History of Satoshi Nakamoto
Most people regard Satoshi Nakamoto as the most enigmatic figure in cryptocurrency. It is currently unknown whether the name refers to a single person or a group of people. What is known is that in 2008, Satoshi Nakamoto published a paper that sparked the development of cryptocurrency.
The paper, Bitcoin: A Peer-to-Peer Electronic Cash System, outlined how a peer-to-peer network may be used to solve the problem of double spending.
The concern that a digital currency or token can be duplicated in multiple transactions does not exist in physical currencies because a physical bill or coin can only exist in one place at a time. Because digital currencies do not exist in physical space, using them in a transaction does not necessarily remove them from someone’s possession.
However, if the trusted third party cannot be trusted, this trust-based model still exposes the user to fraud risk. Only by incorporating cryptography into transactions could the third party be eliminated.
Nakamoto advocated for a decentralised approach to transactions, which eventually resulted in the development of blockchains. Based on proof-of-work, timestamps for a transaction are added to the end of previous timestamps in a blockchain, creating a historical record that cannot be changed.
Since the record of transactions is distributed across many nodes in the system, it is nearly impossible for someone to gain enough control and rewrite the ledger to their advantage. The blockchain records are secured because the amount of computational power required to reverse them can deter small-scale attacks.
Historically, solutions to the double-spend problem entailed the employment of trusted third-party intermediaries to check whether a digital currency’s holder has already spent it. In most cases, third parties, such as banks, can efficiently execute transactions without introducing considerable risk to the transaction.
The mystery behind Satoshi Nakamoto
Satoshi Nakamoto was a key figure in the early days of Bitcoin, developing the first version of the software in 2009. Communication with and from Nakamoto was done electronically, and the lack of personal and background information made it impossible to determine the true identity behind the name.
However, Nakamoto’s involvement with Bitcoin came to an end in 2010. The last communication anyone had with Nakamoto was in an email to another crypto developer, in which they stated that they had “moved on to other things.” The inability to put a face to the name has fueled widespread speculation about Nakamoto’s identity, particularly as the number, popularity, and notoriety of cryptocurrencies has grown.
Nakamoto’s identity has not been assigned to a provable person or persons yet, but it is projected that the value of bitcoins under Nakamoto’s control — estimated to be around 1 million — might exceed $50 billion. If the maximum number of bitcoins that can be generated is 21 million, Nakamoto’s stake of 5% of total bitcoin holdings has significant market power. Several people have claimed to be the “real” Satoshi Nakamoto, but none have been proven to be Nakamoto.
Dorian Nakamoto
Dorian Nakamoto is a California-based academic and engineer who was identified as the creator of Bitcoin in a March 2014 Newsweek article by Leah McGrath Goodman. According to McGrath’s article, “The trail followed by Newsweek led to a 64-year-old Japanese-American man whose name really is Satoshi Nakamoto,” but after more investigation, he was ruled out of the running.
Hal Finney
Bitcoin is the result of the cypherpunk movement, and Hal Finney was a pillar of that movement. Finney passed away in 2014. Finney was a member of the Bitcoin community both before and after its inception, and he was the first person to receive Bitcoin in a transaction. 3 He also happened to live a few blocks away from Dorian Nakamoto, who has been speculated to be the inspiration for Finney’s pseudonym.
Nick Szabo
Szabo, like Finney, was an early cypherpunk and knew a lot of people in that circle. In 2005, he published a blog post in which he proposed a digital currency called “Bitgold” that would not rely on the trust of third parties.
Craig Wright
Craig Wright, an Australian academic and businessman, is one of the more colourful characters nominated as Satoshi Nakamoto’s identity.
According to a website claiming to be his, he is the “creator of bitcoin – Satoshi Nakamoto.”
It describes him as: “(An) eternal student and researcher. (Blockchain company) nChain chief scientist. Lawyer, banker, economist, pastor, coder, investor, mathematician, stats, and world-curious.”
According to a 2015 Guardian article, he has a PhD from Charles Sturt University, as well as a slew of other academic credentials. He was involved in a number of computer companies and served as the director of more than a dozen of them.
In 2016, his rented Sydney home was raided by Australian federal police in connection with a tax-related matter. At the time, a police spokesperson stated that it had nothing to do with any claims that he was the mastermind behind bitcoin.
December 2021, a civil claim was brought against Wright by the estate of a former colleague, the late David Kleiman. Kleiman’s estate claimed that because Wright and Kleiman co-created Bitcoin, Kleiman was entitled to half of Wright’s alleged 1.1 million BTC stash. If Wright had lost the case, the court would almost certainly have ordered him to move half of those coins, implying that he would have to use Satoshi wallets. Wright did not have to submit to such an action because he won the case.
But there’s a bigger story behind that court case. Those bitcoins could only be owned by Nakamoto, who was involved with the venture from the start.
Wright claims to be Nakamoto, and Nakamoto is widely acknowledged as the creator of bitcoin. And, in order to prove he is Nakamoto, Wright must demonstrate ownership of some of the original bitcoin.
Dr David Glance, a computer scientist at the University of Western Australia, compares such a feat to King Arthur removing Excalibur from stone. A document proving legal ownership.
“If you’re going to prove you are who you say you are, you just have to prove you have that key (to the bitcoin),” he says.
“You don’t have to spend it, just move it from one account to another.”
Of course, he admits, Wright or Nakamoto (or whoever he/she/they is/are) could have lost the key.
The New York Times claimed earlier this year that as much as $140 billion worth of bitcoin is lost each year due to users forgetting or misplacing their keys. Stefan Thomas, a resident of the United Kingdom, is one of those who lost his password, which would have unlocked hundreds of millions of cash.
Going back to Bitcoin’s Blockchain
Analysis of Bitcoin’s blockchain has assisted in determining which addresses are most likely Satoshi Nakamoto’s with a high degree of certainty. Satoshi has around 1 million bitcoin or 100 million US dollars, according to chain analysis by Sergio Demián Lerner, the chief scientist of RSK Labs. These addresses can be traced all the way back to the inception of Bitcoin in 2009.
Bitcoins from some very early addresses have been moved over the years, prompting many to speculate whether or not this was Satoshi each time (even though there were some other miners active). So far, this investigation has revealed that each of these transactions was most likely not from Satoshi addresses, and that his bitcoin stash remains dormant.
On May 21st, 2020, @whale alert, a Twitter account that monitors several blockchains and reports on significant transactions, posted the following:
40 #BTC (391,055 USD) transferred from possible #Satoshi owned wallet (dormant since 2009) to unknown wallet. The coins in this transaction were mined in the first month of Bitcoin’s existence.
This immediately caused a stir on Twitter. The @Bitcoin Twitter handle tweeted a poll asking whether Twitter users were bullish, neutral, or bearish on the possibility that this was Satoshi. Bearish was in the lead at first. A day later, 34% of those polled said it was bullish, 35.6% said it was neutral, and 30% said it was bearish.
Despite the fact that indicators on the blockchain suggested that this was not Satoshi, many Twitter users assumed it was and began to worry that Satoshi was selling his bitcoin holdings. Fear and uncertainty seemed to dominate the comments section, with some asking if they should sell and others declaring that they would sell immediately.
While others attempted to explain that these addresses were most likely not Satoshi and that, even if they were, they could have been moving to another address rather than an exchange to sell (proposing that Satoshi was not actually dumping his bitcoin). Many people have also questioned why it matters if Satoshi wants to move or sell bitcoin because Bitcoin is decentralised and one person’s actions, whether Satoshi or not, should not be relevant.
Regardless, the price dropped 4% immediately after the news broke, demonstrating once again how volatile these markets are and how easily news, even if unproven or false, can swing a market. It also demonstrated that, despite the fact that Bitcoin is decentralised, with no single leader or control point, the community is still so obsessed with its creators that the movements of a single person or people can have some level of control over the system.
Why is everyone so interested in bitcoin and its history?
Many banks are beginning to offer cryptocurrency trades, which is understandable given the interest in them, but it appears to contradict the idea of having a currency that bypasses financial institutions.
Even the governor of the Reserve Bank of Australia, Philip Lowe, has expressed interest in a retail form of cryptocurrency, though he does not see it being used for general purpose payments.
Bitcoin is the most well-known and widely used cryptocurrency. Once considered a fringe concept, it is now used by over 100 million people worldwide. However, bitcoin and other cryptocurrencies are highly volatile. Because their value fluctuates so much, Glance says you won’t be able to buy a cup of coffee with them because the price will fluctuate so much.
“The cryptocurrency world is full of colourful people with big imaginations,” he says.
“The idea of it taking over the world hasn’t transpired.”
There are a few concerns about crypto, however.
“It’s fuelling most of the cybercrime we’re seeing today,” he says. “And you can use it to buy drugs online, to extort people, to hire contract killers.”
Another reason he avoids it is the environmental impact of the massive computer power required to create it.
According to research, the production of bitcoin alone could result in a carbon footprint the size of London.
“(And) it has no intrinsic value,” Glance adds. “It’s just a bunch of people participating in a Ponzi scheme.”
Most people will happily live their lives without ever encountering bitcoin. However, it remains a remarkable mystery that somewhere out there is a person (or persons) who have shifted financial markets and helped people make fortunes.
