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Could a government, determined to stop bitcoins, just buy a lot of bitcoins and delete the wallet afterwards? Are the bitcoins gone then?

Murch
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Fabian Zeindl
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The bitcoins are still there, but without the private keys they would be unspendable and it would be highly unlikely that anybody would ever rediscover the private keys.

However, such an attack would not hurt the bitcoin network: The previous owners would already have been compensated through the sale, and as the total value of the network remains approximately the same, the network's value would then redistribute to fewer units of bitcoin, increasing the value of each remaining unit. The attack would only make the bitcoin users wealthier.

Even if all but a single bitcoin were lost, the network could carry on: It has been discussed many times (see , ), that it would be simple to adapt the bitcoin protocol to divide into smaller subunits. Currently Satoshi are the smallest subunit and there are 10^8 Satoshi per Bitcoin, but if the protocol were adopted to allow bitcoin to be divided to 10^16 units, there would again be sufficient money supply to serve a global market to make payments in any amounts.

Community
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Murch
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  • Bitcoin (on-block chain at least) is already a deflationary model; some extra deflation from burning money wouldn't hurt it. – LateralFractal Oct 06 '13 at 00:12
  • What a government could do, is buy most of the currency gradually over time, wait for an opportune moment and then sell it all off crashing any market dependent on Bitcoins. Effectively inducing hyperinflation through coordinated release of Bitcoins (any government mining co-op could do the same without tipping their hand). But that would need to need to be a question in its own right. – LateralFractal Oct 06 '13 at 00:21
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Are the bitcoins gone then?

Yes. More correctly they'll always be there, just unspendable.

Anonymous
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Let's assume, for the sake of argument, this works and destroys the Bitcoin network.

Everyone who held Bitcoins would be rich, since the government had to buy those Bitcoins at whatever price they demanded. Nobody would be out money because nobody would hold Bitcoins that were no longer useful since the government had bought them.

What would the government accomplish in this process? Nobody would have lost any money. A new Bitcoin system could be started easily. It would have cost a fortune.

Destroying or losing Bitcoins is a gift to everyone who holds Bitcoins.

David Schwartz
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