30

The idea of putting back lost Bitcoins back onto block rewards seems like a great idea.

I acknowledge that there were quite a handful of early adopters who were generating blocks daily, but had no idea what they were doing. Time passes, they forget about Bitcoin and they format their hard drive or whatever. Their coins enter the nether, never to be seen again.

I wouldn't be surprised if >5% of the current coins in circulation were lost due to mishandling. My question is, why isn't there something implemented for this? I can't find any disadvantage for this feature, it would simple as invalidating coins that haven't been transferred in x amount of time, which is probable for only sorting lost coins.

  • 3
    Lost coins can be viewed as an advantage to those who own coins currently. As more and more Bitcoins are lost, that only increases the scarcity, and therefore value of those coins owned. – Scott Jan 24 '14 at 2:51
47

As Stephen points out it would force people to spend coins. Age is not a proper measure of lostness. A common recommendation for savings accounts is to put them on physical backups such as printed QR codes that you add to while the account itself remains offline. People may even will their Bitcoin savings to their children. To force people to shuffle these coins around from time to time to keep them from being taken undoes one of the major safety features of Bitcoin. Namely that transactions can not be reversed, and your accounts can not be frozen or taken from you by any mechanism.

Also there is no reason. The entire Bitcoin economy could be run on a single bitcoin because of its divisibility. There simply is no reason to break other important Bitcoin features to regain those coins. It wouldn't even actually increase the miners' rewards because for every extra coin brought back the wealth is distributed over more coins reducing the value of each coin with inflation. A million dollars of value spread over 1000 bitcoins if there are 1000 bitcoins in circulation, is the same one million dollars of value spread over 1 bitcoin if there is only 1 bitcoin in circulation.

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    This answer is incorrect in several ways. This proposal would not undo either of the major safety features: 1. that transactions cannot be reversed, nor 2. that accounts cannot be frozen or confiscated by a central authority. This proposal would make it so that you have to respend your ⓑ to yourself occasionally. If the time limit for unmoved ⓑ was 20 years (as suggested above), then you might want to do a respend every 18 years (giving yourself 2 years to notice and take action if something goes wrong). This answer is also incorrect to say that there is no reason to do this. – Zooko Oct 3 '11 at 6:01
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    @Zooko I think this answer shows pretty clearly that there are situations where this feature would have very negative impacts, and that there is no benefit to the larger Bitcoin economy in implementing it. Lost coins simply aren't a problem for the system, and 20 years is a long way off. – eMansipater Oct 3 '11 at 15:13
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    @eMansipater: you mean the part about having to issue a new transaction every so often to prevent the coins from being recycles? I agree that this is a negative impact. I disagree that it is very important. Also, the three things that I said the answer was incorrect about were not that. – Zooko Oct 5 '11 at 18:42
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    @Zooko the assertions are valid. Confiscation by fiat or by protocol is still confiscation. Reversing a transaction by protocol or by fraud is still reversing a transaction. There is no need for this as the entire global economy could operate from a single fractional bitcoin. All 3 assertions are valid. +1 to the answer. Nobody is confused as to the reason you believe the questions should be downvoted, some simply don't agree with it. – DeathAndTaxes Oct 25 '11 at 21:54
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    @zooko. It is confiscation. You call IRS taking assets "confiscation" but the protocol seizing BTC assets "recycling". That is a dubious distinction. In both cases the owner loses assets due to the actions of a third party. I am not arguing the validity or legality of the action but it is confiscation. A cornerstone of Bitcoin is that transactions are irrevocable. If the protocol confiscates/recycles coins then transactions aren't irrevocable. It doesn't matter how useful that recycle is, transactions are no longer irrevocable. – DeathAndTaxes Oct 30 '11 at 19:19
13

To do so would force those with coins to spend them -- even if just sending to themselves.

Spending coins lessens privacy. That is a property of bitcoin that should not be diminished through this forceful measure.

Incidentally, why this fear of lost coins?

So there are lost coins. It happens. And we have fewer as a result. It is not a problem -- except for those who lost them :-)

  • 3
    I think the "fear" of lost coins is due to the fact that there is a hard limit on how many can be minted. In the real world, if a large number of coins went missing, we could just print more. But yes, as you say this isn't a "real" problem (due to the extreme divisibility of bitcoins), just a perceived one. – mgiuca Sep 3 '11 at 3:55
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    The sense in which it is a real problem is that it makes the supply of Bitcoins increasinbly unknowable. If 100,000 Bitcoins haven't moved in 50 years, are they lost? Or could they be spent tomorrow? The number of coins in this unknown state will increase over time. – David Schwartz Sep 3 '11 at 16:20
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    There were just a 1,000 homes toasted in Texas -- do we know how much currency those homeowners had go up in smoke? Was that unknown something that bothered you enough when you made your last purchase to where it had an impact on whether or not you were going to spend the money? – Stephen Gornick Sep 8 '11 at 1:31
  • @DavidSchwartz While the "lost" status of each coin can't be determined with certainty don't you think algorithms could be developed to estimate the "effective M0" moneysupply by placing loss probability on each coin based on age. An exact (down to the satoshi) money supply isn't necessary just some confidence around effective money supply. As times goes on the model accuracy could be improved as the rate that old coins are used is observed. – DeathAndTaxes Oct 30 '11 at 19:21
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    I think you just did explain when you wrote that Bitcoin is not anonymous. Taking proper precautions, however, it can be used anonymously. So forcing me to spend my coins, even if to myself, would reveal information that I might not wish to reveal. It's my money, I should not be forced to do anything with it just because others are frustrated in not knowing the true level of the money supply. That's the property that those holding physical gold like about holding physical gold -- it is theirs to do with as they please. Bitcoiners will not accept an approach that impacts that benefit. – Stephen Gornick Jun 16 '12 at 4:52
6

I agree with the other answers pointing out the issues with this approach. And no matter how good an idea it was, it would be a very bad idea to change the rules Bitcoin follows at this time. But I think the benefits outweigh the disadvantages overall and that this would be a sensible approach for future crypto-currencies.

The best coin recovery proposals look more or less like this: If a transaction output is unclaimed for 20 years or so (you have to specify the time in blocks, but the equivalent of around 20 years) then it can be 'reaped' by a miner. The miner pulls that output into his coinbase transaction and is permitted to claim up to 50 coins (or some low number) from that pool for himself. Any coins remaining in the pool are passed along to the miner of the next block to claim. (No jackpot blocks.)

The advantages of this approach are that the supply of coins remains predictable and stable and that there is likely to be a mining reward even without unlimited inflation. The disadvantage is that you cannot store your coins forever without 'refreshing' them. Obviously, a client for such a scheme would have to have a simple 'refresh' option, likely automatic, and would display the 'expiration date' of all coins.

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    20 years is short. Nelson Mandela served 27 years. The political prisoner Chia Thye Poh was imprisoned in singapore for 23 years without charge or trial. Elizabeth Fritzl was captive in a basement for 24yrs. If bitcoin is intended to give genuine personal control - such a feature should be very carefully considered. – Julian Noble Sep 11 '11 at 13:54
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    As Julian points out a 20 year limit would mean anyone in prisoned for >20 yrs would risk complete asset forfeiture. Also "traditional assets" stocks, bonds, CD, etc the were misplaced or forgotten and not found until estate sales. If a limit was put in place I would argue it should be greater than average life exepectancy. Something like 100 year expiration date however even then I would vote (with my computing power) against such a proposal . – DeathAndTaxes Oct 14 '11 at 12:48
  • While this answer is well thought and written, I feel I have to -1 it to show my disapproval, agreeing instead with +JulianNoble and +theUnhandledException. nothing personal of course ^^ – o0'. Oct 19 '11 at 15:33
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    I agree with them as well, for what it's worth. They are completely legitimate criticisms. – David Schwartz Oct 19 '11 at 17:09
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    My understanding of the way to use a stack exchange is to vote up good questions and correct and relevant answers and vote down useless questions and incorrect answers. Therefore, if someone writes a correct and relevant answer which suggests a policy that you disagree with, you should vote their answer up, and if they write an incorrect or irrelevant answer that promotes a policy you agree with, you should vote it down. This stack exchange is going to serve as an information source for learners, not as a referendum for policy setters. – Zooko Oct 25 '11 at 21:25
2

I think that this would be an improvement because it would reduce the unpredictability of the (M0) money supply, which is a good thing. There are two other effects it might have which are also potentially good: 1. it would provide more ongoing reward for miners after ab initio mining runs out, and 2. it would limit the amount of transaction history that you need to remember in order to check the correctness of a transaction.

  • I should have written M0 instead of M1 here. – Zooko Oct 30 '11 at 15:08
  • I completely agree, what is the deal the "it doesn't matter, divisibility, divisibility" people? Having lost coins means that those coins could potentially boom back into the economy after the market prices had adjusted to their absence making bitcoin not much more certain than fiat. Plus, like you said, limiting transaction history and giving miners the incentive to continue to support the network. It seems to me this will be implemented one day in a sort of bitcoin 2.0 where the majority of the miners and the market go to a new standard. – Motes Jan 14 '14 at 1:14
1

I have myself worried about this, but:

As the volume of traded bitcoins increases so will the transfer chain.

While the size of the chain is not a big problem, validating that there are no double transfers would take increasingly more GPU time.

As such it is possible that many miners will start to cull the chain on their own to be faster and in many doing so it becomes the de facto standard to cull the chain.

If growing computer power makes chain handling a non issue a similar thing could still happen; if bitcoin markets are weighed down by too many missing coins, fewer miners will exist and as such security diminishes - once enough coins have been stolen the system will reboot, so to speak, and hacking/mining will become hard once more.

Even if it DOES become an issue, a new crypto-currency backed by the few bitcoins left would be divisible once again. If a lost key is recovered and bitcoin supply is very small there will be a massive upset and people will likely just switch entirely to the new cryptocurrency with little hassle as when the dollar went off gold entirely and no one noticed.

This means that your bitcoin savings are probably limited at around maximum 200 years and minimum 10-20 with no self-sending.

-2

What about a 'keep alive' algorithm in the Bitcoin client which is setup to 'send coins to self' every 2 - 5 years (where the amount of time picked is a balance between time and the generation of unnecessary transactions). Anybody running the client and maintaining a wallet with coins would automatically have their coins kept 'fresh' with the appropriate refresh interval. The client would then be setup to 'cull the blockchain' by ignoring transactions that are 'stale'. Destroyed coins could then be added back as an extension of the mining rewards.

I suspect this proposal essentially parrots what @David Schwartz mentions in his answer.

  • 3
    This doesn't deal with the fact that people may be storing coins in a wallet that is not open in a client. – tysat Sep 28 '11 at 22:21

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