bitcoin supply

If a fiat currency is destroyed, money could be printed to replace the lost supply. In the case of BTCs however, the number of BTCs that will ever be “printed” will, at most, be 21,000,000. Additionally, there exists no central authority that can decide to “print” more BTC because someone say, failed to care properly for their wallet.

Nobody can ever be sure what quantity of BTC has been lost forever but surely some has. I lost a small fraction of 1 BTC when I failed to do a backup. Is this a drawback for BTC? The currency can be broken down to extremely small fractions, so there should be no worry of running out of BTC. However, the network can’t verify when BTCs have disappeared and can no longer be supplied. Is the fact that the amount of BTC in circulation can only be estimated a disadvantage of BTC?

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7 Responses to “bitcoin supply”

  1. davux Says:

    No, it doesn’t matter, because as you said, there are many decimals Bitcoins can be broken down to (8 decimals exactly, and this value could be pushed up if needed).

    Also, what differentiates destroyed bitcoins and inactive bitcoins, or even bitcoins forgotten somewhere for a while? Banks don’t print notes just because you go to them and said “I lost my banknotes”. Sometimes people thought they lost something and find it again days/months/years later.

    What will happen if, say, half the bitcoins in the world (10.5 million, that’s huge but it’s only for the sake of the example) are destroyed? Nothing: the 10.5 million left will be worth twice more and that’ll be it.

    So: good question, but don’t worry.

    • petrock Says:

      Hi davux, reading over my post I clarified my question. I see that I had more so asked if the limited supply is a problem. I see that limited supply isn’t necessarily a problem. But is lack of knowledge?

      With fiat currencies, although knowledge can’t be perfect, the government can track the existence of physical currency to some degree. And when they destroy it, they have knowledge of at least those instances of destruction.

      • davux Says:

        An economist would answer to that better, but in the case of Bitcoin I don’t see it as a problem. Moreover, I don’t think it’s feasible to track anything’s destruction, because sometimes one can think something has been destroyed and it’s simply lost for a little while.

        At the end of the day, I would say that what has an influence on prices is the actual money in circulation. But again, I’m not economist, so don’t take my word for it.

  2. petrock Says:

    A destroyed bitcoin is different than an inactive one. I understand that when bitcoins are destroyed, that should make the existing bitcoins more valuable. But is it a problem that knowledge of their destruction can never be had? That is, if the bitcoin market eventually operates under the assumption that 21,000,000 BTC are in circulation but that isn’t true (and the actual quantity supplied can’t even be estimated), what are the effects?

    • KLP Says:

      There’s no way to tell between “destroyed” bitcoins and inactive ones. In fact, “destroyed” bitcoins are just inactive ones by virtue of the fact that no one has the private keys to spend them.

      So, if half the bitcoins should become permanently inactive, people will just have to deal with encountering a given amount of bitcoins half as often. People can still assign whatever value they like to the bitcoins that remain in circulation.

      • petrock Says:

        Hi KLP,

        When I say destroyed I mean wallets that have actually been deleted and, effectively, wallets that may exist but nobody has the key (technically though, they are different…but that doesn’t matter in regard to my inquiry).

        Perhaps here, the word “hoarded” is better than “inactive”. So the problem here is that it is impossible to estimate the money supply when we can’t tell the difference between the amount of hoarded BTC and the amount of destroyed BTC.

    • davux Says:

      Actually I don’t think that anyone would assume there is a certain quantity of bitcoins in circulation, be it 21 millions or any amount. The market kind of adjusts because of the quantity, but not in a “conscious” way.

      It’s like if there’s an illness on apple trees, and for a while there are no apples available in your region or country. Prices will go up dramatically, without anybody having any knowledge of the actual number. It’s just supply and demand.

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