What is the actual spendable supply of bitcoins?

When Bitcoin was created by the mysterious Satoshi Nakamoto back in 2008 they decided to put a hard cap on the number of bitcoin which would enter existence. This value was 21 million and comes about by the fact that there is a new block on the Bitcoin blockchain every ~10mins and initially with each new block 50 BTC were created but this value halves every 210,000 blocks, which is roughly every 4 years, and since a bitcoin as 8 decimal places there can only be 34 halvings before the block reward changes from 0.00000001 BTC to 0.00000000 BTC. Whether these parameters were chosen specifically to result in a finite supply of 21million or whether this was just a byproduct is a mystery and there are even theories that satoshi was a fan of Blackjack, table tennis and numerology to account for “21” being chosen.

However we don’t yet have all 21million bitcoin in existence, there’s currently just over 19m and the last full bitcoin will be generated in block 1,259,999 when the reward is 1.56250000 BTC - thereafter, all blocks will be generating less than a single bitcoin. The last satoshi will be generated in block 6,930,000 which is expected to be in the year 2140 - so there’s some time on the clock left!

This finite supply is often mentioned in the crypto-narrative as one of Bitcoin’s most powerful characteristics since, unlike fiat, you can’t simply print more at the will of the fed. If you did want to create more bitcoin than you’d need the consensus of the Bitcoin community to do a hard fork (non-backwards compatible software change). However this would be against their own interests since adding more supply to the market would most likely result in a decreased price. It’s good old supply vs demand economics!

Instead there’s only so many satoshis to go around and so the hope is that as mainstream and tradfi adoption grows, but the supply stays limited, then the price will increase [this is not financial advice 💸]. It’s why many on crypto twitter talk about the days of wholecoiners (where you own at least 1 BTC) likely being over since with a rising price of bitcoin fewer people will be able to afford a whole coin and instead people will be purchasing and exchanging satoshis instead of whole bitcoins.

However whilst there may be a theoretical hard cap of just under 21m bitcoins that can enter the spendable supply, it’s often noted that in reality the figure is less due to private key loss, unspendable outputs and technical bugs throughout Bitcoin’s history. Popular estimates have quoted 3-4m bitcoins being lost forever, research by Cane Island in April 2020 put the maximum spendable supply at no more than 14m, reports often quote a Chainalysis figure of between 2.78m and 3.79m bitcoins being lost forever, and the website https://bitcoin-supply.com/ puts the permanent loss amount at 2,823.43585488 BTC. So it’s clear that there’s a range of values and no definitive figure.

I’ve therefore spent hours combing forums, news pieces, and raw bitcoin code to try to compile all the bitcoin permanent loss events so that the true number of unspendable bitcoins can be calculated and therefore a more correct total spendable bitcoin supply amount can be defined. Here’s my indepth research piece outlining what I believe this figure to be…

TL;DR Conclusion 

Due to block reward underpayments, non-zero amounts being sent to non spendable outputs, ‘donations’ to address blackholes, lost private keys/access and the most well known dormant address, I believe the total amount of permanently lost bitcoins is 1,323,069.92. This represents a 6.3% off the total ~21m hard cap and at the current price of BTC in USD, a value of $27.9billion.

Whilst this may seem a huge amount to be removed from the bitcoin economy, Satoshi addresses this before leaving the community:

“Lost coins only make everyone else's coins worth slightly more. Think of it as a donation to everyone.” 

Block Reward Underpayments

There is a specific validation check to ensure that the miner is not paying themselves more than the allowed block reward but they are perfectly entitled to pay themselves less. This includes the ability to not include all possible transaction fees and there’s been a number of instances in Bitcoin’s history where this has been the case.

• In block 124,724, user midnightmagic solo mined a block but instead of paying themselves the 50BTC reward, they underpaid by one satoshi and created a value of 49.99999999 BTC. They later explained that it was in tribute to Satoshi being missing from the community. However they also failed to claim the fee is 0.01 BTC which was included in user’s transactions within the block.

• In block 501,726 the miner created an empty block and didn’t configure the coinbase transaction correctly so didn’t pay themselves the available 12.5 BTC block reward

• Between block 162,705 and block 169,899 there were 193 blocks which claimed less than the available transaction fees due to a bug. This resulted in a total loss of 9.66184623 BTC
• Between block 180,324 and block 249,185, another 836 blocks saw a similar issue and saw 0.52584193 BTC in transaction fees go unclaimed.
• Then there were two blocks where the coinbase reward was overwritten. This happened in block 91,842 (overwriting the reward from block 91,812) and 91,880 (overwriting the reward from block 91,722). Each time, 50 BTC was lost.
• The miner in block 526,591 failed to claim half the available reward and so 6.25BTC was not created as planned.

Unspendable Outputs

• In addition to block rewards and transaction fees being unclaimed, it’s possible to create an unspendable output in a Bitcoin transaction but send some bitcoin to it - whether accidentally or intentionally. This can be done by using an output type called an OP_RETURN. I’m going to go into more detail on this with a future post however the TL;DR is that there’s various purposes for using zero-value OP_RETURN outputs but since it’s an unspendable output type, any bitcoin sent to one reduces the total spendable bitcoin supply.

Using the Bitcoin RPC command `gettxoutsetinfo` this provides information on the total UTXO set - the Bitcoin outputs which are available for spending. This discounts values to OP_RETURN outputs since they’re rendered unspendable at the protocol level and nodes on the Bitcoin network therefore discard them from their UTXO set. As of block 749,451 we can see that the `total_value` is 19,121,360.92610256 However based on block reward generation by this block the UTXO set should be 19121481.25 BTC. This results in 120.3238975 BTC which have been lost due to being send to an OP_RETURN output.  

This is a not insignificant amount of bitcoin so you might be scratching your head and wondering why someone would throw their bitcoin into a place of no return.

The most frequent reason for non-zero values being sent to OP_RETURNs is so that users can include an immutable message in the blockchain. I’ve previously written a piece about how this works: https://tara-annison.medium.com/message-in-a-blockchain-3d7fa1d50344 but the short story is that there was a trend in 2015/16 where users paid a very small amount, usually a single satoshi (0.00000001) to a service who broadcast a transaction on their behalf with a short message in. Some examples of this range from a simple hello, a plug to bitcoin reddit, and more recently a touching tribute immutably broadcast to the world:

Whilst the trend of sending messages within OP_RETURNs has largely fallen out of fashion, there are other reasons which someone would want to send a non-zero OP_RETURN value. The vast majority of recent transactions including a non-zero OP_RETURN value are all following the same pattern, and can be linked to a document certification company Constata: https://twitter.com/constataEu 

Each transaction, and there is one every few blocks, sends 0.00000546 BTC to an OP_RETURN with the the remaining value circling to the same address: bc1qw3ca5pgepg6hqqle2eq8qakejl5wdafs7up0jd . In the metadata of the transaction is what looks like gobbledygook however this represents a collection of documents which have been hashed and stored in the blockchain in order to utilise the immutable nature of the blockchain and the ability to reference a timestamp for when the documents were ‘certified’. 

The value of the OP_RETURN represents the minimum transaction amount you can send on the Bitcoin network, often referred to as dust, however Constata could create a zero value OP_RETURN output and still include the metadata, so are needlessly losing $0.13 into the Bitcoin void each time.

• Along the OP code lines, Mt Gox had a number of malformed transactions which saw a reported 2609.36304319 BTC lost. One specific transaction had 497 BTC rendered unspendable due to OP_0 being included in the output script rather than the required public key.

Address Blackholes

Whilst not technically unspendable, there are a number of Bitcoin addresses which are understood to be blackholes for transactions since generating the associated private key is understood to be beyond current computational ability:

• There is a well known Bitcoin vanity address ‘1BitcoinEaterAddressDontSendf59kuE’ which is considered to be an unspendable address since computing it from the associated private key would be expected to take 3.3 decillion years! 

I wrote a piece on vanity addresses here: https://tara-annison.medium.com/what-is-a-vanity-address-d689502a7800 but the TL;DR is that creating a Bitcoin address which has human readable words in can be VERY computationally heavy. Creating an address which starts with 1Tara…. would take a few seconds but creating 1TaraBitcoin… could take up to 200,000 years! 

As such what someone has done is just create an address using the correct bitcoin format without first generating the private key. This means that they cannot access any bitcoin sent to it. However when we use a block explorer we can see that there have been 409 transactions sending 

13.29898217 BTC to it. These are unspendable unless computing takes a significant leap forward and is able to crack the private key - however we’d have bigger fish to fry if that was the case as Bitcoin’s public private key generation process would be in jeopardy! https://www.blockchain.com/btc/address/1BitcoinEaterAddressDontSendf59kuE 

• There are a vast number of other vanity addressed which are used for burner addresses, of the almost 400 addresses listed on https://www.bitcoinwhoswho.com/blog/2017/12/30/8-97-bitcoins-burned-in-2017/ from back in 2017, the current total balance held in them is 3016.111972 BTC
• There are a number of addresses thought to belong to Bitcoin’s mysterious creator Satoshi Nakamoto and since their identity has never been revealed many assume that any coins sent to these addresses will never be moved.
• One of Satoshi’s most famous addresses is 1A1zP1eP5QGefi2DMPTfTL5SLmv7DivfNa which was used in the genesis block (block 0) to receive the initial 50 BTC reward. It’s since received over 3,300 transactions (many as ‘donations’ from the community) but this leaves 68.54940096 BTC within this black hole.

It’s thought that Satoshi mined 22,000 blocks with each of the block rewards being paid out to new addresses so this places their total estimated wealth at 1,100,000 BTC.

Lost Private Keys/Access

Combing various forums and news pieces there are also reports of people losing access to their private keys. There’s a whole range of ways this can occur from accidentally deleting the private key, damaging or throwing away the device where it’s stored, and forgetting the password to access the wallet information. The below are reported cases of people who have lost access to their bitcoin wealth:

• James Howell’s accidentally threw out a harddrive containing 8,000 bitcoin. He has since been in a battle with the local dump to try and excavate it but to no avail.
• In June 2010 a user (Stone Man) on the Bitcoin Talk forum reported that he’d lost access to almost 9,000 bitcoins. They have remained in the listed addresses for over 12 years so look to contribute a 8999.00606337 BTC to the unspendable supply.
• User 01BTC10 reported that they lost access to their initial bitcoins and shared the related address which still shows 5.66100000 BTC left unspent.
• There are a number of other users who have contributed to a BitcoinTalk thread on lost bitcoin. The losses reported in the first 3 years of Bitcoin were over 31,000 bitcoin:

User td, reported they lost 50 BTC as they switched between wallets, Timo Y lost 0.05 BTC, programmerbruce lost 0.05 BTC from reformatting a harddrive, Arsenal lost 250BTC, an anonymous user claimed to have lost 1,008, dwdollar also had a reformatting issue and lost 1,000 BTC, Lynzoi reported that they and their friend had collectively lost 30.09 BTC, kwukduck’s friend was even less fortunate and threw away 150 BTC, Nevezen lost 20 BTC in a disk crash, Alex Thornton saw 0.02 disappear, cypherdoc lost 1.12 BTC, 0.0211 BTC was lost by dooglus, Rassah locked 2BTC in his wallet, Spruce’s friend lost 0.025 BTC, ThiagoCMC’s friend lost 2.5 BTC, Matoking lost 0.0 1BTC, dab saw 4 BTC vanish, bitplane lost 0.2BTC, MaxSan lost 0.01 BTC, neo_rage had 0.089 BTC disappear, Raize reformatted their device and lost the 100 BTC they had mined back in 2010, finway lost 40 BTC, 2 went from istar, a disk repartitioning saw TobyGoodwin lose 0.07 BTC, mb300sd lost 1,300 BTC due to due to a lost encryption key, opticbit saw 2 BTC disappear from not backing up his private key, Dalkore lost a huge 27,000 BTC after being an early miner and ltc_foundry lost 88 BTC in 2011.

• From 2013 to 2015 users reported losses of over 936 BTC:

User sublime5447 reported 5 BTC were stuck on a harddrive, lenny_ saw 34.372652 BTC lost due to a bug in their multibit wallet and the funds are still confirmed as stuck there to this day (address 1, address 2), MoonShadow’s brother lost a thumb drive with 150 BTC on, soc123me’s developer friend lost 500 BTC when their laptop was reformatted, RTQ1154 lost 78 BTC when they encrypted their wallet and mistyped the password, atlosas lost 0.3 BTC, OceanWhispers reported 55 BTC was lost for them, Musent reported 0.000035 BTC, 50 mined BTC were lost by MarketNeutral in a hard drive reformat accident, KuromaYoichi had a similar situation and lost 1.05 BTC, Tuxavant lost 1.3 BTC during the android RNG fiasco, adizzle lost the private key to their 4.1 BTC, Fabrizio89 had 0.85 BTC vanish, leen93 forgot the credentials to their blockchain.info wallet and lost access to 50 BTC, mallard lost 2 BTC, Furio lost 5 BTC by forgetting the private key. User david19 also reported a loss of 15,000 BTC however this was disputed by the community and he didn’t post any proof so the value is not being included.

• From 2016 - 2018 users reported losses of over 1,400 BTC: 

User mkc lost 0.008 BTC, vdramaline lost 0.03 BTC after deleting the wallet file. Pandalion98 sent 0.5 BTC to a null address by mistake when testing, one user lost 3.8 BTC after reformatting their phone, Rude Boy had a number of mishaps which saw 0.032 BTC be inaccessible, DaveF had 5 BTC disappear when the wallet file became corrupt, ViceOfBTC21’s mum threw away the paper wallet with 0.00542 BTC on, mr.mister’s friend lost 2.9 BTC in the all too common hard drive reformat, AIGADS lost their encryption key to 1,300 BTC, a damaged hard drive saw anheqiaobei lose access to 100 BTC, and MWD64 lost 3.1 BTC after forgetting the credentials

• A wallet encryption bug reportedly saw 68.8 BTC lost (although the thread doesn’t appear to exist any more).
• Polish exchange Bitomart reported in July 2011 that they had lost access to 17,000 BTC when the virtual machine including the wallet file and backups was accidentally deleted. 
• Suisse developer Stefan Thomas, who’s been rumoured to be a satoshi candoidate, lost 7,002 BTC by accidentally deleting the backup private keys and then forgetting his password for the third.
• Gabriel Abed, ambassador of Barbados to the United Arab Emirates, lost access to his 800 BTC fortune in 2011 when a colleague reformatted a laptop that contained the private keys.
• In January 2020, famous crypto skeptic and gold bug Peter Schiff managed to lose access to his wallet when he confused his phone pin and wallet password and then couldn’t remember his seed phrase to access his 0.23523760 BTC. 
• Alex Jones, the founder of the right-wing media group Infowars, claims he lost access to 10,000 BTC when he lost a laptop which had been gifted to him in 2011 by television personality and bitcoin proponent Max Keiser.
• In 2010 Australian technology journalist Campbell Simpson spent $25 on 1,400 BTC and then accidentally threw out the hard drive containing the private keys in a house clear out. 
• Technology magazine WIRED lost over 13BTC when they shredded the hardrive containing their hard earned crypto funds. The address can be seen here with the 13.34690781 BTC still sat in it.
• Reddit user Shotukan claims that he lost access to 533 BTC after his brother died and he couldn’t access his laptop where the private keys were stored. Some commenters have questioned the authenticity of the claim as no addresses with this balance could be seen around the reported time, however Shotukan retorted that the funds were split across multiple address. 
• In 2014 Brock Pierce, an early crypto investor and industry personality, revealed that he’d lost access to 50,000 BTC when he accidentally threw away the hard drive they were stored on in a garage clear out.

This will of course be a lower bound with many users not reporting their lost bitcoins and many not realising they've lost access to their funds yet! If you've lost access to some bitcoin then let me know and I can add it to the total.

Dormant Addresses 

Finally it’s possible to examine the bitcoin addresses which have not made any transactions for a number of years - these are referred to as dormant addresses. When looking at the top 100 dormant addresses where funds haven’t moved for 9 years we can see that there is a total of ~496,026BTC locked within. However, likely wrapped within this figure are some of Satoshi’s funds already counted in above, and the bitcoin of long term hodlers who still have the private key but are not yet selling. Estimates of lost bitcoin often include the value of all bitcoin which hasn't moved in 5 years or more however long term holding is a common investment strategy in bitcoin, especially with cycles typically mirroring the 4 year halving cycles, therefore I have not included all dormant bitcoins with my total for lost bitcoins as I believe this contributes to an over estimation.

The dormant address which has the most bitcoin within 1FeexV6bAHb8ybZjqQMjJrcCrHGW9sb6uF has had its own associated scandal and mystery. The 79,957.22061504 BTC currently within were stolen from Mt Gox in 2011 and later claimed by Faketoshi Craig Wright to be under his control, however there has been extensive research to debunk this claim. It therefore looks like the private key for these funds may be lost forever and we can add these to the total. 

The above is a result of extensive googling and reviewing on-chain data but is certainly a lower bound. However it does look to challenge other estimates of permanently lost bitcoin, especially the common figure of 3-4million. If you have any others of permanantly lost bitcoin then comment below and we can make the estimate even more accurate.

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[All views and research in this post is my own and does not reflect any views of current, previous or future employers]