This explainer piece will discuss the legend of Satoshi Nakamoto; the founder and creator of Bitcoin. From the famous white paper to those coming forward claiming to be Satoshi, this post provides a quick intro to the beginnings of the Bitcoin universe.
So, who (or what) is Satoshi Nakamoto? It’s an unknown personality or group responsible for inventing what we know as Bitcoin today. They made their debut on October 31st, 2008 after releasing a white paper on a peer-to-peer electronic cash system.
The White Paper
This document has sparked a revolution by challenging the very concept of currency itself. Dismayed by the current state of world affairs, Satoshi argues that these 4 points make Bitcoin a better alternative:
1. Removing the Third Party
Satoshi discusses the benefits of a completely peer-to-peer transaction process and removing trust from any kind of third party. This is the beginning of the people-powered currency that would become the Bitcoin revolution.
“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,” the white paper reads (page 1).
2. The timestamp
In order for this peer-to-peer system to function, Satoshi posed the idea of ‘timestamping’. Now better known as the blockchain, this concept of the timestamp ensures a permanent, legitimate and chronological record of all transactions.
“The timestamp proves that the data must have existed at the time, obviously, in order to get into the hash. Each timestamp includes the previous timestamp in its hash, forming a chain, with each additional timestamp reinforcing the ones before it.” (page 2)
3. Incentive to mine
Another key point in this white paper is Satoshi’s discussion about incentives to mine bitcoin within the blockchain network. Satoshi saw this as a way to sustain the network and maintain the production of bitcoin, a crucial component in a system that does not have a central authority to distribute the currency.
As explained in the white paper, “By convention, the first transaction in a block is a special transaction that starts a new coin owned by the creator of the block. This adds an incentive for nodes to support the network, and provides a way to initially distribute coins into circulation, since there is no central authority to issue them.” (page 4)
Despite its very public, peer-to-peer nature, Satoshi’s system enables extreme privacy for users. This privacy comes in the form of anonymous ‘keys’, now more commonly known as private keys, that maintain the anonymity of each transaction on the blockchain.
“The public can see that someone is sending an amount to someone else, but without information linking the transaction to anyone. This is similar to the level of information released by stock exchanges, where the time and size of individual trades, the ‘tape’, is made public, but without telling who the parties were,” Satoshi explains. (page 6)
Satoshi and the Crypto Community
How did Satoshi’s revolutionary white paper become so popular? Perhaps it was Satoshi’s interaction on crypto forums at the time, as they engaged with the community excited by his thinking. Or was it because Satoshi stood for a completely decentralised network and showed confidence in its success?
Satoshi explains that Bitcoin is empowered by its differences from other digital currencies. He comments that: “A lot of people automatically dismiss e-currency as a lost cause because of all the companies that failed since the 1990s. I hope it’s obvious it is only the centrally controlled nature of those systems that doomed them. I think this is the first time we’re trying a decentralised, non-trust-based system.”
The Hunt for Satoshi
After the person or group behind Satoshi suddenly disappeared, rumours began to swirl. Satoshi deleted some of their forum posts and comments, shrinking their online presence down to nothing. Inevitably this has sparked intense mystery and speculation within the crypto community.
For now, though, the hunt for Satoshi continues. Satoshi’s legendary status has invited hoaxes and fraudsters to take the mantle for themselves. Many individuals have ‘revealed’ themselves as ‘the true Satoshi’, while failing to produce evidence of these claims.
Some of the people that have been suspected to be Satoshi in the past include Nick Szabo, Hal Finney, Dorian Nakamoto, and Craig Wright.
Nick Szabo is a computer scientist, a legal scholar and a legend within the crypto universe. Szabo’s blog Unenumerated features all things crypto, from bitcoin to Bit Gold. The concept of Bit Gold is a precursor to Bitcoin, and both were announced in late 2008.
Hal Finney was an early bitcoin contributor and enthusiast, who received the first bitcoin transaction (10 BTC) from Satoshi Nakamoto.
Each one of those mentioned, with the exception of Wright, has denied being behind the launch of the first cryptocurrency.
What Does This Mean for Bitcoin?
Satoshi Nakamoto embodies what this currency is all about. Bitcoin’s decentralisation and anonymity make it just like its founder. And that’s probably how it works best.
Satoshi has become a figurehead for the ungoverned currency and a reminder of how Bitcoin came to be. But the technology has grown beyond Satoshi. While individuals will join and leave the community, just as Satoshi himself chose to leave, the technology will continue.
Satoshi’s legacy lives on in the modern incarnation of his brainchild. This is greatly due to the legacy of Satoshi’s initial white paper; detailed yet clear enough to still serve as a manual for Bitcoin and cryptocurrency. And it doesn’t matter to the Bitcoin protocol whether we know the real-world identity or address of the person who invented it.