The post Lost Crypto: How Much Cryptocurrency is Inaccessible Due to Forgotten Wallets? appeared first on Coinpedia Fintech News
Cryptocurrencies like Bitcoin are known for their decentralised nature and the responsibility of managing personal wallets. However, with this responsibility comes a significant risk: losing access to your funds if private keys or wallet credentials are lost. Over the years, billions of dollars worth of crypto assets have become inaccessible due to lost wallets, forgotten passwords, or destroyed hardware. The team at Coinsdrom, a regulated online crypto exchange, has analysed the extent of this issue, highlighting the importance of being mindful of wallet security.
How Much Cryptocurrency Is Lost?
Bitcoin (BTC), as the largest cryptocurrency, has a notable portion of its total supply locked in wallets that are no longer accessible. Based on estimates, about 3 to 4 million BTC—approximately 14% to 20% of the total supply—could be lost forever. Over 19 million BTC have been mined out of the total capped supply of 21 million BTC. This means that a significant portion of Bitcoin’s circulating supply is effectively out of reach, which some analysts believe could affect the scarcity of the asset.
Studies from firms like Chainalysis suggest that much of this lost Bitcoin belongs to early adopters, miners, or individuals who did not foresee the long-term value of Bitcoin. For example, it is estimated that between 2.78 million and 3.79 million BTC have been lost due to forgotten passwords, misplaced private keys, or hardware malfunctions.
Why Do People Lose Access to Their Cryptocurrency?
Several factors contribute to the loss of cryptocurrency, particularly Bitcoin. These include:
Lost Private Keys: Cryptocurrencies like Bitcoin are stored in wallets secured by a private key, which is the only method of accessing the funds. If this key is lost, the wallet cannot be recovered.
Forgotten Passwords: Some users have forgotten their wallet passwords, making their crypto holdings inaccessible. This often occurs when wallets are stored on encrypted devices or when users fail to keep backups.
Destroyed Hardware: Early Bitcoin was often stored on local devices such as computers or external hard drives. These devices may have been thrown away or damaged, resulting in the permanent loss of crypto assets.
The Impact of Lost Cryptocurrency
While the amount of lost cryptocurrency remains uncertain, the estimated figures show that a substantial part of Bitcoin’s total supply is no longer available. This, in turn, can affect the dynamics of supply and demand. Though these lost coins may never re-enter circulation, their impact on the ecosystem is worth acknowledging.
The team at Coinsdrom believes this phenomenon highlights the early-stage nature of cryptocurrency adoption, when many users may not have been aware of the long-term value of digital assets. Moreover, it emphasises the importance of carefully managing wallet credentials and secure backups for those who continue to participate in crypto.
Other Cryptocurrencies at Risk
Although most studies focus on Bitcoin, challenges like those of other cryptocurrencies exist. Altcoins and tokens stored on decentralised wallets are also vulnerable to being lost similarly. However, the extent of these losses is less well-documented due to the broader variety of coins and platforms involved.
The decentralised digital currency world’s unique characteristic is the loss of cryptocurrency due to forgotten wallets, misplaced private keys, and destroyed devices. While this phenomenon cannot be undone, it provides an essential lesson for current and future participants in the crypto space. Coinsdrom‘s review of these lost assets reflects the importance of effectively remaining informed and vigilant in managing digital wallets.