The Impact on the Bitcoin Economy When You Lose Your Bitcoin Wallet

In short-term – nothing. Long term impact exists, especially if we observe huge number of cases and not each one individually. So, what happens?

Let’s start with facts:

  • Number of Bitcoins is limited to 21 million (currently we have almost 17 million mined and in circulation)
  • Every day, certain number of Bitcoins is lost due to various reasons (people forgetting the keys of their wallets, dying without telling about it, etc.)

So, in short term (if the amount of lost Bitcoins is not extremely large) nothing happens. The economy will continue to flow just like before. But, in long-term, this will definitely have impact. Naturally, over time the number of Bitcoins in circulation (after all of them are mined) will start to drop. The more Bitcoins is lost – the “deficit” of Bitcoin increases. And as the “shortage” increases – the increase in value follows.

So, now we have two variables that change over time:

1. Higher demand (as Bitcoin adoption rates grow every year)

2. Lower supply (as number of Bitcoins starts to drop due to lost Bitcoins)

Simple law of the market applies:

When everyone wants something that only a few have – the price goes up.

Considering the high adoption rate and an exponential growth in the number of Bitcoin transactions in combination with lost coins, and other factors that lower supply the only natural path for the price is to go up. This means that in longer periods of time and with more and more Bitcoins lost the price will increase.

This means that you’re not going to buy something for 1 BTC (current price – $1189), but for let’s say 0.01 BTC. Hypothetically speaking, of course. So, the only consequence of the Bitcoin high number of lost Bitcoins will be the use of decimals.

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