Bitcoin, the four-year-old virtual currency that approximates cash on the internet, now powers an economy worth more than $1 billion and is widely admired for the technical sophistication that allows it to operate without a central authority. It got its own ticker on CNBC and inspired a legion of startups. And yet, we still don’t know where it came from.
Bitcoin was first introduced to the world by the pseudonymous Satoshi Nakamoto, a persona that communicated by email and in the official Bitcoin forum before abruptly disappearing. No one has ever met him, or at least no one who will admit to it. No one knows if Nakamoto is male or female. His (or her) early emails even refer to a "we."
"It's all part of the fun."
Both The New Yorker and Fast Company tried and failed to unmask Nakamoto. The ongoing crowdsourced investigation hasn’t done any better. "People analyze Satoshi's written words, trying to divine if he speaks native British English, American English, or learned the language as a second language," said Jeff Garzik, a developer who works on the Bitcoin Project and emailed with Nakamoto in the early days."They analyze his posting dates, trying to guess his local time zone. It's all part of the fun."
But two weeks ago, programmer Sergio Demian Lerner discovered something new about Nakamoto.
Bitcoin is designed to mimic gold in some ways. Anyone can "mine" for new Bitcoins by running the Bitcoin client. The process is designed to get more difficult as more people start mining. At first, the client could create 50 Bitcoins in an hour running on an average laptop. It now takes a day to generate three Bitcoins using a powerful machine that does nothing else.
It was generally assumed that Nakamoto has been mining Bitcoins since the very beginning and probably owned a large amount. But if Lerner’s analysis is correct, Nakamoto is likely hoarding an eye-popping fortune of almost a million Bitcoins, worth more than $100 million at today’s market price.
The Bitcoin protocol creates a public ledger as Bitcoins are generated and exchanged, which produces a receipt for every transaction and prevents coins from being spent twice. By examining this ledger, Lerner deduced that Nakamoto has only spent around .0005 percent of his fortune, or about 500 Bitcoins, over the last four years.
Nakamoto is likely hoarding an eye-popping fortune of almost a million Bitcoins
There is some disagreement over whether Lerner’s numbers are correct, but the experts The Verge consulted all said the basic gist was accurate: there is an entity that has amassed a large fortune in Bitcoin, and that entity is probably Nakamoto. "Sergio's latest detective work is technically sound," Gavin Andresen, the Bitcoin developer who took over for Nakamoto, said in an email. "It sure looks like one person (or group of cooperating people) mined about a million bitcoins in 2009, and the most likely suspect is Satoshi."
Bitcoin was introduced to the world in 2008 in an academic paper that was emailed to the Cryptography and Cryptography Policy Mailing List. Nakamoto started emailing with individual programmers who took an interest, and then began posting on the Bitcoin forum. His communications were overwhelmingly technical, never personal, and always in text.
In April of 2011, Nakamoto emailed Andresen to say that the Bitcoin Project developers "should try to de-emphasize the whole ‘mysterious founder’ thing when talking publicly about Bitcoin." No one has heard from him since.
Lerner’s analysis includes more information than has ever been revealed about Bitcoin’s elusive inventor. It also provides a new starting point for those who want to discover Nakamoto’s real identity. The Nakamoto-entity did make some transactions, each of which has the potential to reveal more clues. Lerner noted this in a blog post announcing his findings. "If the real name of the sender of a single transaction belonging to the entity is identified, then Satoshi’s mystery identity will be revealed," he wrote. "I bet that this will happen in the days following this post." (It hasn’t, yet: the difficulty of tracing transactions back to a name is one of Bitcoin's most popular features.)
By Bitcoin logic, Nakamoto’s identity shouldn’t matter
But by Bitcoin logic, Nakamoto’s identity shouldn’t matter. Bitcoin was designed to substitute technology for trust. "What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party," Nakamoto wrote in the original Bitcoin white paper.
That doesn’t change the fact that people still want to know.
"I’m as curious as I was back then, probably even more curious," said Joshua Davis, who spent four months trying to find Nakamoto for a piece in The New Yorker in October 2011. "Every time I see a news post about the rise of the value of the Bitcoin, I wonder if Satoshi is seeing that too. What’s he thinking? Is he proud? Is he thinking that, at some point, some day, he’ll finally reveal himself? Imagine 15, 20 years down the line. The world has now really adopted Bitcoin. It is a viable currency. At that point will Satoshi, on his death bed, say, ‘It was me’?"