At least 1.6 million BTC stones sink into the sea! Why is Bitcoin scarier than you think?

Source: coinmetrics
Compile: Shallot
The actual circulation of BTC is 16.3 million, leaving less than 3 million bitcoins for mining.

At 8:4 on October 19, the bitcoin block reached 600,000 and the 18 million bitcoin was dug up. The onion query found that as of now, the total flow of Bitcoin is 18,056,950.

However, according to further research by CoinMetrics, the actual supply of Bitcoin is much lower than this data.

According to statistics, at least 1.6 million bitcoins may be permanently lost. In addition, the actual liquidity of Bitcoin (over 16.3 million) is much lower than it should be.

After delving into the bitcoin code, you can see that there are formulas that set limits on block rewards. These simple lines of code effectively set the bitcoin supply to 21 million BTC.

Of course, most investors know the total supply of Bitcoin. However, what more people don't know is that Bitcoin's code base does not review BTC supply limits of no more than 21 million, but software checks each block's requirements no more than the specified amount.

Take the 18 million bitcoin mining on October 19 as an example:

210,000 Blocks* 50 BTC + 210,000 Blocks* 25 BTC + 180,000 Blocks* 12.5 BTC = 18 million BTCs (Small Onion Note: The company calculates based on block rewards)

The birth of this bitcoin, known by the encrypted community, is a milestone in the end of the bitcoin inflation process. But savvy observers commented that Bitcoin's supply did not reach 18 million BTC when the block height reached 600,000. Bitcoin core developer Pieter Wuille mentioned that the actual supply of bitcoin at the block height of 600,002 was 17,999,854.82192702 BTC.

Today, we will delve into why bitcoin supply is lower than expected and explore how many bitcoins have been lost forever.

1. Bitcoin that can prove lost

1. Creation Zone Block Coin

The bitcoin ledger consists of a set of "unspent outputs" or "UTXO set". By summarizing the BTC values ​​of these outputs, you can get the bitcoin supply seen by the entire node.

The first block of Bitcoin contains a transaction that has produced 50 BTCs. However, the 50 BTC outputs of the transaction were not included in the UTXO set. It is not clear whether this is due to negligence or intentionality.

The direct result of this is that even if the 50 BTCs are visible in the transactions contained in the main chain, they will not appear in the bitcoin ledger.

2. Duplicate Coinbase transactions

Another negligence of Bitcoin designers is the handling of duplicate transactions. Although at first glance this seems unlikely (because they contain digital signatures and references to previous transactions), it is still possible to create duplicate transactions.

The easiest transaction to copy is a Coinbase transaction (the first transaction in the block is a special transaction called a coin transaction or a Coinbase transaction). The miners who won the mining were built and paid the coin and the miner fee to their own Bitcoin wallet address (without digital signatures or quoted transactions for previous transactions). If the miner wants to create a Coinbase transaction, pay the same amount of bitcoin to the same address and use the same extra nonce function (used in Coinbase trading to help with mining), then the transaction will be the same.

This happened twice in the early history of Bitcoin:

The transaction d5d2..8599 is the coinbase output of block blocks 91, 812 and 91, 842

Trading e3bf … b468 is the coinbase output of blocks 91, 722 and 91,880 In each case, when the second transaction occurs, its output will overwrite the previous output. This results in neither of the covered outputs being concentrated in the UTXO.

In other words, this 100 BTC is not in the book of Bitcoin.

To this end, the developer introduced BIP-30 in 2012 to prohibit the inclusion of new duplicate transactions before the output of the old transaction is fully used. However, the processing of existing duplicates has not changed and remains in the chain to this day.

In addition, the introduction of BIP-34 in the second half of 2012 also made it more difficult to replicate the coinbase transaction library.

3. Remuneration not received by miners

Another group can prove that the lost bitcoin is related to the coinbase transaction through full node verification.

The Bitcoin agreement stipulates that the miners in the effective block can receive the remuneration specified in the agreement and the transaction fees contained in the block. Each node checks whether the miner is trying to claim compensation beyond the allowable range. However, it is worth noting that the entire node does not care whether the amount received by the miners is lower than the amount it deserves.

Obviously, asking for less than what they should receive is not a rational act of the miners, but this happens quite often.

The first was on Block 124,724 in May 2011, and the last was at the height of 564,959 in late February 2019.

The table below lists the most notable cases:

Overall, this behavior occurred in 3 different events, with a total of 1,221 anomalies. The chart below shows the number of blocks that have not applied for full compensation:

As shown in the above figure, there are many cases where the application for remuneration is not fully applied at a height of 162,000. In addition, there are many cases in the vicinity of block heights of 180,000 to 230,000 and 530,000.

According to Bitcointalk user midnightmagic, the original intention of Bitcoin developer Matt Corallo was to pay tribute to Nakamoto.

4, OP_RETURN output

There is a special type of bitcoin transaction output as OP_RETURN. This transaction output allows the user to embed data into the blockchain (currently up to 80 bytes per output) without adding these outputs to the UTXO set.

Although most of these outputs are created with a value of 0 satoshis, some output is not. As of block 600,000, there are already 3.723039 BTCs sent to the OP_RETURN output, making it permanently unusable and not part of the bitcoin supply.

4, summary

In general, we can calculate the actual supply of bitcoin at a block height of 600,000 by subtracting 18 million bitcoins from the bitcoin that can be proved to have been lost.

It is calculated that at a block height of 600,000, the number should be 17,999,817 BTC. This is the exact value of the technique, which we can get by querying the entire node.

In addition, there are cases where the actual supply of bitcoin bitcoin (more than 16.4 million pieces) is lower than it should be.

Second, assume the lost bitcoin

1, pseudo address

There is no easy and provable way to destroy Bitcoin before the OP_RETURN output is standardized. As a result, some users use a "false address (pseudo address)", that is, an address without a known private key.

We have listed some notable fake addresses:

As the block height is 600,000, only these 3 addresses result in the loss of 221.193.53012 BTCs.

However, in theory, these bitcoins will not be lost forever. Someone can find the private key for it. However, the only known way to find the private key through only one address is to randomly guess until the correct combination is found. In fact, the possibility of this happening is extremely small.

2, Bugs

There are some key sections of code that will be responsible for drafting, signing, and broadcasting our transactions to the Bitcoin network. Today, we rarely find some destructive errors in it, but this is not always the case.

In November 2011, MtGox encountered a vulnerability in its wallet software, sending 2,609,363,043,419 BTCs to fake scripts, and then did not know how to spend it. The fake script is like if you are trying to send money to an "empty" public key, and the software is not programmed to detect it. This is not advisable.

In addition, similar vulnerabilities have occurred in other cryptographic assets (Etherbase Parity lost 513,000 ETH).

3, zombie coins

As we all know, another example of losing Bitcoin is the currency that has not been moved for years. We have no way of knowing if the asset owner still has a password.

Conservatively, we only calculate the currency of the last mobile bitcoin before July 2010. The reason is simple: investors who bought Bitcoin before July 2010 have a very low cognitive value for Bitcoin, so they probably haven't gone to backup the wallet.

As of the 600,000 blocks, there were 1,496,907.88,000 bitcoins in the last mobile bitcoin before July 2010. According to various estimates, Nakamoto has more than half of these coins (because it was the main miner in the early history of Bitcoin).

Overall, these zombie coins have rarely moved since the bull market in 2013. Considering that the price of stolen bitcoin has experienced a skyrocketing situation, it can be concluded that the owners of these bitcoins are either long-term Holders or they cannot obtain them at all.

4. Bitcoin that will not be circulated for the time being

The last category may be considered to be lost, or at least temporarily not circulating, bitcoin (known stolen bitcoin).

There have been many major hacking and theft incidents in the history of Bitcoin. Bitcoin in two cases of theft was considered to be no longer in circulation.

In March 2011, hackers stole 79,956 BTCs from MtGox wallets, which have not yet been touched. As of today, it is the address of the sixth richest.

In the history of Bitcoin, there have been many major hacking and theft incidents, and two of them have been considered “non-circulating” events. In 2011, MtGox’s stolen 80,000 BTCs and the 2016 Bitfinex were stolen. The 120,000 BTC.

In March 2011, hackers stole 79,956 BTC from MtGox's wallet. These bitcoins have not moved so far (the hacker is most likely to be unable to access the private key). As a result, the address ranks sixth in the Bitcoin Rich List.

In addition, in August 2016, Bitfinex lost 119,756 BTC due to hacking, and until today, these stolen coins rarely moved. As of the 600,000 blocks, there are still 117,091.31922097 BTCs in the hacker's address.

Third, summary

We depict the supply of bitcoin up to 600,000 blocks from three perspectives.

1. Bitcoin's Supply: The correct value of bitcoin supply on Bitcoin technology (except for bitcoin that can prove lost);

2.Allive Supply: A supply other than Bitcoin that can prove lost and assumed to be lost;

3.Liquid Supply: A supply other than stolen, bitcoin that can prove to be lost and assumed to be lost. The calculation results are shown in the figure below:

As of the block height of 600,000 bitcoins, the supply of liquid supply (Liquid Supply) was 1630.1039, which was lower than the 18 million that should be.

Although the report calculates the most conservative estimate of the number of bitcoin losses. But it still shows that bitcoin is getting scarcer. At present, there are only less than 3 million bitcoins left in Bitcoin for mining. And can scarcity really stimulate the price of bitcoin? let us wait and see.

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