Bitcon: What benefit comes from the latest Satoshi outing?

Over the past couple of days we’ve heard an awful lot of noise about the apparent revelation that the Australian ‘entrepreneur’ Craig Wright is actually the creator of Bitcoin, Satoshi Nakamoto. For those who haven’t been following Bitcoin and this saga, this post will deal with an introductory summary, before we explore the potential reasons for what is going on tomorrow.

N.B. For this post, we’ll use the Coinbase USD/BTC price for bitcoin. The title is quite deliberate.

In May 2008, an individual or a group of individuals published a paper under the name Satoshi Nakamoto describing a new type of digital currency – Bitcoin. In 2009, Satoshi published the Bitcoin software, which was to become the underlying network for arguably the world’s only truly successful digital currency so far. The basic concept underlying Bitcoins relies on two elements – users can ‘mine’ Bitcoins by allowing the bitcoin software to use their computing power to verify and log transactions in the public ledger. Secondly, all transactions are public so that the above can happen, and all transactions use private and public cryptographic keys – that’s a blog post in itself and is well explained here. The premise of these keys is that people can prove that they are who they say they are and that the transaction is genuine using unforgeable signatures which apply to each and every transaction. Vitally, the true identities of the sender and recipient cannot be discerned from the transaction itself – Bitcoin can be used anonymously. Keys like these are used all day, every day all over the web – you will use them regularly without ever realising it.

Bitcoin themselves initially started life with relatively little worth – trading for tens of cents up to tens of dollars in 2010 – 2012, before slowing picking up at the beginning of 2013. Media interest caused more users to become interested in the currency which, partially due to the currencies design, made the currency more valuable (more users/transactions = harder to mine = currency more valuable). September 2013 saw a change in the Bitcoin market – the currency hit $100 and kept climbing, partially driven by the media and partially by the economic climate of the time. By November 25th 2013 it was peaking at over $1,000/1 BTC and market hysteria was in full effect – the crash was coming but people wanted to see the currency keep climbing.

The market inevitably crashed and the value fell $200, partially recovered and then kept falling. By 2015 it seemed to have settled at about $250 and stayed that way for much of the year, with wild jitters either side that would collapse any normal economy.

Unearthing Satoshi

For the entire time that Bitcoin has existed, people have wondered about who actually created it. Satoshi kept his (or their) identity entirely secret, but speculation is rife and a number of individuals have been ‘outed’ as Satoshi.

Most (in)famously in a potentially career destroying move, Leah McGrath Goodman wrote a Newsweek cover article identifying Dorian Nakamoto, an elderly Japanese engineer living in California as the true Satoshi. He denied the accusation and threatened to sue, leading to great embarrassment for Newsweek and the removal of the article from the Newsweek’s website – the Google Cache of it is here. This outing of a man who I’ll presume as innocent led to the most important event in the Bitcoin community since the spike of 2013. Satoshi spoke out.

Satoshi had created the entire Bitcoin theory and software and then as one commentator has put it “dropped the mic” and went completely silent in mid-2010. Throughout the rise and fall of the market, no-one had heard a thing from him. Nearly 5 years later the founder broke his silence. “I am not Dorian Nakamoto.” This was incredibly important – it indicated that a) Satoshi was alive and b) Satoshi was very aware of what was happening in the community. His silence was a choice, his lack of movement of the 1 million+ bitcoins (at the peak of the market worth over a billion dollars) held in his assumed wallets was absolutely deliberate and that he still apparently had access to his accounts.

So far, so background.

Enter Dr. Craig Wright

At the end of 2015 Bitcoin was back on the rise, closing out the year at $428. Investigative journalists from both Wired and Gizmodo were undertaking parallel investigations into Dr. Craig Wright, an Australian academic turned businessman. I won’t rehash the contents of those articles, if you are interested in their contents, please read them. In November 2015, separate overlapping ‘leaked’ caches of documents were provided to both Wired and Gizmodo that indicated that both Wright and the Late Dave Kleiman, an American computer security expert, were actually Satoshi. The leaked documents and email accounts appeared to be owned by Wright and included communication between Kleiman and Wright and other correspondence signed with keys apparently matching Satoshi’s.

The articles were published, Wright went offline, his linkedin deleted and twitter set to private. The community went into overdrive, the internet is not known for taking a story at face-value and Wright’s story and the leaked files appeared to fill with more holes every hour. A university he had attributed his doctorate to denied granting him one, the companies he supposedly did business with denied it and damningly, the keys used to sign documents within the leaks just didn’t add up – mostly because they couldn’t have dated from when the documents purported to be from. Wright stayed silent.

4 Months later on Monday 2nd May, in another multi pronged attack the Economist published an article along with the BBC and GQ apparently asserting that they believed Wright to be Satoshi, based on private demonstrations by Wright in London. Ostensibly, Wright was coming out to protect those close to him who had been hounded by the media. Further credence was lent to the claim when two of the Bitcoin communities longest serving members said that they too believed Wright to be Satoshi. Wright for his part published a blog post at the same time stating:

If I sign Craig Wright, it is not the same as if I sign Craig Wright, Satoshi.

In direct reference to the famous quote of Jean-Paul Sartre,”If I sign myself Jean-Paul Sartre it is not the same thing as if I sign myself Jean-Paul Sartre, Nobel Prizewinner“, Wright appears to admit that he is Satoshi, signing a portion of text on Sartre with what would appear to be his private key, producing a public key which when validated (and his post goes on to explain how that works) proves that he is indeed Satoshi. Note that he doesn’t actually say this, but provides screen shots which result in the public key.

A Fly in the Ointment

As this excellent writeup by Patrick McKenzie and this Reddit post detail, the public cryptographic key from the post is actually taken from a Satoshi signed bitcoin block from 2009 and the other information provided is all publicly available. This all suggests that the blog post was written to intentionally mislead people into believing that Wright has actually provided a public key generated by Satoshi’s private key proving that he is Satoshi… nothing of the sort has actually happened.

The Economist was quick to deal with the backlash and realised that they needed actual, public proof from Wright. The BBC’s  reported on but didn’t necessarily commit himself one way or the other and Wright himself said that he will provide the “extraordinary” proof required in the coming days by moving one of the Satoshi owned Bitcoins.

I’d be happy to be proved wrong, but given the evidence so far, I am of the opinion that this is a very complex (and almost admirable) hoax, so the question for me now is why bother?

We’ll deal with that in part 2, tomorrow.