The Real Amount of Bitcoin: The Gap between the Capped and Real Quantity

It is well-known that Bitcoin’s supply cap is 21 million coins, but multiple losses, technical issues, and hacks have all contributed to the fact that this large number of Bitcoin will never emerge in the flow.

Main Conclusions

• Bitcoin’s supply cap is known to be 21 million, but the figure is actually much lower.
• During the years of its existence, some Bitcoin has been wasted and eliminated for many reasons.
• Bitcoin ‘s famous founder, Satoshi Nakamoto, is responsible for most BTC losses.
• The maximum possible supply of Bitcoins is believed to be 19.5 million, and the current amount of mined coins is 16.8 million.

Bitcoin’s scarce supply greatly influences its value. Bitcoin’s developer, known anonymously as Satoshi Nakamoto, created the system in such a way that the coin’s supply cap is set at 21 million. But how many coins are there really, given the fact that many were simply erased from the system forever?

How Bitcoins Disappear

The maximum supply of Bitcoins is said to be 21 million, but in reality, the maximum amount appears to be much lower.

When a person opens a bank account and later forgets the passcode, the bank manager can help reset them the passcode, and the money on the account won’t disappear. But it’s different with Bitcoin. If a user forgets the private key to access the wallet, the coins disappear and can’t ever be retrieved.

Banks control the accounts and funds, while the Bitcoin system is not controlled by an institution. Once the coins are lost, there is no way to bring them back. However, such losses can be avoided if the coins are deposited in an outside server — an exchange, for example.

Bitcoin was composed this way on purpose by its creator, a mysterious person or team that goes by the name Satoshi Nakamoto. Nakamoto is thought to be the first Bitcoin’s miner and the one responsible for most lost coins.

When Bitcoin first emerged, it had no price or any valuable characteristics, such as the ability to be liquidly exchanged. Before it hit the world as the most popular crypto-asset, it was simply a game for amateurs. Normal people could easily mine Bitcoins on their regular personal computers. The system was immature, and many early users may have consciously erased their private keys, believing that the newly emerged currency would never become a successful venture, let alone skyrocket.

Defining Bitcoin’s Actual Supply

Of course, it would be interesting to know the real amount of lost Bitcoins. The question was addressed CoinMetrics, which specializes in crypto-asset statistics and overall crypto data. It completed a study to evaluate the total amount of lost bitcoins. To find an answer, the company launched a thorough investigation called “Unspent Transaction Outputs” to find out how many bitcoins have been inactive since July 2010.

The company found that 1.5 million bitcoins had been completely erased from the network, or “burned,” by November 2019. In crypto slang, “burned” means that the coins have been totally wasted and can never return to the coin’s circulation system.

The researchers defined the five major factors that shaped the figure.

First, the first 50 Bitcoins mined by its creator were not covered by the research. The first 50 coins were never real, despite the transaction that shows their mining.

Second, two types of similar electronic signatures exist that apply to four separate transactions when a miner obtains a block reward. For example, blocks 91722 and 91880 had the same signatures. The miner was supposed to receive rewards for the two blocks, but the reward coins for block 91722 were erased because it was the first of the two blocks. The same happened with blocks 91812 and 91842. These errors led to 100 bitcoins being erased.

Third, miners sometimes didn’t apply for rewards for their two blocks and the transaction fees. These occasions led to 20.5 BTC being burned.

Fourth, miners sometimes sent bitcoins to fake addresses. The website counterparty.io shows coins transferred to fake addresses have resulted in the destruction of no less than 2,214 BTC.

Finally, there are “zombies,” which are coins that have not been used for around a decade. These coins do not circulate on the Bitcoin network anymore and, therefore, are not included in the supply. BTC creator Satoshi Nakamoto mined 1.496 million BTC and has never used them. Not a single address belonging to Nakamoto has ever demonstrated any transactions.

The Actual Number of Bitcoins

We now know that the amount of lost bitcoins is 1.5 million, so we can determine the current supply volume with high certainty. The most BTC possible is 19.5 million, as opposed to the official cap of 21 million.

According to the data provided by CoinGecko, 18,294 BTC has already mined. Therefore, the amount of existing BTC is approximately 16.8 million.

Nevertheless, there are some more things to take into account. First, it is practically impossible to define the number of bitcoins burned in the last ten years. Second, scammers have managed to steal some bitcoins from exchanges, and these coins are usually “laying low” (are untouched), so it’s hard to determine their existence. However, during the PlusToken Ponzi scheme, stolen PlusTokens were traded via Huobi exchange, so the same may have happened for Bitcoin.

The research does not allow us to estimate the amount of lost BTC precisely, but it does provide the basis for defining the minimum amount of losses, as well as the maximum supply.