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Bitcoin has a supply of 21 million, but about 3 - 4 million of those Bitcoins have been lost for various reasons.
When is a Bitcoin considered “lost”?
According to River Financial, to use Bitcoin, we must have a private key to prove ownership. When we lose this key, we have no way to prove that we are the owner of the Bitcoin in our wallet, which means that no one can use that Bitcoin anymore.
How many Bitcoins are lost?
It is impossible to determine exactly how many Bitcoins have been lost. In the early years, many people did not realize the future value of this cryptocurrency, so they accidentally lost the hardware containing Bitcoins, forgot their private keys, or gave away their Bitcoins... Many reports estimate that about 3 - 4 million Bitcoins have been lost, while the current Bitcoin supply is only about 21 million Bitcoins, so only about 17 - 18 million Bitcoins can be circulated in the market.
How Bitcoins Were Lost?
In theory, the Bitcoin blockchain is an extremely secure and immutable digital ledger, and erroneous transactions are rare. Cases of Bitcoin loss are mostly due to human error.
On the other hand, there are millions of Bitcoins that have been sitting in their owners' wallets for a long time, not knowing when they will be released into circulation again. However, this does not mean that those Bitcoins have been lost. A typical example is the case of the "father" Satoshi Nakamoto. The creator of Bitcoin is holding a large amount of cryptocurrency and has not made any transactions, completely removing that amount from circulation. With Satoshi holding more than 1 million Bitcoins, the total supply of this cryptocurrency does not actually reach 21 million Bitcoins.
When there is a large amount of Bitcoin that remains unchanged for a long period of time, the market will consider that Bitcoin has been removed from circulation and adjust the price based on the lower supply.
Cases of Bitcoin loss
User error
Bitcoin is an asset that allows the owner to keep it safe without having to hand it over to a third party. However, keeping the asset safe means that users have little chance of getting their money back if something goes wrong. Many people keep their Bitcoin wallets on personal hard drives or external storage devices, then accidentally throw away or destroy the device. A man named James Howells was once famous for... accidentally throwing away a hard drive containing Bitcoin worth nearly $300 million, based on current market prices.
Third-party security risks
Fearing the loss of private keys, many people choose to deposit cryptocurrency, entrusting their money to experienced and specialized depository organizations. However, these organizations are also easy targets for hackers, as evidenced by many cases of hackers deliberately targeting cryptocurrency exchanges to steal private keys of many users.
Error in transaction
Bitcoin transactions cannot be changed once they are added to the blockchain. Therefore, if you accidentally send Bitcoin to the wrong address, you risk losing those Bitcoins. The only way to recover them is for the other party to refund you.
However, this case is extremely rare, so many e-wallets have the ability to automatically check if the address is valid before we press send Bitcoin. To avoid losing Bitcoin, we should verify the other party's address before making a transaction.
