As Cryptocurrency Plummets, Bitcoin Father Is Still Nowhere to Be Found

As Cryptocurrency Plummets, the Father of Bitcoin Is Still Nowhere to Be Found.

 

 

 

Nothing fires the imagination like an anonymous hero with a secret identity. It’s been an enduring trope since the Scarlet Pimpernel rescued his first aristocrat from Madame la Guillotine. From Batman to the street artist Banksy, each hero has his own reason for donning the mask of anonymity.

This phenomenon has come to the world of finance in the person of Satoshi Nakamoto, the so-called father of Bitcoin. He appeared out of the ether in 2008 and disappeared just as abruptly three years later, after establishing the world’s first cryptocurrency. On April 23, 2011, he sent a farewell email to a fellow Bitcoin developer. “I’ve moved on to other things,” he wrote, assuring that the future of Bitcoin was “in good hands.” He has not been heard from since.

Today, Bitcoin is valued at nearly $325 billion, and while Nakamoto’s identity might be simply a matter of speculation for some, it means far more to others: He is said to own over 1 million bitcoins or around 5 percent of the total number in circulation. The price of Bitcoin has fallen dramatically in 2022—it’s plummeted by over 66 percent since January 1—but even so, that would put the value of Nakamoto’s Bitcoin holdings at over $16.2 billion. At the cryptocurrency peak, in November of last year, the mysterious figure’s bitcoins would have been worth more than $67 billion.

Should the person—or persons—behind the name Satoshi Nakamoto decide to sell just some of this hoard, the transaction would completely upend the cryptocurrency market. Cryptocurrency trading platform Coinbase, which went public on the Nasdaq in April 2021, noted the potential revelation of Nakamoto’s identity (and the movement of that person’s Bitcoin holdings) as a risk factor in its IPO filing with the Securities and Exchange Commission (SEC). Coinbase even went so far as to send a copy of the filing to the last known email address for Nakamoto.

That may sound like overkill to some, but it was recently made abundantly clear just how much of an effect an individual party can have on the entire cryptocurrency industry. At the beginning of November, FTX, one of the world’s largest cryptocurrency exchanges and a company valued at $32 billion, imploded after Coindesk reported that leaked documents showed that it was close to insolvency. The documents suggested that the Bahamas-based FTX’s finances were deeply intertwined with CEO Sam Bankman-Fried’s hedge fund, Alameda Research, and that it may not be backing user funds one to one.

In the wake of the revelations, Changpeng Zhao, the CEO of FTX’s biggest competitor, Binance, announced his exchange would liquidate its share of FTT, a cryptocurrency token native to FTX, forcing its price to plummet and leading to a spike of customer withdrawals that the exchange could not meet. On November 8, Binance agreed to bail it out FTX, but pulled out of the deal the next day, forcing the exchange to declare bankruptcy and Bankman-Fried to resign.

In the bankruptcy that followed days later, Bankman-Fried’s replacement as FTX CEO, John Jay Ray III, said he’d never witnessed “such a complete failure of corporate control,” according to the New York Times.

Ahead of these recent struggles, financial services behemoths like BlackRock, JPMorgan and BNY Mellon began offering cryptocurrency and related services to their customers, adding legitimacy to an asset that Berkshire Hathaway’s Charlie Munger once characterized as “contrary to the interests of civilization.” It remains to be seen how the fall of FTX will affect the industry as whole, but so far it has only compounded what has already been a bad year for cryptocurrency. Prices have been falling since late 2021, but the last month has been particularly harsh, and not just on FTT, which has seen its value plummet by 95 percent since the beginning of November, according to Crypto.com. In that same time, Bitcoin’s value has also fallen by over 17 percent, while the next biggest cryptocurrency, Ethereum, has fallen by nearly 19 percent.

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Bitcoin came to life when Nakamoto published his famous white paper in 2008 on a cryptography mailing list describing a digital currency that would allow secure, peer-to-peer transactions without the involvement of any middleman, whether that be the government, financial system or a company. These transactions would be tracked through a blockchain, a ledger like those used by any financial institution, except that this ledger would be distributed across an entire network, with exact duplicates held by all participants and visible to all, secured by cryptographic means. There would never be more than 21 million Bitcoin.

Nakamoto created his cryptocurrency with the goal of wresting control of currency from financial elites and putting it in the hands of the common man. The first Bitcoin transaction occurred when Nakamoto sent 10 bitcoins to Hal Finney, a well-known developer who had downloaded the Bitcoin software on its release date in early 2009. The first commercial transaction came in 2010, when a programmer named Laszlo Hanyecz bought himself two Papa John’s pizzas for 10,000 bitcoins. At Bitcoin’s current price of nearly $60,000, those were some very expensive pizzas.

Bitcoin is open source, meaning its design is public. No one person owns or controls Bitcoin, and anyone can participate. While Satoshi continued to control Bitcoin’s development, users and developers congregated in Bitcoin forums to contribute code and work on the project, which had become a collaborative effort. The users running the Bitcoin software were the ultimate authority.

Many programmers and developers have written code for Bitcoin, but Gavin Andresen was one of the most enthusiastic. He reached out to Nakamoto in 2010 and became the founder’s right-hand man. When Nakamoto withdrew from sight, he left Bitcoin in Andresen’s hands. Today, even Andresen himself has grown more reclusive: He no longer serves as “core maintainer” of Bitcoin’s code; in fact, that role may soon become as decentralized as the cryptocurrency itself.

Throughout the history of Bitcoin, efforts to unveil Nakamoto have continued unabated. Gossips in cryptocurrency forums have engaged in wild speculation: Nakamoto is a member of the Yakuza, part of a cabal of developers, a money-launderer or maybe even a woman.

In 2014, a reporter from Newsweek identified 70-year-old Dorian Nakamoto, a soft-spoken resident of Los Angeles, as Bitcoin’s creator. While his long and distinguished career in engineering was cited as evidence, Nakamoto has vehemently denied any involvement with the cryptocurrency. The day after Dorian Nakamoto released a public statement, Satoshi surfaced in an online forum. He posted “I am not Dorian Nakamoto” before vanishing once again.

Nick Ut/Associated Press

Australian Craig Wright claimed to be Nakamoto in 2016, and Bitcoin developer Andresen corroborated the statement, saying he was “98 percent sure” that Wright was the elusive Satoshi. The cryptocurrency community wasn’t having it, and Wright backed away from the claim.

Suspicion also fell upon Nick Szabo, a secretive crypto expert who contributed significantly to the development of Bitcoin. Linguistic researchers analyzed Szabo’s writing as well as writing from other suspected Satoshis. The linguists claimed that there were definitive similarities between Szabo’s writings and Satoshi Nakamoto’s. The New York Times even went so far as to pin Szabo as the shadowy Nakamoto, but Szabo strenuously denied the claims.

The upshot is that Satoshi Nakamoto remains anonymous, a mythical creature with a Bitcoin stash of epic proportions. He has strong incentives to remain anonymous. Owning a $60 billion fortune makes personal security a compelling concern. Given Bitcoin’s potential to challenge sovereign fiat currencies, Nakomoto could fear potential legal actions by governments—if not other forms of government sanction.

Unquestionably, efforts to uncover the identity of Satoshi Nakamoto will continue. The threat he poses to the cryptocurrency market is too great and the mystery surrounding his identity is too compelling. In a world where anonymity is increasingly difficult to pursue, Satoshi Nakamoto has succeeded beyond imagination in keeping his secrets.