MONEY FOR THE INTERNET
The root problem with conventional currency is all the trust thatâs required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust.
Satoshi Nakamoto
THE STORY OF BITCOIN begins on Halloween of 2008 when a mysterious message was posted to an online cryptography mailing list. Mailing lists are groups of people that use email to discuss things. In the early days of the internet they existed for everything from woodwork to rocket science.
The message in question contained a link to a white paper, which is a document that guides readers through a complicated issue, and was signed by an author named Satoshi Nakamoto along with the message:
Iâve been working on a new electronic cash system thatâs fully peer-to-peer, with no trusted third party.
This now-famous sentence introduced a combination of ideas that had been progressing in cryptography and computer science since the early nineties, all centred on improving the way that people can trust each other in online interactions.
Another project that was prominent in these communities at the time is Hashcash, which was proposed by a British cryptographer named Adam Back in 1997.
Hashcash aimed to solve one of the biggest issues plaguing early use of the internet â junk email. The idea was to make sending an email more difficult computationally so that individual messages would become more expensive. Spammers rely on being able to send large volumes of messages to their victims and doing so would be impossible if it took longer and cost more.
The system would create a kind of digital stamp for email. These stamps would be generated by computers that would have to process a complex math sum by guessing what the answer was over and over again until they got it right. By providing the correct answer it could be proved which computer did the work and generated the stamp.
This offered an additional advantage in that it would allow receivers to verify the sender of an email message, further limiting the powers of spammers and criminals that often rely on making email messages look as though they were sent by someone else â like your bank.
With Hashcash you could trust that the sender of the email was who they said they were, because their digital stamp â or signature â could not have been created by anyone else.
The rate at which a computer can crunch through numbers is referred to as âhash rateâ, hence the name.
The Hashcash algorithm was a big deal in computer science because it meant that computers could prove they had done something. This system was called âproof of workâ. A computer could say, âI have the correct answer to this sum, therefore I must be the one that did all the work to arrive at it.â
From this background Bitcoin emerged as a way of using proof of work to create an electronic cash system. Like all the best ideas, it is simple to describe but was deceptively difficult to pull off.
Letâs break down Satoshiâs sentence and look at each bit to fully understand the significance of what was achieved in his proposal.
âIâve been working ...â
Who was Satoshi Nakamoto?
No one knows for sure.
After Satoshi first posted to the cryptography mailing list hosted by Metzger, Dowdeswell & Co., the Bitcoin white paper began being shared online by cryptographers and computer scientists. Some of these individuals emailed Satoshi offering to help with the development of the Bitcoin system.
This group of early Bitcoin developers had many interactions with Satoshi over the years following the publication of the Bitcoin white paper and until Satoshi went quiet in 2011, never to be heard from again.
One of the first people to respond to the message was a cryptographer by the name of Hal Finney who was also the first person ever to receive Bitcoin from Satoshi in February of 2009. Hal sadly passed away in 2014 from complications related to amyotrophic lateral sclerosis, and his body was cryonically preserved in the hopes that he can one day be cured and brought back to life.
We donât know much about Satoshi and some have suggested that he was really Hal Finney. Weâll probably never know for sure.
Some people did claim to speak to Satoshi telephonically and reported that he had a young-sounding male voice. Others donât believe Satoshi couldâve been a single person, given the quality of code in the original version of the Bitcoin software that he wrote that would have been difficult for a single person to produce, and the fact that he often referred to himself in the plural, for example in the Bitcoin white paper:
We have proposed a system for electronic transactions without relying on trust.
Satoshi may be a lady-person, or many people working together â but the name is traditionally only used for men in its native Japan.
An Australian computer scientist by the name of Craig Steven Wright claimed to be Satoshi Nakamoto in 2016, but has failed to produce any proof since then, despite promising that he would and throwing tempers on Twitter whenever confronted about it.
To prove that youâre Satoshi Nakamoto would be straightforward. All youâd have to do is publicly access some of the Bitcoin that Satoshi owns â kind of like logging into your Facebook account to prove to the world that itâs yours. Not a single bit of Satoshiâs Bitcoin has ever been accessed. Craig said that he would do so in public but then later withdrew this promise.
Itâs estimated that Satoshiâs addresses hold 980 000 Bitcoins, with a value hovering around $10 billion at the beginning of 2018. The fact that he has never accessed it suggests that heâs committed to storing as much value as possible on the Bitcoin blockchain, or perhaps that he is so rich without Bitcoin that he doesnât care. Another obvious option is that he is dead, although one would presume that he wouldâve left keys to family or friends if that was the case. Itâs unlikely that he has lost access to his wallets due to negligence.
The one thing we do know for sure about Satoshi is that he wasnât stupid.
My personal encounters in the Bitcoin community have produced strong suggestions that Satoshi Nakamoto was Dave Kleiman, a computer forensic expert who passed away in 2013 from complications related to a Staphylococcus infection. Kleiman was also a good friend of Craig Wright. While this is another strong possibility, and would explain why Satoshi often wrote in the plural â suggesting that it couldâve been Kleiman and Wright working together â this has no more hard evidence than any of the other suggestions made.
Another name often cited as a possibility is Nick Szabo, a cryptographer and computer scientist who has published many articles online with writing that does resemble Satoshiâs. This could just be a coincidence, however, and there is no more evidence to suggest that he is Satoshi Nakamoto than for any of the other dudes mentioned here.
There are, of course, also people whose names are literally Satoshi Nakamoto, one of whom lived just blocks away from Hal Finney in California. None of these leads have produced much evidence either.
If youâre looking for intrigue, the story of Satoshi Nakamoto has a lot to offer, including conspiracy theories ranging from Satoshi being the Chinese government trying to bring an end to the reign of the US dollar, to Satoshi being an artificial intelligence.
Suffice to say that none of these assertions hold water.
It doesnât matter who Satoshi Nakamoto is or was. Itâs better for Bitcoin if the true identity of its inventor remains a mystery. Too much emphasis is placed on individuals in their relation to the success of things and this has had dire consequences for many companies, creative work and projects.
We are wired to perceive individuals as operating in isolation. Many Apple shareholders had doubts as to the future of the company when its founder Steve Jobs passed away, despite the thousands of brilliant Apple employees who collectively continued to work on its products.
In 2017 a rumour spread online that Vitalik Buterin, the founder of another cryptocurrency called Ethereum, had died in a car accident. This immediately impacted the price of the currency despite hundreds of open source dev...