and I've spotted an interesting problem.

Suppose, we have a not too bright newbie, who has started mining for bitcoin in a pool, had got something about 1-2 BTC and did not back up his wallet.
Now, suppose that something happens with said newbie's computer and his hdd gets damaged beyond repair. This leads to him losing his wallet and the bitcoins, as I understand.
The blame for loss is on the newbie, naturally, but this situation also is a problem for the whole bitcoin-community, because the bitcoins are not only lost for the newbie, but they are lost from the system as well. And as the system is programmed to have no more than 21 million bitcoins ever generated, active use of bitcoins will make situations like the one I described, inevitable and will mean, that the number of bitcoins will slowly decrease over time.
I would like to know, if there are some mistakes in my theory, and if no, is there a way to compensate for the loss of coins?
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plgonzalezrx8
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June 24, 2011, 10:43:15 PM
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OMG!!! I was going to post exactly this right now. Cheesy
Kermee
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June 24, 2011, 10:44:44 PM
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Hi everyone.

Hello!

I would like to know, if there are some mistakes in my theory

You've pretty much nailed it.

and if no, is there a way to compensate for the loss of coins?

In practicality, they're gone. Lost forever along with the private key.

Cheers,
Kermee

x0Jakeyboy0x
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June 24, 2011, 10:45:29 PM
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Perhaps after a 5 year period, all accounts that have not been in use can be wiped and a short mining period can commence.

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June 24, 2011, 10:46:57 PM
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well if you lose your walet.dat and redownload the program on a new pc you would get a new id so yea im guessing you would lose your coins but they might have a failsafe that if a id has not been contacted in a long time the coins get recyed back into the system im not sure.

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XonX
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June 24, 2011, 10:53:17 PM
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Perhaps after a 5 year period, all accounts that have not been in use can be wiped and a short mining period can commence.
Seems like a reasonable way, but is there actually a way to check this?
chungy
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June 24, 2011, 11:01:58 PM
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When they're lost (deleted wallet.dat for instance), they're gone forever.  No, the coins are not "recycled" back or anything (which would be EXTREMELY bad for users that just keep a wallet around, inactive, for many years).  The total pool of bitcoins is decreased and the ones that are still around gain value (deflation).  This is completely by design in the system.
DDreez
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June 24, 2011, 11:04:50 PM
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Yup, they're simply lost forever. Can't really see how you could ever determine which coins are lost and which ones are stored in a "treasure chest wallet", even after years and years of noone touching them. So the maximum 21 million number is really theoretical and the number of Bitcoins in actual use will start declining eventually I guess.
XonX
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June 24, 2011, 11:21:41 PM
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Ok, so I guess, bitcoin has a limited lifespan even in the best-case scenario. After the 21 mil will be generated, it will be only a matter of time, before bitcoins will become too rare to be practical. It could take decades, but it's inevitable.
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June 24, 2011, 11:31:16 PM
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As long as the software is updated to add more zeros after the decimal, there's a good chance bitcoins can surivice just fine on a fraction of a BTC. In any case there is a long way to go before that happens. Anyway, the chances that it will be a problem are probably about the same as running out of coins and dollar bills, if it happens there are bigger problems to deal with.

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myrkul
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June 24, 2011, 11:41:31 PM
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The practical answer is that yes, the bitcoins are lost.

But they're not, not really. There is the miniscule chance that some time before the heat death of the universe, a collision would be generated, and someone makes the same private key. This would result in those bitcoins popping up in their wallet. Think of it as the digital equivalent of finding a $5.00 bill in your pocket when pulling your jacket out of summer storage, except that in the meantime, it's turned into a $100.

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June 24, 2011, 11:41:42 PM
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Ok, so I guess, bitcoin has a limited lifespan even in the best-case scenario. After the 21 mil will be generated, it will be only a matter of time, before bitcoins will become too rare to be practical. It could take decades, but it's inevitable.
It's inevitable, but it won't take decades, it will take millennia.

First, as bitcoins become more valuable, people will transact and hold smaller quantities of them. So the average loss will be of many fewer bitcoins.

Second, as bitcoins become more valuable, people will take more care in guarding them. It's quite probable that future computer technologies will make these kinds of losses nearly impossible. Hard drives are already being replaced by more reliable storage means, and as costs go down, redundancy and history will be routine.

Third, bitcoins are very divisible. Even if a bitcoin is worth a million dollars, people can still exchange one hundred millionth of a bitcoin. And extending the protocol to support even smaller fractions would be possible if it actually became necessary.

There are proposals for bitcoin-like schemes where lost coins can be recovered by miners. However, with the present scheme and hash chain, it is not going to happen.

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anon112
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June 24, 2011, 11:43:17 PM
 #13

think i better back up my wallet.dat before this happens. Whats the drill just like whack it on a truecrypt drive?

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myrkul
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June 24, 2011, 11:47:12 PM
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think i better back up my wallet.dat before this happens. Whats the drill just like whack it on a truecrypt drive?

Truecrypt + Dropbox (or other cloud duplication service) is the best bet.

edit: Oh! and back up after every send. recv is not necessary, but couldn't hurt.

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June 25, 2011, 12:07:34 AM
 #15

The practical answer is that yes, the bitcoins are lost.

But they're not, not really. There is the miniscule chance that some time before the heat death of the universe, a collision would be generated, and someone makes the same private key. This would result in those bitcoins popping up in their wallet. Think of it as the digital equivalent of finding a $5.00 bill in your pocket when pulling your jacket out of summer storage, except that in the meantime, it's turned into a $100.

That happened to me once. Plus, what is that story about fishes and loaves?

deepceleron
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June 25, 2011, 12:37:38 AM
 #16

Hi everyone. I have been thinking about BTC a lot lately and I've spotted an interesting problem.

Suppose, we have a not too bright newbie, who has started mining for bitcoin in a pool, had got something about 1-2 BTC and did not back up his wallet.

With a pool like bitcoins.lc, the coins stay in your user account until you press withdraw. If you lose your wallet, you can't send coins you had in there any more, effectively losing all your money, but the coins you've been mining in the pool are still there.

Solution: after you create a new wallet and bitcoin has gotten all the blocks in the block chain, shut down bitcoin, and make a copy of your wallet.dat. Encrypt it (easy: 7-zip it with a long password) and put it on removable storage. See: https://en.bitcoin.it/wiki/Securing_your_wallet

bitprotection
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June 25, 2011, 12:54:27 AM
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This is why I recommend http://bitprotection.info Smiley always good to back up your wallet.

Working on protecting the community!
ascent
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June 25, 2011, 01:42:54 AM
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This problem is being analyzed in depth in another thread right now. There seems to be some contention among the users here as to the ultimate ramifications of this. I contend that increasing uncertainty will creep into the Bitcoin market as result of Bitcoin loss over time, ultimately rendering the entire system to be not as robust as it could've been. This may take some significant portion of eternity, but I think it's an indisputable fact.

Please read the thread, and contribute, if you will. Pay attention to the discussion further into the thread about ratios and increasing uncertainty. And please, don't bring up the fact that Bitcoins are nearly infinitely divisible. That's not relevant to the discussion. Here's the thread: http://forum.bitcoin.org/index.php?topic=20799.0

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jollyjim
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June 25, 2011, 02:00:52 AM
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The Bitcoin currency was designed to be deflationary.  Most other fiat currencies are inflationary.  What that means is with Bitcoins, the longer you save, the more valuable it would become, so long as the currency succeeds and people trust it.  With most other currencies that aren't backed by anything but trust, they can print as much money out of thin air as they want, so long as trust is maintained.  However, saving money with these inflationary currencies means you'll lose money the longer you save.  Right now many worldwide fiats are becoming more fragile and trust is gradually being lost as countries try to print more money to bail out the rich people, allowing them to maintain their wealth with the newly printed money while everyone else gets devalued money in return.  The disparity between rich and not rich has widened at a greatly accelerated rate since the economic collapse.
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June 25, 2011, 02:06:58 AM
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The Bitcoin currency was designed to be deflationary.  Most other fiat currencies are inflationary.  What that means is with Bitcoins, the longer you save, the more valuable it would become, so long as the currency succeeds and people trust it.  With most other currencies that aren't backed by anything but trust, they can print as much money out of thin air as they want, so long as trust is maintained.  However, saving money with these inflationary currencies means you'll lose money the longer you save.  Right now many worldwide fiats are becoming more fragile and trust is gradually being lost as countries try to print more money to bail out the rich people, allowing them to maintain their wealth with the newly printed money while everyone else gets devalued money in return.  The disparity between rich and not rich has widened at a greatly accelerated rate since the economic collapse.
jollyjim,
Could someone dump 6 billion Bitcoins on the market right now? You and I both know the answer to that.

In the far future, when for many years, it appears that only 1,000 Bitcoins are in circulation, the rest presumed lost, could someone dump a million Bitcoins on the market?

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