Beyond the supply cap: How lost coins make Bitcoin scarcer than you think

While over 93% of Bitcoin’s total supply has been mined, that doesn’t mean it’s all available. A significant portion is permanently out of circulation, lost due to forgotten passwords, misplaced wallets, destroyed hard drives or early adopters who never touched their coins again.

Estimates from firms like Chainalysis and Glassnode suggest that between 3.0 million and 3.8 million BTC — roughly 14%-18% of the total supply — is likely gone for good. That includes high-profile dormant addresses like the one believed to belong to Satoshi Nakamoto, which alone holds over 1.1 million BTC.

This means Bitcoin’s true circulating supply may be closer to 16 million-17 million, not 21 million. And because Bitcoin is non-recoverable by design, any lost coins stay lost — permanently reducing supply over time.

Now compare that to gold. Around 85% of the world’s total gold supply has been mined — approximately 216,265 metric tons, according to the World Gold Council — but nearly all of it remains in circulation or held in vaults, jewelry, ETFs and central banks. Gold can be remelted and reused; Bitcoin cannot be resurrected once access is lost.

This distinction gives Bitcoin a kind of hardening scarcity, a supply that not only stops growing over time but quietly shrinks.

As Bitcoin matures, it’s entering a monetary phase similar to gold: low issuance, high holder concentration and increasing demand-side sensitivity. But Bitcoin takes it further; its supply cap is hard, its loss rate is permanent, and its distribution is publicly auditable.

This may lead to several outcomes:

Increased price volatility as available supply becomes more limited and sensitive to market demandHigher long-term value concentration in the hands of those who remain active and secure in their key managementA premium on liquidity, where actually spendable BTC trades at a higher effective value than dormant supply.

In extreme cases, this could produce a bifurcation between “circulating BTC” and “unreachable BTC,” with the former gaining greater economic significance, particularly in times of constrained exchange liquidity or macroeconomic stress.

What happens when Bitcoin is fully mined?

There’s a popular assumption that as Bitcoin’s block rewards shrink, the network’s security will eventually suffer. But in practice, the mining economy is far more adaptive — and much more resilient — than that.

Bitcoin’s mining incentives are governed by a self-correcting feedback loop: If mining becomes unprofitable, miners drop off the network, which in turn triggers a difficulty adjustment. Every 2,016 blocks (roughly every two weeks), the network recalibrates mining difficulty using a parameter known as nBits. The goal is to keep block times steady at around 10 minutes, regardless of how many miners are competing.

So, if Bitcoin’s price drops, or the reward becomes too small relative to operating costs, inefficient miners simply exit. This causes difficulty to fall, lowering the cost for those who remain. The result is a system that continually rebalances itself, aligning network participation with available incentives.

This mechanism has already been tested at scale. After China banned mining in mid-2021, Bitcoin’s global hashrate dropped by more than 50% in a matter of weeks. Yet the network continued to function without interruption, and within a few months, the hashrate fully recovered, as miners resumed operations in jurisdictions with lower energy costs and more favorable regulations.

Critically, the idea that lower rewards will inherently threaten network security overlooks how mining is tied to profit margins, not nominal BTC amounts. As long as the market price supports the cost of hash power — even at 0.78125 BTC per block (post-2028 halving) or lower — miners will continue to secure the network.

In other words, it’s not the absolute reward that matters, but whether mining remains profitable relative to costs. And thanks to Bitcoin’s built-in difficulty adjustment, it usually does.

Even a century from now, when the block reward approaches zero, the network will likely still be protected by whatever combination of fees, base incentives and infrastructure efficiency exists at that time. But that’s a distant concern. In the meantime, the current system — hashrate adjusts, difficulty rebalances, miners adapt — remains one of the most robust elements of Bitcoin’s design.

Did you know? On April 20, 2024, following the launch of the Runes protocol, Bitcoin miners earned over $80 million in transaction fees within a single day, surpassing the $26 million earned from block rewards. This marked the first time in Bitcoin’s history that transaction fees alone exceeded the block subsidy in daily miner revenue.

The future of Bitcoin mining: Energy consumption

It’s a common misconception that rising Bitcoin prices will drive endless energy use. In reality, mining is constrained by profitability, not price alone.

As block rewards shrink, miners are pushed toward thinner margins, and that means chasing the cheapest, cleanest energy available. Since China’s 2021 mining ban, hashrate has migrated to regions like North America and Northern Europe, where operators tap into surplus hydro, wind and underutilized grid energy.

According to the Cambridge Centre for Alternative Finance, between 52% and 59% of Bitcoin mining now runs on renewables or low-emission sources. 

Regulations are reinforcing this trend, with several jurisdictions offering incentives for clean-powered mining or penalizing fossil-fuel operations.

Moreover, the idea that higher BTC prices will always mean higher energy use misses how Bitcoin self-regulates: More miners raise difficulty, which compresses margins, capping energy expansion. 

Renewable-based mining brings its own challenges, but the dystopian future of endlessly expanding fossil-fueled hash power is increasingly unlikely.

How does a crypto mixer work?

To understand a crypto mixer, it’s useful to compare it to the concept of money laundering in traditional finance, albeit with legal and ethical nuances. The process of “mixing” is essentially designed to obscure the origin and destination of coins.

Here’s a typical workflow of how a cryptocurrency mixer operates:

Deposit: You send your cryptocurrency to the mixer’s wallet address. Multiple users do the same, creating a large pool of coins.Mixing/shuffling: The mixer’s system pools and shuffles these coins together, breaking any visible connection between deposited and withdrawn funds.Redistribution: After mixing, the service sends back an equivalent amount of coins to your specified address, but these aren’t the same coins you deposited. They come from the pooled coins of all participants.Fees: The mixer usually deducts a small fee, generally ranging from 1% to 3%, to cover operational costs.

This process effectively disrupts blockchain analysis, making it extremely difficult for anyone to trace the coins back to their original owners.

Types of cryptocurrency mixers

Not all mixers are created equal. They can broadly be divided into two categories: centralized and decentralized mixers.

Centralized mixers

Centralized mixers are the most common and operate similarly to traditional services. You send your coins to a company or entity that controls the mixing process, and then they send back “clean” coins after mixing. These services are relatively easy to use, often providing a simple user interface.

However, centralized mixers require you to trust the service operator with your coins, at least temporarily. This introduces risks such as:

The mixer could be a scam and disappear with your funds.It could be hacked, exposing users’ data and coins.The operator may keep logs that could compromise your privacy.

Decentralized mixers

Decentralized mixers use blockchain technology and smart contracts to automate the mixing process without a trusted third party. They rely on cryptographic methods such as zero-knowledge proofs to mix coins in a trustless environment. Users pool their coins into a smart contract, which then redistributes coins in a way that ensures privacy.

Advantages of decentralized mixers include:

No central point of failure or custody risk.Higher privacy because no single party controls the funds.Often more resistant to regulatory crackdowns.

Did you know? The DOJ indicted four Russians for operating crypto mixers Blender.io and Sinbad.io, yet failed to show they knowingly laundered illicit funds. The indictment relies heavily on vague forum posts and lacks concrete evidence of criminal intent or ties to US commerce, raising serious doubts about its strength in court.

Real-world cases involving mixers and scams

Unfortunately, the privacy offered by crypto mixers has also attracted criminals. The very anonymity that protects innocent users can also shield illicit activities, leading to widespread misuse.

Crypto mixers have been linked to ransomware attacks, dark web marketplaces, fraud and drug trafficking. Criminals often use these services to “clean” proceeds from illegal transactions and hide their tracks from law enforcement.

A notable example is ChipMixer, a service seized by Europol in 2023 for allegedly facilitating money laundering for dark web markets and ransomware groups. Authorities dismantled the platform’s infrastructure over alleged money laundering, seizing four servers, 1,909.4 BTC (about $210 million as of May 26, 2025) and seven TB of data across 55 transactions.

Mixers have also been involved in laundering stolen funds from cryptocurrency exchange hacks. The complexity of these transactions makes it difficult for investigators to recover stolen assets.

In February 2025, Bybit, a major cryptocurrency exchange, suffered a significant security breach resulting in the theft of about $1.5 billion worth of cryptocurrencies. The attackers, attributed to the Lazarus Group, a North Korean state-sponsored hacking organization, employed various crypto mixers, including Wasabi, CryptoMixer, Railgun and Tornado Cash, to launder portions of the stolen assets. 

Despite efforts to trace the funds, a significant portion remains unaccounted for, highlighting the challenges posed by mixers in cybersecurity investigations.

Are crypto mixers legal?

The legal status of cryptocurrency mixers depends largely on the jurisdiction and context of their use.

Most governments impose strict Anti-Money Laundering (AML) and Counter-Terrorist Financing regulations on financial services, including digital currency services. Mixers, by their nature, complicate AML compliance because they obscure transaction trails.

For instance,

In the European Union, the 5th Anti-Money Laundering Directive (5AMLD) includes digital currency providers under its regulatory scope, requiring them to perform KYC checks and report suspicious activity.In the United States, FinCEN classifies cryptocurrency mixers as money transmitters, requiring registration and compliance with AML regulations. Unlicensed mixers can face severe penalties and criminal charges.

Legal uses vs misuse

Using a mixer for privacy reasons is not inherently illegal. However, if mixers are used to launder proceeds from crimes, authorities will prosecute offenders. Similarly, operating a mixer without appropriate licenses or regulatory oversight can be illegal.

If you choose to use a mixer, make sure you understand the legal implications in your country and avoid any activity that could be linked to money laundering or fraud.

Did you know? Crypto mixer transactions are still taxable. Using a mixer doesn’t hide gains from tax authorities; failing to report them can trigger audits or penalties. Always keep records and understand your local tax obligations.

How to stay safe and avoid scam-linked mixers

If you decide to use a cryptocurrency mixer, your safety and security should be paramount. 

Here are some essential tips to avoid scams and legal troubles:

Choose reputable mixers: Conduct thorough research. Look for mixers with good reviews, transparent operations and clear compliance policies.Avoid unknown or suspicious services: Steer clear of mixers linked to scams, hacks or regulatory actions.Check for licensing and compliance: Prefer mixers that comply with AML/KYC regulations, especially if you are a business or high-value user.Understand fees and timelines: Be clear on the fees involved and the expected time for your funds to be returned after mixing.Use hardware wallets and strong security practices: Always safeguard your private keys and use hardware wallets to minimize risks.Stay updated on regulations: Laws surrounding crypto mixers evolve rapidly. Staying informed will help you avoid inadvertent legal violations.