Deflation happens.  With Bitcoin's high divisibility, any permanent losses of the monetary base simply makes the remainder more valuable; literally the reverse of the debasement of a currency (i.e. inflation)


No.  Not anyone here who has an economics background, or has been here long enough to understand it, anyway.  It really isn't a problem, but I understand that me saying so doesn't really help.  Please search the archives on this topic, as it has been beaten long since dead.

Why not make the 'dead' bitcoin reclaimable(say regenerated if inactive for 50 years).  And continuously deflation might not be a good thing(eg. discourage investment).

Mostly because it would introduce an exploit path and reduce security.  Think about this; whether you use time, or confirmations, or whatever to age an account, how would you go about writing such rules into the vanilla client so that all honest nodes could collectively agree when an account is lost or abandoned as well as stop malicious clients from being able to take advantage of that?  Currently it's impossible for any lost coins to be recovered, honestly or not, so it's equally impossible for that to be an attack vector.  Add to that, what would be the gain to the network to be able to recover lost coins?  As already mentioned, lost coins are not a problem for the network's function, and everyone else's base value increases slightly when you lose your wallet down the memory hole.  So the only loser in the event is the owner of those coins.  The rest of the network has no incentive to risk such an attack vector.

And deflation does not discourage investment, although it can alter the risk/reward calculations of an investor.  Any deflation that Bitcoin would experience after all 21 million bitcoins had been dispersed would be very gradual.  Actually, we are experiencing a great deal more deflation right now, due to the size of the bitcoin economy increasing at a vastly greater rate than the currency is currently inflating.  Considering that Bitcoin is currently inflating at about 50% APR, it says a lot that the value has been increasing at the pace that it has.

This is not likely to happen very frequently once Bitcoins become mainstream and people store a serious proportion of their wealth in Bitcoin.

The scenario you describe is equivalent to someone burying gold coins in the garden and telling nobody about it until they die.

Most sane people don't store gold in this way. They keep it in a bank vault, they insure it, and they leave instructions with their lawyer or notary in case they die.

Similarly, most sane people won't store most of their Bitcoins on a single wallet.dat file on their laptop, once Bitcoin becomes mainstream. Unless it's only a small amount. 

At the very least they will make several backups and tell a family member about them.

Sure, we could use 64 or 128 bytes to store a buttload of 0's, or, we could hit the reset button and start a new block chain. Takes less bandwidth and computational power.

if a bitcoin lies around for 50 years in the same wallet does not mean it's dead/lost, maybe there's nothing good enough to exchange it for?

Or the wily, mischievous old guy could make several identical back-up wallets and bequeath a copy to each of his undeserving relatives in his will.