Lost Bitcoin: What happens to it & where does it go?
‘Lost’ Bitcoin refers to Bitcoin or cryptocurrency that has been misplaced, lost physically or sent to the wrong wallet address. Within the Bitcoin blockchain, there is no way to recover Bitcoin that has been lost or misplaced as immutable Bitcoin ledgers make all transactions final and non-refundable.
What are the common ways Bitcoins gets lost?
When first becoming involved in Bitcoin trading, buying and selling, there are some common ways that an individual can lose their Bitcoin. More often than not, it is human error that results in an individual losing their Bitcoin.
Bitcoin sent to the wrong address
Bitcoin trading and cryptocurrency protocols are irreversible by nature which means that transactions cannot be cancelled or reversed after being initiated. This means that sending Bitcoin to the wrong wallet address or user can lead to lost Bitcoin for the sender but a surprise boost of Bitcoin for another unsuspecting user.
It is always extremely important to double check the wallet address that you are sending your Bitcoin to to ensure that it is going to the right place.
Improper storage of Bitcoin
Bitcoins are frequently lost due to how people use and store them, for example, someone using a Bitcoin exchange. While an individual holds and stores their Bitcoin in an online exchange, the exchange gains propriety over the cryptocurrency. This is why a reputable exchange, like Independent Reserve, is extremely important when looking for somewhere to store Bitcoin in case of cyber attacks, hackers or dodgy exchanges stealing users’ assets.
Although cold wallets may seem like the better option due to the online risks of owning a hot wallet, a major contributor to users losing their Bitcoin is through misplaced cold wallets! If users are looking to have a physical, disconnected wallet of Bitcoin, ensure that it is kept safe and secure.
What happens when Bitcoin is lost
Millions of Bitcoin have been lost over the years and have not moved addresses. The market is uncertain if these Bitcoin will re-enter circulation but this is not necessarily a bad thing. Some Bitcoin buyers will hold onto their cryptocurrency in different wallets for longer periods of time to see the increase in value of the remaining Bitcoin on the blockchain.
The higher volume of Bitcoin that are permanently taken out of the market circulation causes the rest on the available market to become more valuable. Bitcoin is infinitely divisible, although finite, which means that lost Bitcoin does not harm the network as a whole but empowers it. Lost Bitcoin makes everyone with current Bitcoin in their possession worth slightly more as the demand rises for new Bitcoin.
How many Bitcoins are lost?
Data analytic firms estimate that approximately 20% of all Bitcoins that have been mined are lost which is somewhere between 2.78 million and 3.79 million. These coins appear to be lost which means they could reside in stranded or inactive wallets.
Is there a way to recover your Bitcoin?
Currently, there is no method to retrieve Bitcoin that is lost. The only true way to recover Bitcoin that has been lost by a mistaken transaction is for the receiver to refund the transaction. This option is only available to those who know the owner of the mistaken address that their Bitcoin has been sent to. If the sender does not know the owner of the receiving address there are no possible actions they can take to retrieve their lost Bitcoin.
You can take steps to reduce the chance of losing your Bitcoin by keeping up to date with the latest standards of information security and data storage systems.
What happens if you lost your private key?
A lost, misplaced or forgotten private key will result in all Bitcoin belonging to that key unspendable or usable. This could result in fortunes being lost just due to not remembering what an individual’s private key may be.
However, there are digital key recovery services like Wallet Recovery Services that have seen success in locating their clients’ lost private keys. Services like these have seen a substantial increase in growth as Bitcoin has become a more popular transaction tool.