Cryptocurrency enthusiasts praise the decentralized nature of bitcoin. However, the imperfect methods used to protect digital tokens remove millions of bitcoins from circulation without much hope of restoring them.
Bitcoin owners keep the private keys they need to spend or move tokens. These keys exist in the form of complex data lines and are often stored in secure digital wallets.
These wallets are usually protected by passwords or authentication tools. While their complexity allows owners to store their bitcoins more securely, losing keys or passwords to wallets can be devastating. In many cases, bitcoin owners are denied access to their assets indefinitely.
An estimated 20% of the 18.5 million existing bitcoins are lost or in unaffordable, The New York Times reported on Tuesday, citing Chainalysis data. Currently, this amount is about 140 billion dollars. These bitcoins remain in the world's stock and still have value, but they are essentially kept from circulation.
Simply put, these coins will remain trapped indefinitely, but their inaccessibility will not change the price of cryptocurrency.
"There's a phrase that the cryptocurrency community uses: 'not your keys, not your coins,'" Jimmy Nguyen, president of the Bitcoin Association, told Insider.
At the moment the proverb is relevant. Some exchanges, such as Coinbase, provide some emergency recovery measures that can help users regain access to forgotten keys or passwords. But the exchanges are less secure than wallets, and some have even been hacked, Nguyen said.
The Bitcoin community is now at a crossroads, where participants disagree on whether bitcoin should maintain its strict security practices or exchange some of its decentralization for user-friendly security measures.
Nguyen gets into the last group. A supporter of the cryptocurrency argued that mechanisms should be created to allow users to recover inaccessible bitcoins in case of forgotten passwords, transfer of property and mis-addressed payments. The absence of such systems creates a barrier between cryptocurrency enthusiasts and the population that has not yet embraced bitcoin.
"If I keep the keys to your house, it doesn't mean I own the keys. I could have stolen the keys to your house. You may have lent me the keys," Nguyen said. "It doesn't prove who owns this property or asset."
He added that maintaining the current method of storing bitcoins also reduces its value both as a new form of payment and as security.
"There is a mismatch, if not outright hypocrisy, among bitcoin supporters because they want to promote the idea that you should have closed keys so that the coins are yours," Nguyen said. "If they want the value of the coin to grow because it is growing in use, then you have to take a much more open and convenient approach to bitcoin."