What happens if all the Bitcoins are lost?
In the Trenches with a Technology Evangelist
I’ve been increasing the amount of time I spend evangelizing Bitcoin. Given I’m working on a highly distributed knockoff of AWS, I figure it can’t hurt to raise awareness around the new concept of trusted decentralized technologies. I also own and trade BTC and mine DOGE, so it goes without saying I believe in the technology behind crypto currencies, especially given I was the inventor of an early distributed trust based system myself.
A fellow by the name of Thao Nguyen has been asking around on Twitter about what he considers an important point: What happens if Bitcoins are lost over time and won’t they eventually reach zero? Given Twitter’s 140 character limit is itself very close to zero, I choose to answer his question here.
A Proof with No Hypothesis
Without further ado, here’s Thao’s ‘proof’ that losing all bitcoins is inevitable (and the implication Bitcoin itself is unviable):
I’m not going to dissect Thao’s ‘proof’ line by line because he has a critical flaw in his hypothesis(?): dividing a single Bitcoin into satoshis or sub-satoshi units does not affect the outcome of all Bitcoins being lost.
He attempts to use this ‘fact’ later to ‘prove’ his equation balances as coin is lost over time by simply dividing it out of his equations. He attempts to treat it as a constant by holding the number of subunits to a fixed amount, but in reality these subdivisions are infinite in number. In short, his argument is a mathematical fallacy.
Before I get into the rational behind his fallacy, let me give a node to the master evangelist himself: Satoshi Nakamoto.
What is a satoshi?
A satoshi is defined as a sub unit of BTC equal to 1/100,000,000th of a Bitcoin. If you have one Bitcoin you could, in theory, send 100 million people the same transaction amount and be left with zero Bitcoin.
In practice this is currently unreasonable as the transactions need to be confirmed by the Bitcoin miners and they charge a much larger fee than a satoshi to do the validations. Coinbase provides off block transactions which support small amounts of BTC, so if two parties both used Coinbase for their wallet they could send each other satoshis.
Now, back to our topic: is subdivision irrelevant when considering Thao’s ‘proof’?
No, subdivision is not irrelevant. From what we understand of math, numbers are infinitely divisible. While the limit of 1/x as x approaches ∞ is zero, the limit of 1/x actually never reaches zero. To the lay person this means there are an infinite number of smaller pieces of Bitcoin that can be created and used. No matter how many Bitcoins are lost to bungling security practices, there will always be more coins to subdivide further.
As the subdivisions are a human factor, let’s talk about what humans will do to fix this over time.
How do we stay ahead of the lost coin?
In order to support amounts smaller than a satoshi, we will have to change the Bitcoin client code. If the supply of Bitcoin started running ‘low’, we’d simply put a proposal up on the Github repo for Bitcoin and then wait for it to be approved. As everyone in the ecosystem would want more spendable units it is assumed the change would be pushed through quickly.
We could do this an infinite amount of times. Each and every time we find the amount of spendable coin running low, we simply tack on more precision to the numbers. Remember, this is allowed because math allows things to be infinitely divisible. This works in practice because humans are reacting to the change in supply and extending it to be more numerous before it runs out.
And that brings me to the failure of Thao’s ‘proof’: he’s failed to factor the human equation into his own ridged ‘logical’ equations. The human factor of implementing the division over time is a glaring omission in his equations.
And now, as I type this, I realize I know why he’s left it out. I’ve been having a two day conversation with him over the topic but our discussion has been completely devoid of any emotion and he has consistently rejected every logical explanation I’ve given him thus far. While he seems like a nice guy, he’s also completely bent on ‘proving’ to everyone Bitcoin was destined for failure before it even got out of Beta. To me, that smells of cognitive dissonance, a key indicator someone is experiencing internal conflict over something of importance to themselves. Hey, it’s a choice, but it affect the rest of us at peace with Bitcoin.
I feel it is all our duties to understand where this dissonance comes from, acknowledge the emotional basis for it and address it in a positive manner by listening to the individual experiencing it. I hear you Tao. Bitcoin is scary shit. It’ll be OK, but I understand you are concerned.
BTW, if I failed at explaining this decently, it’s been flogged to death on Reddit already. Go have a look. People there seem as exhausted as I feel now having to explain it here again.
Now it’s time to go meditate!
