What happens if Bitcoins are lost Since there are a finite number of Bitcoins that can be created, I am wondering what happens if some of the coins are lost. My questions are three fold:


How do you define a "lost" coin? For example if a bank note that was in my pocket is not there anymore (provided that I did not spend it), I know I lost it.
How does the network know a coin is lost?
How would the remaining coins value if some are lost? For example, assume there are 10 coins in total in circulation each worth 100 usd, the total spending power is 1000 usd. If say 2 of them are lost, are they assumed to be taken out of the circulation for good or someone can pick them up and reuse them. I guess in the first case the value of the remaining coins are worth 125 usd each due to fewer coins in circulation while in the latter case the value of each case would stay the same (this comes back to the second question of if the network is aware of the lost coins).


I come from non-programming background so appreciate clarification.

Thanks
Since the "ownership" of bitcoins is essentially tied to having knowledge of the private key for the address they are stored against, it's very difficult to prove that nobody knows the private key.

However, it is possible to send bitcoins to an address with no private key, essentially destroying them. Details here: How to generate a valid bitcoin address for destroying bitcoins?

To answer your 3 questions:


There is no accepted definition of a lost bitcoin that I'm aware of, and it's unlikely there will be one because of the difficulty in providing proof.
The network doesn't know whether the private key for some bitcoins have been lost.
The value is based on market demand. From this perspective, bitcoins that aren't currently offered for sale are the same as lost coins until they are offered up for sale, at which point the price is affected. Though individuals do have the capability to prove they own bitcoins without offering them for sale, they rarely do so, so you'll probably never be able to find out much about which unspent bitcoins are still being quietly held and which are lost.