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Could the lost cryptocoins go to charity?

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What gold is buried in dead computers?

With cryptocurrencies like bitcoin, you must guard the private keys which give you control of your own bitcoins well. You must guard them from being stolen (which calls for secure wallet programs, strong passwords and even offline paper wallets) but you must also guard them from being lost, which means backups, and possibly escrow in the event of your death.

These two desires can sometimes be at odds. For better or worse, there are reports of people who have lost many thousands of bitcoins, today worth many millions, due to hard drive failures, poor backups and other reasons. They are gone forever.

A coin could be created with this rule. Every coin must be "spent" in a transaction every so often, such as every 2 years. You can "spend" your coins by sending them in a transaction back to yourself, usually to a new unknown address. Any coins not spent for 2 years would be declared lost, and would be transferred to the address of a charitable foundation created by the coin's creators. The foundation would have a charter promoting suitable causes -- which could range to cryptocurrency related causes to other popular ones. It probably would not be a controversial or polarizing cause because people might be annoyed if the coin is seen benefiting something of that sort.

All wallet software for this coin would be programmed to make sure all coins were spent in such a way on a regular basis. This would incur small transaction fees, but they should be quite minor. (If desired, the rule could be that small fragments, which are not at least 1000x expected transaction fees, would not be subject to this expiration rule. Or there could be a practice that renewal transactions are marked as such and usually processed without fees. In the long run, I expect fees to get quite low anyway.)

This would mean you could not keep coins long term in paper or offline wallets.

Existing blockchains

Existing blockchains could try this approach as well. The least controversial way (though still controversial to be sure) would be to declare the policy in a new software revision, only for addresses created after the revision, and only after there was time for all wallets to adapt for the requirement to renew.

Much more controversial -- but most valuable for charity -- would be a retroactive declaration. In that case, the declaration would not take effect for several years, telling people, "If you don't refresh your coins by spending them to yourself sometime in the next 3 years, they go to the foundation."

The value of that proposal is that a lot of the lost coin is early bitcoin. There are known reports of major losses. There are many people who believe that Satoshi him/herself may have lost a large block of coins disk destruction. There are also those who believe that Satoshi is dead. (They largely believe this because Hal Finney is a leading candidate for being Stoshi. Hal is cryopreserved, which means the keys to his bitcoins might exist in his preserved brain for possible future extraction with as-yet nonexistent technology, or of course his reanimation. I did not know Hal well but he did not die the death of a billionaire, that is for sure.)

Even so, it can't be ignored that even without Satoshi's $6B worth of bitcoin, there is probably hundreds of millions of dollars of lost bitcoin out there, and it's a shame that it should just stay destroyed, rather than doing good in the world. Of course, it can be pointed out that the lost bitcoin shrinks the supply of traded bitcoin, and thus increases the value, so the value is not lost. That's partially true, but not entirely, unless everybody knows the bitcoin to be truly lost.

And yes, there are some who have lost bitcoin that might be found in the future. I have a paper bitcoin somewhere that I can't find. I would lose it under this scheme. There may be hard drives sitting in storage units, or dead drives that can be recovered with future technology. There are supposedly drives in landfill somewhere with significant coin on them. But the odds of recovery are low and the benefit good.

Even so, I doubt a retroactive proposal would win the world. This doesn't mean that future coins or future forks of coins might not, so I put it out there.

Comments

If Bitcoin added the ability to reclaim lost coins, would existing lost property laws take effect?

I assume they don’t today because there’s no practical way to reclaim lost coins.

Well, to reclaim a coin (or a transaction rather) you would need to know its public key and have some way to prove it was yours. The private key is lost, of course. You could prove it was yours if the person who sent it to you would testify that they sent it to you, and if there were a mechanism for recovery that could work. I doubt that a coin would want to give police or governments such power.

If you got the coin by mining it, there is nobody who "gave" you the coin to testify. It could be if you spent part of the coinbase from that mined block with somebody, they could prove that they were the recipient and then testify who spent that money, thus confirming ownership of the mining block. But again, I don't see any coin adding an ability to take an unspent block and transfer it to a specific person. To a foundation perhaps, but not a specific person. Police might use that to just say, "Those are criminal coins from selling illegal goods, we are seizing them, redirect them to us."

I’m not an expert on the topic by any means, but I know some jurisdictions have laws that require lost property to be turned over to the government if the owner can’t be located. So it seems to me that the key question is not whether the former owner can prove it was his, but whether some entity is taking possession of it based on the fact that it was lost or abandoned.

Have not studied those laws. If they exist, then this would never happen. Nobody is interested in that.

https://www.sec.gov/fast-answers/answersescheathtm.html
"All states require financial institutions, including brokerage firms, to report when personal property has been abandoned or unclaimed after a period of time specified by state law — often five years. Before a brokerage account can be considered abandoned or unclaimed, the firm must make a diligent effort to try to locate the account owner. If the firm is unable to do so, and the account has remained inactive for the period of time specified by state law, the firm must report the account to the state where the account is held. The state then claims the account through a process called "escheatment," whereby the state becomes the owner of the account."

If it were possible to identify abandoned bitcoins, then I would expect the same process to apply.
On the other hand, one could argue that loss of the key means the bitcoins no longer even exist, equivalent to setting fire to stack of $100 bills.

There are different definitions of exist, of course. The key no longer exists. And unless they are known to be destroyed, it harms nobody else to give them to a foundation, thus my proposal.

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