Bitcoin is based on a technology which makes it decentralized and impervious to government control. This strength happens to be a result of layers of security, combined with multiple step processes.
According to Chainanalysis, a digital forensics company that studies the Bitcoin blockchain, it's estimated that 3.79 million Bitcoins are gone for good based on a high estimate (2.78 million based on low estimates).
What the numbers mean, 17 percent to 23 percent of all existing Bitcoins, are lost.
Chainalysis findings are significant because they rely on a detailed empirical analysis of the blockchain, where all Bitcoin transactions are recorded.
While the methodology Chainalysis used is confidential, but a spokesperson shared some details about how the company assesses which Bitcoins are lost.
One of the sources of lost, comes when there is a "fork" in the blockchain, like for example when Bitcoin was cloned to Bitcoin Cash. Such events can lead to the owners of the wallets that have been inactive for years to conduct a transaction, providing an opportunity for statistical analysis.
Then there are misdirected transactions or the loss of a private key through death or carelessness.
Others include: taking coins out of circulation, hoarding coins, buying and selling coins and strategic investments, among other factors. Chainalysis findings don't include those that were stolen by hackers or other bad actors.
And finally, the question about Bitcoins owned by Satoshi, the pseudonymous creator of the cryptocurrency, who has remained anonymous since 2011. Chainalysis said that wallets associated with Satoshi represent about 1 million Bitcoins, could also be lost forever.
The research shows that in the future, if Bitcoins will become more expensive, the rate of lost Bitcoins will be much less and slow. Because the cryptocurrency becomes more valuable, people that own them will be more vigilant.
