Since there are a finite number of Bitcoins that can be created, I am wondering what happens if some of the coins are lost. My questions are three fold:
How do you define a "lost" coin? For example if a bank note that was in my pocket is not there anymore (provided that I did not spend it), I know I lost it.
How does the network know a coin is lost?
How would the remaining coins value if some are lost? For example, assume there are 10 coins in total in circulation each worth 100 usd, the total spending power is 1000 usd. If say 2 of them are lost, are they assumed to be taken out of the circulation for good or someone can pick them up and reuse them. I guess in the first case the value of the remaining coins are worth 125 usd each due to fewer coins in circulation while in the latter case the value of each case would stay the same (this comes back to the second question of if the network is aware of the lost coins).
I come from non-programming background so appreciate clarification.