The Mystery Of The Lost Bitcoin…

Posted By on November 30, 2017

Earlier this week, IG Markets chief strategist Chris Weston described bitcoin and other cryptocurrencies as a  massive influx of retail investors getting into the cryptocurrency as a “mania” fueled by press headlines and fear of missing out.

Bitcoin’s exponential 1,000 percent rise this year has captured imaginations and led to warnings of a “bubble.” Its current market capitalization — the price multiplied by the number of bitcoins in circulation — is now nearly $169 billion, according to CoinmarketcapIt’s so big that attention is now rapidly turning to bitcoin’s missing billions.

By Frank Chung, News.com.au

Of the more than 16.7 million bitcoins in circulation, nearly 4 million could be lost forever, according to new research from digital forensics firm Chainalysis. The research is based on a detailed empirical analysis of the blockchain — the “digital ledger” which records all bitcoin transactions, and which gives the currency its value.

The study, reported by Fortune, concluded that between 2.78 million and 3.79 million bitcoins — 17 to 23 percent of existing supply — are lost, amounting to more than $30 billion.

“It’s very easy to lose crypto,” said Martin Davidson, co-founder of Melbourne-based not-for-profit Blockchain Center and business development director at Blockchain Global.

“Bitcoin is a predetermined currency issuance system, so there will only ever be 21 million bitcoins created up to the year 2140.”

“It started in 2009 with the currency issuance of 50 bitcoins every 10 minutes, and every four years it goes down by half. It went down to 25, now we’re in the third phase where it is 12.5 bitcoins every 10 minutes.”

“When bitcoins are produced, they have a private key associated with them. It works using key-pair cryptography — you have a public address and a private key that go together. The public address is what you use to send bitcoins, the private key is what you need to spend them.”

“If you lose the private key, because of the mathematics involved and the strength of the cryptographic system, which is what makes it so safe, it’s impossible to ever get it back. What’s commonly happened is people have just deleted the file off their computer — the text document that holds the private key.”

While many have made analogies with burning a $100 bill or losing a gold bar off the side of a pirate ship, Davidson agreed that the ease with which bitcoins can be accidentally lost forever at the press of a button — particularly given how valuable they now are — can make people uneasy.

“Absolutely, that is one of the largest barriers to adoption,” he said.

“What people need to understand is this technology was born out of the cipher-punk movement, using cryptography for people’s individual freedom and privacy for protection against the state.”

“It was never designed to be user-friendly, but obviously now people are investing hundreds of billions of dollars into these systems that are still nascent with respect to the usability and design of the applications.”

In order to keep their keys safe, some users literally print them out in what’s known as a paper wallet, but Davidson said the best option was a Trezor USB wallet, which retails for about $100.

“They’re known as the best in the world, the most secure. They have firmware on the device designed to keep your private keys safe, they can store bitcoin, Ethereum, some other currencies.”

 

 

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