How many Bitcoins have been permanently lost?

The supply of Bitcoin is limited to 21 million, but approximately 3-4 million are out of circulation due to irreversible losses.

When is a Bitcoin considered "lost"?

According to River Financial, to use Bitcoin it is necessary to possess the private key that proves ownership. When this key is lost, it becomes impossible to demonstrate ownership of the Bitcoins stored in the wallet, which means that these assets become permanently inaccessible to any user.

Millions of units of Bitcoin have become unusable due to mistakes by their owners.

Dimension of lost Bitcoins

It is impossible to determine precisely the exact amount of lost Bitcoins. During the early years, many users did not anticipate the future value of this digital asset, resulting in the accidental loss of hardware containing Bitcoin, forgetting private keys, or even the free distribution of these assets. Various studies estimate that between 3 and 4 million Bitcoins (approximately 15-19% of the total supply) have been permanently lost.

Considering that the total supply of Bitcoin is limited to 21 million, this means that only between 17 and 18 million can actually circulate in the market.

Causes of Bitcoin Loss

In theory, the Bitcoin blockchain constitutes an extremely secure and immutable electronic ledger, with erroneous transactions being uncommon. Cases of Bitcoin loss are primarily attributed to human error.

On the other hand, there are millions of Bitcoins that remain "inactive" in wallets for extended periods, with no certainty about when they will return to circulation. However, this inactivity does not necessarily imply that they have been lost. A paradigmatic example is the case of the "creator" Satoshi Nakamoto, who holds a significant amount of the cryptocurrency without having made transactions, completely withdrawing it from circulation. With Satoshi controlling over 1 million Bitcoins, the effective supply does not actually reach 21 million.

When a substantial amount of Bitcoin remains stable over a prolonged period, the market effectively considers it out of circulation and adjusts prices based on a reduced supply.

Common Scenarios of Bitcoin Loss

User Error

Bitcoin is an asset that allows its owner to maintain direct custody without the need for intermediaries. However, this self-custody implies difficulties in recovering funds in case of problems. Numerous users store their Bitcoin wallets on personal hard drives or external storage devices, and later accidentally discard or destroy these devices. A notorious case is that of James Howells, who gained notoriety for accidentally discarding a hard drive that contained Bitcoin valued at approximately 300 million dollars, according to current market prices.

Security Risks with Third Parties

Due to the fear of losing their private keys, many users opt for cryptocurrency custody solutions, delegating the management of their assets to institutions with expertise and specialized knowledge. However, these organizations can become prime targets for cyber attacks, as evidenced by numerous cases of hackers specifically targeting exchange platforms to obtain the private keys of multiple users.

Transaction Errors

Bitcoin transactions cannot be modified once added to the blockchain. Therefore, if we accidentally send Bitcoin to the wrong address, we will likely lose those assets permanently. The only possibility of recovery depends on the other party making a voluntary refund.

However, this scenario is extremely unusual, which is why many digital wallets incorporate automatic verification of valid addresses before confirming transactions. To prevent the loss of Bitcoin, it is essential to carefully verify the recipient's address before proceeding with any transaction.

The recovery of lost Bitcoins is extremely complex, although some successful cases have been documented when partial information such as seed phrases or backup files is available. According to security specialists, prevention through proper storage and key management practices remains the most effective strategy against the permanent loss of digital assets.