Here is one of bitcoins major flaws.. NO method of identifying and replacing lost coins which is unstable and potentially inflationary.
Yes... one of the biggest flaws. We assume that the number of Bitcoins in circulation will slowly increase from 2009 to 2140 and that they will stabilize by 2140. If such large numbers of BTCs are "lost", then the currency will be extremely vulnerable to deflation.
Something should be done to maintain the total number of BTCs available.
What's so bad about deflation due to lost BTC?
It should be less of a problem as time goes on and people get more and more careful with their BTCs.
I guess over the long run at some point as time approaches infinity it would have to by defn kill he system..