With the latest surge in bitcoin related media stories and the wildly volatile price fluctuations in bitcoin price. Many are wondering can a bitcoin be lost and if it can is it possible to find lost bitcoins? Absolutely, the first risk is from the wild price swings. If you buy high and sell low, then your bitcoins can definitely become lost bitcoins to you, but they are not lost bitcoins to the system.
So can you find lost bitcoins? Perhaps.
First we must understand how bitcoins are generated. There is really only one way bitcoins can be created and that is by mining. Mining is the technical process that helps to secure the system and as a reward the miners’ receive a reward in bitcoins. This creates new bitcoins. I guess they had to just create some in the beginning, but now all bitcoins up to the limit of the system which is around 21 million bit coins.
Okay so how do we know how many bitcoins are in existence at any one time. You can calculate the number in existence of who owns every bitcoin because everyone has a copy of all the transactions ever created in the system and thus know how many coins exist.
Not to get off track, but these individual files with all the transactions is actually a weakness of the bitcoin system and may become somewhat of a technical limiting factor. As more people become involved in the transfer of this digital currency the file size of these flat files could get out of control. It is already hindering adoption of the currency as a lot of really slow cable connections and a lot of rural areas are experiencing initial download times of the files in days. This time will only grow as the system processes more transactions. These files are going to get huge, well beyond the size of current hard drives in personal computers. This really will have to be fixed before we can have long term adoption. Sorry for the diversion, but thought this should be mentioned just for context in learning how to find lost bitcoins.
At the end of the day a bitcoin is just a little piece of code residing on a hard drive. Bitcoins are kept in a file called a wallet. Lot of programs name this file wallet.dat. So if you could find someone else’s wallet file, then you can find some lost bitcoins. Actually that would be stealing, since that would require hacking and would not really be right.
But what about when hard drives crash and bitcoins are lost in that manner, what happens to those bitcoins. These are lost. If you can not recover your wallet file, then the SHA256 hash that encrypts the value of your bitcoins can not be decoded. That bitcoin is gone with no way to recover it.
Wait I thought you where going to tell us how to find lost bitcoins? Bottom line is it would be very difficult to lay claim lost bitcoins for your own. It may be possible to set up a computer with some serious hash solving capability and figure out which ones are missing, then try to crack their hash, but you could probably find more bitcoins using that same equipment as a miner and just mine bitcoins for profit.