This is the fate of someone negligent in not keeping his seed phrases or private key well in a safe place. If he loses his hardware wallet, he can recover his assets if he has kept his security seed phrases. However, the problem lies in losing access to the seed phrases. This is the most important thing that anyone should give attention to, help secure it and make sure that it can be accessed even after years have passed. The amount of Bitcoin stuck in wallets whose owners have lost access to them is coins that will remain stuck in the wallets for years. There is no way to recover these Bitcoin amounts, and it is not logical to compensate those who have lost their wallets and the Bitcoin amounts they hold. These are the consequences of their mistakes; no one else should pay the price for them.

Indeed, I would feel very sad if I were exposed to what they were exposed to because the amount of Bitcoin that perhaps didn't seem significant at the time when it was in their possession might have significant value now. Still, perhaps their mistakes will be a great lesson for others, so every person must not lose access to his wallet because it will forever lead to the loss of Bitcoin.

Don't expect any compensation from what you called lost BTC since no one could ever touched those balances unless the owner of that wallet found there private key and open it back again. If located owners would decide to dump all of that 5 million BTC expect that there will be a dump to happen since imagine how huge that volume to dump by those people so for sure that it create a fud which can contribute other people decision to sell out there coins since they get afraid for worse situation that might happen.

Also much better you should not pay attention with those things and try to pay attention on other things since I believe its more worthy if you focus your attention on some things that can give you benefits in long run.

Well, I guess if you had money that was somehow locked away permanently, with no way to access it ever again, there'd be no way to definitively prove the money was yours. Even if you knew deep down that you earned or owned that money at some point, with no private keys as the rightful owner you'd have no evidence to back up your claim over it.

So, in that kind of situation, how could you conclusively prove the money doesn't actually belong to someone else instead? If you can't verify your own ownership of it, the door is open for another party to potentially step in and argue it's their money that got locked away. And, if it is someone else's, then it is not lost.

First we need to understand what is meant by losing bitcoin. In real world, losing fiat means losing ownership of the paper currency (like dropping it somewhere unintentionally, stolen etc). Losing bitcoin means you lose method to access your coins like losing private key or seed. This is biggest dilemma of Bitcoin i.e. once you lose the access its gone forever and this is something not possible in real world financial system.
AFAIK, in Bitcoins who ever owns the key owns the coin. There is no concept of identities in Bitcoin since its pseudonym. To prove the ownership you need the private key. (Correct me if I am wrong) 

Lost BTC are lost forever unless they are found by getting access to where they were stored. I do not think they will be able to recover those coins.

Who will compensate them? Do you know of any BTC reserve from where they can be compensated? Assuming there is any planned compensation, do you know those who lost their coins. What will happen to those who lost their coins through mistake of wallets? I do not see any point in compensating those who lost their coin because I don't think anyone will send them their mined Bitcoin.

“Lost coins only make everyone else’s coins worth slightly more. Think of it as a donation to everyone”
~ Satoshi Nakamoto

/thread

+1 
This is the first thing I remember when I saw this thread.
It just happened you quoted it first

This statement from Satoshi Nakamoto before is a simple yet straightforward explanation for the one what OP stated. If you really think and analyze it is indeed correct and applies.

That's a great donation. I wonder if he's dead or just really doesn't want to use his Bitcoin. I guess we'll never find out.

What you are proposing goes against bitcoin itself. Satoshi knew since the beginning that a good portion of bitcoins would have gone lost forever, and he was fine with that, so why should you worry? I am extremely against adding you bitcoin because that would mean giving space to many other changes in the future, and bitcoin would lose what made it special.

This is a commendable idea because it would make those who lost their BTC really happy BUT it would certainly create only chaos in the whole Bitcoin network and market. Now, maybe in extension with your idea there can be another coin that would instead be used as compensation for those lost Bitcoin but then again the question of distribution can be a big problem. So better us stick to what has happened...lost Bitcoin are forever lost there is no way to recover them and that is why there is a big reminder to holders to make sure all safeguards are in placed...just like the fiat money once you lost them then most probably you lost them for good.