2008 Financial Collapse

In 2007-2008 Banks were failing. The world’s financial system was collapsing. Anarchy seemed nigh.

Governments printed trillions of dollars to save the banks. The newly printed pounds, dollars and other currencies devalued the old ones. Gold soared. There were calls for a return to the gold standard.

Dollar hoarders wanted a new currency that couldn’t be devalued at the whim of a government. Then their prayers were quietly answered.

Satoshi Nakamoto

On 1 November 2008, a new individual appeared on the Cryptography mailing list called metzdowd.com. The new poster used the pseudonym “Satoshi Nakamoto”.

Bitcoin is born

Satoshi wrote: “I’ve been working on a new electronic cash system…” He attached a link to his White Paper, “Bitcoin: A Peer-to-Peer Electronic Cash System”.

Bitcoin had just been born. It was set to become an economic miracle.
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Bitcoin.exe version 0.01

By early January 2009 Satoshi released the program Bitcoin.exe version 0.01. It was the first Bitcoin mining software.

Satoshi wrote:

"Total circulation will be 21,000,000 coins. It'll be distributed to network nodes when they make blocks, with the amount cut in half every 4 years.

first 4 years: 10,500,000 coins
next 4 years: 5,250,000 coins
next 4 years: 2,625,000 coins
next 4 years: 1,312,500 coins
etc...

When that runs out, the system can support transaction fees if needed. It's based on open market competition, and there will probably always be nodes willing to process transactions for free.

The real trick will be to get people to actually value the Bitcoins so that they become currency. I would be surprised if 10 years from now we’re not using electronic currency in some way, now that we know a way to do it. It could get started in a narrow niche like reward points, donation tokens, currency for a game or micropayments for adult sites.”

Double spend

Satoshi wasn’t the first person to think of a digital currency. He was however the first to propose a solution to the previously unsolved problem of potential “double spending”. If you owned a digital coin, there was nothing to stop you making a duplicate, and spending it twice.

Blockchain

Satoshi’s solution was to create the Blockchain. The Blockchain is a permanent digital record of every transaction leading up to the current ownership. That ledger is recorded, duplicated and maintained across thousands of trusted Nodes. All the nodes must agree on the ledger, making the current ownership of an asset absolutely indisputable.

#Who is Satoshi Nakomoto?
Satoshi popped up from nowhere on the Metzdowd mailing list. Other members were very active, posting on all kinds of cryptography issues. Most members were posting using their real names. They knew each other. Nobody had heard of Satoshi Nakamoto.

Satoshi tried not to give any clues as to his true identity. His identity still remains a secret.

Journalists continue to try to unmask Satoshi. Fortunately for Satoshi, most investigators are as inept as Sherlock Holmes’ half-witted assistant, and can’t understand the clues is staring them in the face.

From time to time someone pops up claiming to be Satoshi Nakamoto. The claims are always quickly debunked, but not before journalists have had a field day with their front-page news.

Satoshi probably wasn’t Japanese. He had a perfect command of English. He often used British English spelling and he sometimes used British terminology (e.g. he used the phrase “bloody hard”). Based on the times of day when he was most active in forums and on email he was possibly living in the USA.

Satoshi’s last words

Satoshi didn’t write much after 2010. By mid-2011 the Bitcoin project was running itself with hundreds of developers.

In April 2011 Satoshi announced, “I’ve moved on to other things. It’s in good hands.” His emails and posts seemed to fade away after that as if he had a terminal illness.

Satoshi’s last post was on 6th March 2014. He wrote a five-word post, “I am not Dorian Nakamoto”.

This was in response to reports that journalists had found a man called Dorian Satoshi Nakamoto. This particular Dorian allegedly said he was willing to admit to being the inventor of Bitcoins if the journalist would buy him a free lunch – a surprising request from a “billionaire”. The journalist got his story. Dorian got a free lunch.

Satoshi needn’t have bothered writing the denial. Dorian obviously wasn’t the real Satoshi. He wasn’t involved in cryptography. He collected model trains and wrote reviews on Amazon in weak English.

Mining Bitcoin

The software that Satoshi wrote creates Bitcoins. Running the software is known as “mining”. In 2010 some 50 coins could be “mined” each ten minutes. It’s a falling number. Now it’s 12.5 Bitcoins per ten minutes. By 2021 it will have fallen to 6.25.

Limited supply

The reducing supply of new Bitcoins means that there will never be more than 21 million Bitcoins in existence. It’s a hard lock. The supply is perpetually limited.

Satoshi wrote: “My choice for the number of coins and distribution schedule was an educated guess. It was a difficult choice, because once the network is going it's locked in and we're stuck with it. If Bitcoin remains a small niche, it'll be worth less per unit than existing currencies. If you imagine it being used for some fraction of world commerce, then there's only going to be 21 million coins for the whole world, so it would be worth much more per unit.”

Mining getting harder

Every month it becomes harder to mine Bitcoins. When Satoshi started mining you could mine 300 coins per hour with just one computer. Now you would need tens of thousands of computers to mine a single Bitcoin.

In 2010 Satoshi wrote: “Eventually, most nodes may be run by specialists with multiple GPU cards. For now, it's nice that anyone with a PC can play without worrying about what video card they have, and hopefully it'll stay that way for a while. More computers are shipping with fairly decent GPUs these days, so maybe later we'll transition to that. By Moore's Law, we can expect hardware speed to be 10 times faster in 5 years and 100 times faster in 10. Even if Bitcoin grows at crazy adoption rates, I think computer speeds will stay ahead of the number of transactions.”

Today there are millions of computers trying to mine Bitcoins. Each has less than a one-in-a-million chance of mining the next Bitcoin. With the Bitcoin price at a record level, miners are spending a lot of money to get the fastest mining equipment.

80% of all Bitcoins have already been mined

16.5 million of the 21 million possible Bitcoins have already been mined. That’s around 80%. The remaining 20% will mined over the next 25 years. Then that’s it. No more new Bitcoins.

The start of mining

In early 2009, Satoshi was the only miner. Soon online friends and computer geeks joined in. At the start Bitcoins were worthless. Geeks mined Bitcoins for the fun. Eventually most deleted the program and moved on to something new.

Satoshi didn’t give up. He was sure that he had created the currency of the future. “A currency free from the control of any government, state, or enterprise.”

Satoshi’s Billion-dollar Bitcoin hoard

From 2009 until early 2011 Satoshi mined more than one million Bitcoins. Then he stopped. As he saw it, Bitcoins only have value if they are widely distributed. If one person owns all the Bitcoins, then they are worthless.

Satoshi wasn't against capitalism or the accumulation of wealth. He wanted to give Bitcoin the best chance of becoming a currency.

By 2011 Bitcoins started to have some value. It was just a few cents at first, then a few dollars. By the end of the year Bitcoins were changing hands for around 4 dollars each. With a hoard of more than $4 million in Bitcoins, you might have thought that Satoshi would have spent a few, - to buy himself a treat – a new computer perhaps?

Satoshi knew you couldn’t sell any meaningful number of Bitcoins, even in 2011. It would have taken the sale of 1000s of coins to buy a new computer. In practice you couldn’t actually trade more than 2 or 3 coins at a time.

The $40 million Pizza

The first recorded transaction using Bitcoins was on 22nd May 2010. A developer successfully bought 2 pizzas for 10’000 Bitcoins. That’s around $40 million based on today’s price for Bitcoin. It was definitely the most expensive pizza ever.

Bitcoin wallets gathering dust

We know that Satoshi didn’t spend any of his Bitcoins. The beauty of the Blockchain is that you can see every transaction right back to the beginning of time. You can see where every single fraction of a Bitcoin sits. We can see the wallets that Satoshi created for himself. They’re gathering dust.

Satoshi mined the Bitcoins, put them in his wallets, and that’s it. He never touched them again.

$4 billion waiting to be spent

Satoshi’s hoard of Bitcoin is worth more than $4 billion. If it were me, I would have attempted to spend a few. I would have split the hoard so as to avoid having too many eggs in one basket.

His billions lie untouched. Many geeks, journalists and robots are watching his wallets. The moment he buys anything, even a cup of coffee, using his Bitcoins, the whole world will know it.

The real Satoshi, (RIP), will probably never spend his Bitcoins. They will most likely remain dormant forever.