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10 May 2016

In search of Satoshi Nakamoto, Bitcoin’s mysterious creator

In May 2008, Nakamoto published an online paper outlining how the cryptocurrency would work. Then he vanished.

By Ian Steadman

Who is Satoshi Nakamoto? This week, he is a computer scientist from Australia. In 2014, he was a Japanese-American man living in Los Angeles. In 2013, a Japanese mathematician. In 2011, a Finnish sociologist . . .

Satoshi Nakamoto is a pseudonym. Eight years ago, he or she (or they) invented the digital currency Bitcoin and then disappeared. To some, he’s a hero, and to the tech press he’s their great white whale. Discovering the Bitcoin creator’s real identity has become what finding Lord Lucan was to the British tabloids in the 1970s.

In May 2008, Nakamoto published an online paper that outlined how Bitcoin would work, then released the software needed to run it the following year. A completely decentralised “cryptocurrency”, Bitcoin is the perfect product for an early-21st-century ideology that thrives online, that is technologically hyper-literate and radically libertarian. It is designed to avoid any kind of central control. New bitcoins are generated by solving difficult cryptographic calculations that are “computationally expensive” and occur at a predictable rate, unlike the money that a central bank prints.

So, trusting Bitcoin does not involve trusting people. It relies on rational mathematics and computer code that are immune from political interference. Bitcoin is an ideal currency for buying something (legal or not) without anyone finding out.

This aspect was deliberately designed: Nakamoto spent a year or so corresponding with other experts in the nascent Bitcoin community, explaining his philosophical reasons for wanting to create a kind of digital gold standard. Then Nakamoto vanished and that community, obsessed with freedom from authority, has been trying to find its founding father ever since.

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There are some obvious candidates. Hal Finney, a games developer-turned-cryptography advocate, was the first person to receive bitcoins (from Nakamoto, in a test transaction). He died from complications related to motor neurone disease in 2014.

Nick Szabo, a cryptographer and legal scholar, had worked on an idea that was similar to Bitcoin a few years earlier called “bit gold”. Others involved in Bitcoin in its early stages, such as Gavin Andresen, the chief scientist at the Bitcoin Foundation (which, if Nakamoto is Jesus, would be the Vatican), have also been suspected.

These suspicions are based on anecdotal evidence – such as Nakamoto’s use of British English idioms such as “bloody” – but rarely meet the standards expected by cryptographers. Confidence can lead to embarrassment, as Newsweek found in 2014, when it turned the world’s media on to a retired computer scientist called Dorian Nakamoto, basing its efforts on little more than coincidences.

This brings us to Craig Wright, who is by all accounts a politically and intellectually appropriate candidate. Is he Nakamoto? Maybe. There is only one kind of proof that most experts will accept: a signature, encrypted using Nakamoto’s private key and associated with the “genesis block”, the first bitcoins “mined” (or created) when Nakamoto’s computer was the only one on the network.

Wright says that he is Nakamoto and wrote a blogpost in which he produced a signature (he also presented evidence to some journalists and Bitcoin experts in private). However, almost as soon as the headlines announced that Nakamoto had been found, many in the community dismissed the evidence as faked. Sceptics speculated whether Wright’s claim was part of a larger scheme involving his business and tax issues.

Regardless, Wright says that he will provide more conclusive proof soon. The Bitcoin community, which has factions and disagreements aplenty, looks to Nakamoto’s early posts and emails when arguments break out. But what makes the story so compelling for journalists is that the mystery makes no sense.

Satoshi Nakamoto is a man (or woman, or group) who created a new kind of money and it took on real value. But Nakamoto can’t spend the million or so bitcoins he or she has (worth about $450m at the time of writing), as doing so would flood the market and depreciate the currency.

Instead, they have to sit, unable to be spent, as their owner avoids scrutiny – from the state, from organised crime, from everyone. Which is one reason why so many people now claim that the one thing we can say for sure is that the founder of Bitcoin wouldn’t be so foolish as to give the game away. 

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This article appears in the 04 May 2016 issue of the New Statesman, The longest hatred