This is why it matters who Satoshi Nakamoto is
Lots has been said and even more has been speculated (Tulip Trust) about the recent revelation or lack thereof by Craig Wright claiming to be Satoshi Nakamoto. At the time of writing the community seem to have embraced the hoax narrative despite his early involvement and relevant background. While the saga continues for the search for Satoshi Nakamoto, it is good to gain an understanding of why it matters who he, she is or they are.
Satoshi’s role in development
After some period of active involvement in the development of the Bitcoin protocol after its release in 2009, Satoshi handed over the scepter to Gavin Andresen. After another period of time Gavin handed the keys to the kingdom over to Wladimir van der Laan. Since then the development roadmap has been two degrees of separation removed from its inventor. And after Wright failed to provide conclusive proof of being Satoshi Nakamoto, Gavin’s judgement — he defended Craig — was put into question and his commit access was revoked. As a result there now exists an even bigger gap between the inventor and the current development of the Bitcoin protocol.
So why does this matter? Open source software is exactly that — open source. Anyone can make a copy of the Bitcoin blockchain and start their own version of it, like has been done by Bitcoin Classic, Bitcoin XT and Bitcoin Unlimited. However, the original version of the protocol, Bitcoin Core, and its developer group supporting it has been dominating miner and node adoption since day one. As such, they practically have a monopoly on protocol changes. While their work has predominantly benefitted Bitcoin and it’s ecosystem, voices rose to oppose Bitcoin Core’s scaling strategy. The aforementioned competing protocols were the result of this heated debate.
Now this is where things get interesting. Satoshi could play a crucial role if he/she/they plan/plans to reveal itself/themselves. None of the alternative protocol implementations have reached a threshold of adoption by the miners or nodes (it needs both) for a so-called hard fork from Bitcoin Core to manifest. Bitcoin Classic, the latest and arguably most successful attempt at this, supported by Satoshi’s successor Gavin Andresen, got really far (also see my industry SWOT post on this subject) and is still in the running. Now imagine if Satoshi comes out of hiding in favour of supporting Bitcoin Classic? What would happen? It could very well be the push Bitcoin Classic needs to reach a tipping point and overtake Bitcoin Core.
The implication of such an action is not only the potential hard fork away from the Bitcoin Core protocol, but also a hard fork away from its developers as it impacts who has commit rights to the most popular version of the protocol. In this case Gavin could reclaim the scepter and it wouldn’t be hard to imagine that Satoshi, the person or the group, would take the lead over development of Bitcoin Classic after revealing its identity. The team currently working on Bitcoin Core would effectively be replaced. It’s the equivalent of firing a development team to replace it with another. And just like a company firing its team, some developers may join the new team, others may not. And the development of the protocol may improve or deteriorate affecting Bitcoin’s future. As you can probably imagine, this underlying dynamic for becoming the lead protocol creates a toxic work environment for both sides of the coin — pun intended.
Satoshi’s 1.1 million bitcoins
As the very first miner Satoshi accumulated and theoretically still has access to 1.1m bitcoins (estimations vary). That’s 7.1% of the current money supply and 5.24% of the money supply when all coins are mined by the year 2140. At the current market price of $453, Satoshi’s bitcoin stash is now worth $499.4 million and $1.34b when Bitcoin peaked at $1216.73 in 2013.
This in itself is not a problem. Everyone can appreciate that the inventor of this new kind of money and its underlying blockchain technology deserves to be handsomely rewarded, even if it makes Satoshi a billionaire. So why does it matter?
Today the market presumably has priced in the 1.1m bitcoins as lost coins. Satoshi by some is considered deceased with no heir to the coins or having lost the keys — it happens to the best of us. If Satoshi suddenly were to reveal itself by proofing to have access to the dormant coins, it could shake up the market. Even worse, if Satoshi decided to offload the coins to other cryptocurrencies or fiat money, it could spark a selloff that crashes the price to oblivion. How likely is this to happen? Not very likely. Even if Satoshi has access to the coins, it’s unfathomable that he/she/they would jeopardise either the wealth or invention. The market reaction however is harder to predict.
Coming back to Satoshi being a billionaire. That is at the current level of adoption at a ~$7b market cap. If Bitcoin ends up becoming the global reserve currency or reaches other milestones of adoption, the wealth of 1.1m bitcoins may exceed a trillion USD. Consequently Satoshi could become the first trillionaire. To some this contradicts the wealth inequality that Bitcoin set out to reverse— or at least its one of its promises. Others argue that the wealth distribution would still be better than is the case with the current financial system. Either way, it begs the question of Satoshi’s motives. What personal beliefs does Satoshi have and how may those beliefs impact our society? Having such wealth in the future would give Satoshi a sphere of influence that stretches well beyond the technological innovation of cryptocurrency or Blockchain.
And therefore it matters who Satoshi is…
For those interested in the views of Craig Wright — in case he turns around and proofs he’s Satoshi — this interview gives a remarkable insight into his thinking and is definitely worth the watch. Few people that I know of speak so passionately about Bitcoin and its future use cases, let alone in 2014.
