- More than 3 million BTC are lost forever
- Bitcoin’s shrinking supply due to lost coins only add to its value
One of the most prominent features of Bitcoin that makes it better than any fiat currency or store of value gold is its fixed supply of 21 million. A hard cap increases the value of an asset when its demand increases.
But this limited supply is even less than the fixed 21 million. Coin Metrics, a crypto data provider, in its latest issue shared that the “technically correct” Bitcoin supply is 17,999,817 BTC.
The firm also points out that Bitcoin’s codebase does not contain any checks of the Bitcoin supply not exceeding 21 million. On applying the supply formula at block 600,000 on Oct. 19, it found that there are 18 million BTC.
Block 600,000 was celebrated as a milestone “towards the end of the inflation process for Bitcoin.” But reportedly BTC supply did not exceed 18 million milestone at block 600,000. Bitcoin Core developer, Peter Wuille mentioned the actual supply as 17,999,854.82192702 BTC at block 600,002.
But why is the supply lower than expected?
The supply is lower because of the lost coins. These proverbially lost coins include the genesis coins of 50 BTC that were minted during Bitcoin’s first block but not included in the UTXO set, with the reason unknown. They also are not present in the Bitcoin ledger though visible in a transaction in the main chain, reports Coin Metrics.
Another oversight is of duplicate transactions that gives us 100 BTC. Coinbase transactions, the easiest ones to duplicate are those that do not contain digital signatures and that has happened twice in Bitcoin’s early history. In response, BIP-30 was introduced in 2012 to forbid new duplicate transactions to be included.
Another set of the lost coins is unclaimed rewards that belong to the verification of Coinbase transactions by full nodes. Bitcoin miners are checked by each full node to not claim more rewards than they are allowed but not if they claim less than their share. Though not a rational behavior, it has happened a number of times. Such behavior resulted in 1,221 anomalies and 28.95502763 BTC as unclaimed.
OP_RETURN outputs are a special type of Bitcoin transaction output that allows users to embed data in the blockchain without bloating the UTXO set. Currently, 3.723039 BTC is sent to OP_RETURN outputs that now can’t be spent ever and are no longer part of Bitcoin’s supply.
The price of the leading digital asset is influenced by its supply and market demand. With its inflation rate keeps on dropping, awareness and adoption rising, and demand from individuals and institutions increasing, Bitcoin’s shrinking supply due to lost coins will only add to its value.