No doubt a large amount has been permanent lost. All it takes is for one early adopter with 100,000 bitcoins to lose their wallet a few years ago. those are gone for good now.
I have a wallet with ~2,400BTC and I forgot my encryption passphrase. It was >400 chars and I know most of it but I'm making some mistake somewhere in my recall. If the value keeps going up I'm going to have to get serious about cracking that wallet.
I meant measures beyond remembering really hard. Writing software to brute force it with the bits I already know. Believe me I'm pretty unhappy about the situation.
Provisioning EC2 GPU instances and the like and writing the grammars.
If someone has the incentive to break into your wallet, all you need is a phrase long enough to make physical violence a better alternative for the attacker, and you're set, no need to make the phrase any longer.
It has been estimated on bitcointalk that around 1-2% have been lost. That's not really a large amount. You can still divide bitcoins into satoshis (1E-8) or even further with a protocol change in the future.
I never thought much about the effect of permanent loss on Bitcoin. Unlike cash, encrypted wallets and the block chain make theft harder than just destruction of the money.
A virus which deletes wallets instead of trying to exfiltrate BTC seems much easier to implement and would be pretty devastating for the currency.
Damaging but not fatal. Bitcoins are divisible down to 8 decimal places so the value would just scale up according to the reduced supply. And 8 decimal places is a software limit; a revised protocol could increase that.
Sounds like bitcoin requires a backup system by default, then. Because otherwise, the first virus written by some pissy kid that just deletes wallets will devastate a lot of people.
