Bitcoin Burn Addresses: Unveiling the Permanent Losses and Their Underlying Causes

Bitcoin burn addresses are addresses where bitcoins can be sent but never retrieved, resulting in the permanent loss of those coins. Given Bitcoin's fixed supply of 21 million coins, understanding the usage and the amount of bitcoins lost in burn addresses is crucial for evaluating their economic impact. However, identifying burn addresses is challenging due to the lack of standardized format or convention.

In this paper, we propose a novel methodology for the automatic detection of burn addresses using a multi-layer perceptron model trained on a manually classified dataset of 196,088 regular addresses and 2,082 burn addresses. Our model identified 7,905 true burn addresses from a pool of 1,283,997,050 addresses with only 1,767 false positive. We determined that 3,197.61 bitcoins have been permanently lost, representing only 0.016% of the total supply, yet 295 million USD on November 2024. More than 99% of the lost bitcoins are concentrated in just three addresses. This skewness highlights diverse uses of burn addresses, including token creation via proof-of-burn, storage of plain text messages, or storage of images using the OLGA Stamps protocol.