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  • Are Bitcoins Really Missing?

    Synopsis: In 2014 a lot of bitcoins went missing with Mt. Gox shouted bankruptcy. Over two-hundred thousand, of 650,000 coins were found. Now with Bitcoin’s value in the stratosphere, people are re-raising old questions: Where are the missing coins?

    Losing gold bars in the ocean or $100 bills burning in a house fire are two events comparable, in a way, to bitcoins disappearing from the Internet.

    By 2040 when all 21 million bitcoins are mined, the total available for trading or buying will be lower than it is today. According to a study from Chainalysis, 3.79 million bitcoins are absent based on a high-end estimate. Just over 2.7 million tokens are gone based on the low end of the same scale. The figures point to about 17% to 23% of bitcoins are gone.

    Despite much speculation about the number of lost bitcoins, Chainalysis’ finds are appropriate as they depend on a detailed and empirical analysis of the blockchain.

    The figures reflected in the study indicate that bitcoins are lost — not hacked or stolen — just lost.

    The future will see more bitcoins lost, but the rate of disappearance will slow because of the increase in value. Individuals will just be more careful about keeping track, unlike the guy who threw away a hard drive which held the key to 7,500 bitcoins.

    What is not known from the study’s findings is are bitcoins more scare that assumptions or have the market already priced the missing coins into the current value.

    “That is a complex question,” said Kim Grauer, Chainalysis’ Senior Economist. “The market has adapted to the actual demand and supply, so the answer is yes — and no.”

    Bitcoin has a fixed supply. The number of coins which can be created is finite. With protocol designed so that new Bitcoins are generated at a diminishing and inevitable rate, the tally of new bitcoins created annually is consistently slashed by half over time. Bitcoin issuance will halt when a total of 21 million Bitcoins exist.

    As of June 20, 2017, Bitcoin reached a total circulation of 16 million coins which is roughly 78-percent of the total amount that there ever will be in existence.

    One of the earliest and most public fails in the Bitcoin era, Mt. Gox was the King of the Hill in 2014.

    Then the exchange declared bankruptcy and nearly $500 million Bitcoins and cash disappeared.

    Of the 850,000 Bitcoins have been spotted, leaving many former investors and analysts to speculate as to where the money is. The missing Bitcoins would be worth somewhere in the neighborhood of $2 billion by now.

    Cyberscoop, the investigative firm working for Mt. Gox’s creditors, claims Chainalysis knows the missing coins’ location. This was revealed in congressional testimony provided by Chainalysis co-founder in June 2017.

    In his answer to a question by Representative Warren Davidson, Jonathan Levin said, “We did find them — the coins’ location is known.” Davidson failed to follow up, and Levin didn’t offer any more information.

    Jerry Brito, Coin Center’s executive director, said, “Just because you know their location doesn’t mean you can get them back.”

    The coins, moved through exchanges, were likely sold. There is no ‘pile’ of coins sitting around, and Levin’s words may be misleading.

    The Search Continues

    “That there’s no pile of recoverable coins doesn’t mean it’s a cold case,” Kim Nilsson, a researcher at WizSec, told CyberScoop. “Numerous investigations are still active, and we have a grasp of the who, how and when of the thefts.”

    According to Patrick Howell O’Neill, writing for CyberScoop in the summer of 2017, the market cap for bitcoin was over $46 billion. On the day Mt. Gox collapsed they were valued at a cap of $7 million.