If BitCoins only ever go out of circulations past 21 million, What do we do when all coins are stored in dormant, idle or otherwise inaccessible wallets ?
That would be like dividing by zero.
Example; Lets say a person has accumulated 10,000 BTC over their lifetime...and then...they die. There computer is formatted and either resold or passed on to a relative. Either way the wallet.dat and the private keys are gone.
Thats 10,000 BTC that will never be circulated again.
It that occurred only 21,000 or so times. That would the whole of BitCoins in circulation would it not ?
The next time it happens, it would not be 10,000 BTC. The loss of 10,000 BTC would decrease the total supply of BTC by 10,000 BTC, so a comparable loss the next time would be 9995.23809524 BTC. The third time, a comparable loss would be 9990.47845805. The cost of anyone actually accumulating and retaining 10,000 BTC drops with each loss, compounding dramatically. By the 100th iteration, a comparable amount is 9539.40398171, and by 1000 iterations, a comparable amount is 6213.70605389.