3.61 million bitcoins have been permanently lost, accounting for approximately 20% of the current circulation.
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With less than a month to go, Bitcoin is about to enter its 12th year online. In the past nearly 11 years, Bitcoin and the entire blockchain world have transitioned from mere mentions in mailing lists, professional papers, and technical forums to the spotlight, with digital currency economics and blockchain technology now out of the niche circles and into a global conversation. Currently, Bitcoin's block height has surpassed 600,000 (as of the scope of this article), with a market capitalization exceeding $130 billion, accounting for about 70% of the total market capitalization of the entire digital currency market (as of December 6, 2019). The average daily transfer volume within the Bitcoin network approaches nearly $10 billion.
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The value of Bitcoin largely comes from its scarcity. Perhaps the first thing that comes to mind for everyone who comes into contact with Bitcoin is that magical number - 21 million. As of block height 606,000, there are 18,075,000 bitcoins generated through block rewards, accounting for about 86% of the total supply. This means that in the next twenty years, only 14% of the total supply, which is less than 3 million bitcoins, will be mined. However, just as paper currency may accidentally be damaged during storage and circulation, although Bitcoin's UTXOs are difficult to eliminate once generated, private keys and the hard drives storing them can be lost. During the period when the highest number of bitcoins were produced, the price of Bitcoin was very low, and miners and traders at that time were mostly driven by temporary interest and experimental nature, and they may not have kept their private keys safe for a long time.
How many bitcoins have become "dead coins"?So, of the accumulated 18 million bitcoins today, how many can actually enter circulation? And how many have become "dead coins," permanently removed from the 21 million limit? Let's explore this from a data perspective.If we sum up the spendable outputs of Bitcoin (UTXO), the quantity obtained will be slightly less than the total issuance calculated based on block rewards. There are several reasons for this:
The 50 BTC from the genesis block did not generate UTXOs, so they cannot be spent;
Some miners did not claim the full block reward, leading to BTC that do not have corresponding UTXOs;
Repeating coinbase transactions. In the early days, a few miners took advantage of the fact that the Bitcoin protocol did not prohibit repeating transactions (creating identical transactions to overwrite existing ones) and created repeating transactions in the coinbase (without inputs, so it was easy to create the same transaction), causing some coinbase UTXOs to be overwritten and unidentifiable;
A small amount of BTC was sent using the OP_RETURN method, making them unable to be included in the UTXO set.
CoinMetrics recently conducted a study on the total amount of BTC affected by the above situations [1], concluding that a total of 182.6754176 BTC cannot circulate due to the lack of corresponding UTXOs.This portion of "disappeared" BTC accounts for only a small portion of "dead coins." I believe that anyone who has dealt with digital currencies outside of exchanges has encountered a common question: where is my private key/recovery phrase? Many bitcoins are permanently unusable due to the loss of private keys. Some bitcoins have intentionally or unintentionally been sent to addresses with unknown private keys or used incorrect scripts, rendering these bitcoins permanently lost. However, from a data perspective, both of these situations can be considered as a form of silent addresses. The "Satoshi's Bitcoins" we previously discussed fall into this category. There are also many addresses with early generation times that had large UTXO transfers before 2014, with small transfers occurring over the years but never being spent, indicating a high probability that their private keys have been lost. For example, the addresses on the Chain.info rich list.We can see from the UTXO generation dates at block height 606,000 that 72% of UTXOs were generated after 2017, and 81% were generated after 2014. Combining this with the historical price changes of Bitcoin, we see that the price of Bitcoin broke $100 in early 2013 and remained around $100, breaking $1,000 for the first time at the end of 2013 and staying above $200 since then.Data Source: Chain.infoData Source: Chain.infoTherefore, based on the UTXO totals classified between 2013, 2014, and 2017, the total UTXO amounts generated between the corresponding time periods are approximately 2.7 million BTC, 720,000 BTC, and 1.62 million BTC. For different generation times, we assigned an estimated weight to measure the likelihood of private key loss, resulting in the following conclusions.Data Source: Chain.infoThrough the above estimates and calculations, we conclude that approximately 3.61 million BTC are currently lost, accounting for 20% of the issuance. Similarly, Chainalysis estimated in 2017 through research and estimation of loss rates in different circulation channels (long-term holder holdings, frequent transfers, strategic investors) that 2.87-3.79 million BTC cannot be recovered [2], which is close to the conclusion we obtained from on-chain data.ConclusionThrough the study of UTXO generation times, we believe that approximately 3.61 million BTC are permanently lost and have become "dead coins," accounting for about 20% of the current issuance, which, at the current price ($7,372), is approximately $26 billion. At the same time, this reduces the total number of bitcoins to 17.39 million, which may be a positive development for Bitcoin holders.References[1] https://coinmetrics.substack.com/p/coin-metrics-state-of-the-network-d2e[2] https://coinmetrics.substack.com/p/coin-metrics-state-of-the-network-d2eDisclaimer: The views mentioned in this report are based on data analysis and comprehensive judgment, provided for reference purposes and not as investment advice. Trading cryptocurrencies carries risks, so investors should exercise caution.This article is from our partner PANews.
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