Technology

$3.4B in Ether lost forever due to user errors, Coinbase warns

Posted on by Minakshi

₹28,500 Crore in Ether Vanishes Forever: User Errors and Bugs to Blame, Warns Coinbase Executive

Ethereum image

The world of cryptocurrency, while promising, also carries significant risks. A recent report highlights a concerning trend: a massive amount of Ether (ETH), the cryptocurrency powering the Ethereum network, has been permanently lost. The reason? Simple human errors and software bugs.

Staggering Losses: Over 913,000 ETH Gone

According to Conor Grogan, Head of Product at Coinbase, a staggering 913,111 ETH has been lost forever. This represents approximately 0.76% of the total circulating supply of Ether. At current market prices, this translates to over $3.43 billion USD, or roughly ₹28,500 Crore. The increase since March 2023 has been over 44%!

How Does This Happen?

While the reasons for these losses vary, they often stem from:

  • Incorrect Address Input: Sending Ether to the wrong address due to typos.
  • Loss of Private Keys: Forgetting or losing the private keys needed to access an Ethereum wallet.
  • Smart Contract Bugs: Flaws in the code of smart contracts that can lead to the unintended locking of Ether.
  • Sending ETH to Burn Addresses Sending ETH to an address from which it is impossible to recover funds.

The Impact of EIP-1559

Adding to the equation, over 5.3 million ETH has been deliberately “burned” (permanently removed from circulation) since 2021 through Ethereum Improvement Proposal 1559 (EIP-1559). This mechanism aims to make Ether a deflationary asset and control transaction fees, further decreasing total supply.

Summary:

  • Over ₹28,500 Crore worth of Ether lost due to user errors and bugs.
  • Lost Ether represents 0.76% of the total circulating supply.
  • Deliberate burning of Ether through EIP-1559 also reduces total supply.
Key Takeaways:

  • Double-Check Addresses: Always meticulously verify the recipient’s address before sending any Ether.
  • Secure Your Private Keys: Use secure methods to store and back up your private keys, the keys to your digital wealth. Consider hardware wallets.
  • Understand Smart Contracts: Be cautious when interacting with unfamiliar smart contracts and understand the risks involved.
  • The price can go up: The dwindling ETH supply could mean an appreciation in the long run.
  • Regulatory Scrutiny: The increased rate of permanently lost ETH could spur regulators to accelerate consumer protection initiatives in the crypto space.