9 Satoshi Nakamoto
There was good reason for Satoshi Nakamoto to disguise his real identity when he came up with the idea for bitcoin. Governments don’t take kindly to those who contravene state policy on the creation of money, because that’s the job entrusted to the central bank and to commercial banks.
The money supply in an economy is known as broad money, and includes base money or currency. In simple terms, central banks issue base money, the notes and coins that circulate in an economy to pay for goods and services. Broad money includes that as well as the money created by commercial banks, which create money by issuing loans, or in other words, by crediting the borrowers bank account with the amount of the loan. When loans are repaid, that money is effectively destroyed, though banks receive the interest paid by the lender.
What happens to people who try to break this arrangement? In 1998, when Bernard von Nothaus created the Liberty Dollar, the US Mint informed him that circulating the Liberty Dollar medallions constituted a federal crime. A US attorney wrote: “While these forms of anti-government activities do not involve violence, they are every bit as insidious and represent a clear and present danger to the economic stability of this country.”
So for someone thinking about produced a new money supply, creating a cypher made sense, and Satoshi Nakamoto appears to have done enough to keep his real name a secret. Ten years after Satoshi Nakamoto circulated his pioneering white paper Bitcoin: A Peer-to-Peer Electronic Currency, his real identity remains unknown. The paper, published to a cypherpunk mailing list in October 2008, described bitcoin and how it could work. Nakamoto - who many believe to be an academic of some sort - said he had been working on the code to run the bitcoin system, and three months later he released the first version of bitcoin’s open source software on the website Sourceforge.
Years later, commentators continue to discover that bitcoin was made possible by a concept called the blockchain, an electronic ledger for keeping track of all bitcoins. Satoshi Nakamoto put the first blockchain into operation early in January of 2009, when he created the first block on the chain, earning himself the first bitcoins in the process.
Bitcoin is a protocol, a set of rules that governs how bitcoin works. The blockchain was a solution to the problem of double spending that previously bedevilled efforts to create a digital currency. The blockchain is designed to prevent this problem.
Instead of a bank acting as a trusted third party to verify transactions, the bitcoin protocol invited bitcoin network members to verify transactions using proof-of-work, using computing power in a process called mining, and earning bitcoins as a reward.
One of the first to download the code was Hal Finney, who was rewarded with bitcoins. Satoshi continued to mine bitcoin, earning himself roughly the first million bitcoins. Satoshi Nakamoto wrote all of the early changes to the code himself, though he soon accepted help from Gavin Andresen, an Australian programmer living in the US who wrote to Nakamoto and offered to help with the project. During 2010 and early 2011 Nakaomoto worked with Andresen on the project, until Andresen mentioned in an exchange that he had accepted an invitation to speak to the CIA about bitcoin. Satoshi Nakamoto promptly vanished from sight, leaving an untouched bitcoin wallet containing around one million bitcoin - which at bitcoin’s 2017 peak was worth about $19 billion.
Several people and organisations tried to track down the real Satoshi Nakamoto, with some trying the technique of stylometry. The idea came to prominence during the search for Ted Kaczynsky, dubbed the Unabomber, who was a disaffected former maths professor who killed three people and injured 23 more by sending bombs in the post to businesses and institutions. The bombing spree ran from 1978 to 1995, when investigators agreed to publish Kaczynki’s manifesto in the hope that a reader would recognise the writing. FBI investigators using a technique called stylometry eventually convinced a jury that the Unabomber’s manifesto matched the writing style of notes investigators found at Kaczynski’s remote cabin.
Several bloggers and journalists have tried to use similar techniques to identify Nakamoto, using published writing by the inventor. One blogger claimed that the NSA know Nakamoto’s identity by combing its vast database of emails and communications from its surveillance programme and using a stylometric method to connect Satoshi Nakamoto’s writing with writing from its database. But from what we know to date, Satoshi Nakamoto was something of an expert in privacy and cryptography, and may have used other techniques to hide his identity. (Although he claims to be Japanese, his writing suggests a native English speaker.) Several reporters and investigators have concluded that Nick Szabo himself is Satoshi Nakamoto, something Szabo unsurprisingly has denied. The same goes for the other early programmers of bitcoin.
In 2014, Newsweek reporter Leah Goodman tracked down a man called Dorian Satoshi Nakamoto who was living in California. Nakamoto, a 64-year-old Japanese-American physicist, told Goodman that he was not the creator of bitcoin. Most accepted Nakamoto’s denials. If he was unmasked as the real creator of bitcoin, he would be hounded for the rest of his life, not to mention being under constant threat for possessing such a vast fortune.
But as we’ll see later, while bitcoin is pseudonymous, it’s possible to trace bitcoins as they move into bank accounts. If the original Satoshi Nakamoto wanted to spend some of his million bitcoins, he would quickly be tracked down as the money moved through his bank account (if he has one). And so, one of the great prizes for the genius of Nakamoto sits untouched: many observers believe it will remain that way forever, an unintended comic consequence of an idea that even its creator can hardly have thought would ever reach so far.