the bitcoin bubble

The Hijacking of Satoshi Nakamoto

Dorian S. Nakamoto, identified by Newsweek magazine as the founder of Bitcoin, stands surrounded by members of the media as he arrives home in Temple City, California, U.S., on Thursday, March 6, 2014. Nakamoto, a 64-year-old physicist, denied involvement in the digital currency before leading reporters on a multi-vehicle car chase and entering an Associated Press bureau.
Dorian Prentice Satoshi Nakamoto, either the creator of Bitcoin or a very confused 64-year-old man. Photo: Jonathan Alcorn/Bloomberg via Getty Images

Yesterday, the tech world was captivated by the Newsweek exposé about Dorian Prentince Satoshi Nakamoto, a reclusive 64-year-old California engineer who was, according to the magazine, the same Satoshi Nakamoto who invented Bitcoin. Today, Newsweek’s claim is under the microscope, after an AP interview in which Nakamoto fervently denied he was involved at all.

While the is-he-or-isn’t-he debate was swirling around Nakamoto yesterday, I took a minute to go back and review the original white paper [PDF] in which the creator (or creators) of Bitcoin first described the concept. It was a good reminder of just how far removed the current Bitcoin ideology is from the original vision, and how badly the Bitcoin community has screwed up the plan that Nakamoto – whoever it/they is/are – laid out six years ago.

The Bitcoin system Satoshi Nakamoto described in 2008 didn’t come attached to a chest-puffing manifesto, an end-the-Fed jeremiad, or a desire to rid the world of government-backed currency. It was a beautifully simple idea: a system that would allow people to send payments to each other without having to go through a bank, using a system of algorithmic matching called a “block” to make sure that people actually got paid the amounts they were owed.

In the five years since the white paper, Nakamoto has gone underground, and his idea has been taken up by a group of zealous dorks. These people call each other “brothers,” wax rhapsodic about their devotion to Bitcoin, and make no bones about their prediction that their beloved crypto-currency will change the world in the same way the Internet did. Their politics tend to be, if not straight-up libertarian, then at least suspicious of government – they see Bitcoin as a tool with which to pry the global monetary system away from political officials and put it in the hands of a decentralized, mathematical grid.

To the de facto leaders of today’s Bitcoin movement – like the Winklevoss twins, who compared Bitcoin to the expeditions of Vasco de Gama and Sir Edmund Hillary in a blog post about their upcoming space voyage – Bitcoin is much more than a simple payments system. It’s a revolution in thought, a shift from a world in which people are entrusted with making the rules to one in which numbers and algorithms do the talking. They’ve ascribed a religious quality to the crypto-currency – and as a result, they’ve brought themselves to the point of self-parody.

Just compare how much more sober and reasonable the Nakamoto of 2008 sounds when describing Bitcoin:

[A] peer-to-peer distributed timestamp server to generate computational proof of the chronological order of transactions. The system is secure as long as honest nodes collectively control more CPU power than any cooperating group of attacker nodes.”

To how the Winklevii of 2014 sound:

Today, we see an independent technological infrastructure being built that allows these courageous entrepreneurs to risk their greatest human resources – their time, intelligence, extraordinary energy, and hard-earned capital – in modern attempts to achieve the unachievable, unconstrained by the technologies and boundaries of generations past.”

Nakamoto does seemed to have grasped the political implications Bitcoin might have – he’s quoted frequently as having said, “[Bitcoin is] very attractive to the libertarian viewpoint if we can explain it properly” – but if you look through his early writings, what sticks out is that the politics of Bitcoin were very much secondary to the technology. Bitcoin was never meant to be the cornerstone of a new world order, and it’s only when it began to spread that it picked up the goofy connotations it has now.

I used to be hopeful that Bitcoin could succeed as part of a payments system, even if it never became a mainstream alternative to fiat currency. After all, it is expensive and annoying to move money, and a Bitcoin-based system would allow people to cut out the fee-heavy middlemen. I still think a system like that would be valuable – and I think that one day in the not-so-distant future, we’ll have a system of digital currency that carries many of the benefits of Bitcoin with a much more secure, more regulated infrastructure.

But Bitcoin won’t be it. You simply can’t put the ideological horse back in the barn once it’s left, and few members of the Bitcoin faithful would be satisfied with a world in which crypto-currency was used simply for cross-border payments, but had no part in an insurrection against the monetary status quo. And their wild-eyed fanaticism – coupled with the Mt. Gox bankruptcy, the Silk Road debacle, and other headline-grabbing Bitcoin setbacks – is what’s going to damn Bitcoin in the eyes of normal people who don’t live in Silicon Valley, who have probably never heard of Bitcoin before, and whose participation would be necessary to achieve the ultimate aspirations of Bitcoin’s backers.

Timothy B. Lee’s analysis of the Nakamoto situation is probably right. (Basically, he says, Bitcoin wouldn’t have become Bitcoin if Nakamoto’s identity had been known from the beginning.) But I sort of wish, for Bitcoin’s sake, that Nakamoto had been able to pop out of the shadows once in a while to remind his fanboys that they were taking his proposal far too seriously – that it was a disintermediated money wire he’d been proposing, not a new way of life.

I have no idea if Newsweek’s Satoshi Nakamoto is the real Satoshi Nakamoto, or just a poor schmuck who happens to have the same name. But whoever the real Nakamoto turns out to be, it’s too bad that his original idea got co-opted, and that the saner, more pragmatic voices in the Bitcoin arena have been drowned out by the ideologues. Bitcoin had a chance of catching on as a payments system. As a revolution, though, it’s already toast.