How much Crypto is inaccessible due to forgotten wallets? Coindrom highlights this issue.
Cryptocurrencies like Bitcoin are known for their decentralized nature and the responsibility of managing private wallets. However, with this responsibility comes a big 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 been accessed due to lost wallets, forgotten passwords or damaged hardware. The team at Coindrom, a regulated online crypto exchange, analyzed the scale of this issue, which showed the importance of considering wallet security.
How much cryptocurrency is lost?
Bitcoin (BTC), as the largest cryptocurrency, has a significant portion of its total supply locked away in wallets that are no longer accessible. Approximately 3 to 4 million BTC – approximately 14% to 20% of the total supply – may be lost forever. Of the 21 million BTC supply held, over 19 million BTC have been mined. This means that a significant supply of Bitcoin transfers is effectively inaccessible, which some analysts believe could hurt the asset's scarcity.
Studies from companies like Chainalysis indicate that most of the lost Bitcoin is due to early adopters, miners or individuals who did not foresee the long-term value of Bitcoin. For example, between 2.78 and 3.79 million BTC are estimated to be lost due to forgotten passwords, misplaced private keys or hardware failures.
Why Do People Lose Access to Cryptocurrency?
Several factors contribute to the demise of cryptocurrency, especially Bitcoin. These include:
Lost Private Keys: Cryptocurrencies like Bitcoin are stored in wallets protected by a private key, which is the only method to access the funds. If this key is lost, the wallet cannot be recovered Forgotten passwords: Some users have forgotten their wallet passwords, leaving their crypto holdings inaccessible. This usually happens when wallets are stored on encrypted devices or when users fail to maintain backups. Corrupted hardware: Early bitcoins were often stored on local devices such as computers or external hard drives. These devices may have been dropped or damaged, resulting in permanent loss of crypto assets.
Impact of Lost Cryptocurrency
While the amount of lost cryptocurrency is uncertain, estimated figures show that a significant portion of Bitcoin's total supply is no longer available. This can affect the dynamics of supply and demand. Although these lost coins may never be re-entered into circulation, their ecological impact is worth noting.
The team at Coinsdrom believes that this phenomenon shows the early stage nature of cryptocurrency adoption as many users remain unaware of the long-term value of digital assets. Moreover, it emphasizes the importance of careful management of wallet credentials and reliable backups for those who continue to participate in crypto.
Other cryptocurrencies at risk
Although most studies have focused on Bitcoin, there are challenges like other cryptocurrencies. Altcoins and tokens stored on decentralized wallets are similarly vulnerable to loss. However, the extent of the losses is poorly documented due to the wide range of coins and platforms.
A unique feature of the decentralized digital currency world is the loss of encryption due to forgotten wallets, misplaced private keys and compromised devices. While this event is irreversible, it provides an important lesson for current and future participants in the crypto space. Coindrom's review of these lost assets reflects the need to stay informed and proactive in effective digital wallet management.
