The amount of Bitcoin is scarcer than we think

posted by
October 25, 2016
Bitcoin.com
by Jamie Redman  
Posted in Commentary

"There will be only 21 million Bitcoins, and more than two-thirds of those have been distributed to the public. However most people don't take into consideration that many of those Bitcoins have either been lost or purposely discarded. For instance, in November of 2013, the media had reported on a man who had lost 7,500 bitcoins in a landfill. James Howells is one of many who have lost thousands of Bitcoins by accident. In May of 2016, Bitcoin.com reported on a man who lost US$67,000 worth of Bitcoin while upgrading his computer. The fact is many people have misplaced Bitcoins due to accidents and user error. Mistakes like this have caused significant amounts of the cryptocurrency to be lost forever. Whether it's computer errors, lost paper wallets or forgotten brain wallets, a non-trivial amount of Bitcoin is gone forever." (10/24/16)

https://news.bitcoin.com/amount-bitcoin-scarcer-think/  

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  • dL

    any wallet should be replicable from the public blockchain if you have not misplaced your seed phrase(wallet words).

    “21 million bitcoins” is not accurate b/c of bitcoin’s divisibility. In reality there are 2^15 discrete units of divisibility, making the problem of “lost coins” a quite insignificant one(other than to the the poor saps who did not keep a record of their wallet seed phrase) in relation to “bitcoin scarcity.”

    • —–
      “21 million bitcoins” is not accurate b/c of bitcoin’s divisibility. In reality there are 2^15 discrete units of divisibility,
      —–

      “2^15 discrete units of divisibility” is just another way of saying “21 million Bitcoins.” The more Bitcoin is permanently gone (because e.g. some guy threw a hard drive in a landfill and doesn’t have info to recreate the wallet), the more scarce Bitcoin is.

      • dL

        “2^15 discrete units of divisibility” is just another way of saying “21 million Bitcoins.”

        true, trivially true as an identity…of course, transactions are conducted in terms of mBtc, not Btc, and a bitcoin is divisible to EIGHT decimal places(compared to say a dollar, which is divisible to 2 decimal places). Incidents of lost wallets have absolutely no effect on bitcoin scarcity, evidenced by the fact that such an event would have zero impact on exchange rates, sans the possibility of a massive breach of a major online wallet exchange.

        • “Incidents of lost wallets have absolutely no effect on bitcoin scarcity”

          Except that, by definition, they do. If 1 Bitcoin is lost, then there’s one less Bitcoin and Bitcoin is now more scarce than it was. Saying that no, it’s really just 1,000 mBTC more scarce is saying the same thing.

          • dL

            economic scarcity is measured by the price system…not by absolute quantity comparisons(the difference between economics and math. In the latter case, “scarcity” would not be the correct term to use). And the primary reason lost bitcoins do not affect prices is b/c of the 8 decimal place divisibility of bitcoin. This is by design.

          • If there are 10 of a thing and then something happens to one of them and there are now only nine of that thing, that thing is now 10% scarcer than it was before.

            If there are 10,000 of a thing and then something happens to 1,000 of them and there are now only 9,000 of that thing, that thing is now 10% scarcer than before.

            It doesn’t matter how many pieces I divide the thing into, 10% more scarce is 10% more scarce.

          • dL

            “if there are 10 of a thing and then something happens to one of them and there are now only nine of that thing, that thing is now 10% LESS than it was before.”

            FIFY

            Scarcity is an economic concept and it is measured by the price system. If changes in an absolute quantity of an item do not affect prices, then the item is not less or more “scarce” than before.

            Now why wouldn’t lost bitcoins result in a change of prices?

            Well, in math, a ratio of, say, 1/3=1000000/30000000 is a trivial identity. Obviously. But in economics, the difference between removing 1 from 3 VS removing 1,000,0000 from 3,000,000 results in a much different marginal utility calculation regarding remaining units. I mean this is basic marginalist economics 101. So no, removing one bitcoin from 21 million bitcoins is not the same as removing 10^8 satoshis from 2 quadrillion satoshis. Economics is not math.

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