In the previous episode, we took a look at how cryptocurrencies were born in the 1980s, and then we followed their underground struggle in the 1990s, a group of individuals risked prison time because they believed in total financial freedom from the government.
Today we'll dive into the civil war in the modern bitcoin community, and see how some believe that the cryptocurrency has been co-opted by banking interests, and lastly we'll take a look at some theories into who Satoshi Nakamoto may be, let's begin.
One of the first things you need to understand to grasp the modern state of bitcoin, is the block size wars, as we discussed in the last episode bitcoin is mined in blocks these blocks contain a record of all the most recent transactions, the size of these blocks measured in megabytes have a meaningful impact in the way that bitcoin functions, Satoshi originally placed a one megabyte block size limit on bitcoin so why did he do this, well Satoshi didn't want some miner on the network to create a huge block terabytes in size that could clog up the entire system, as time went on this one megabyte block size limit made bitcoin hard to scale, as more users came online as more people used the bitcoin system, payment times became longer and fees became higher, even to date bitcoin can only do about 7 transactions per second, for context PayPal does about 15, and vis 2 000 transactions per second, but Satoshi knew this was coming and in his original writings he remarked that bitcoin would be updated with larger block sizes as it scaled.
So here's where the issue arises, there was a fundamental split in the community it was over the question of if bitcoin was a long-term store of value like gold, or a quick medium of exchange like cash, within the bitcoin developer community so-called big blockers wanted bigger block sizes so more transactions could take place this would make bitcoin function closer to a method of payment and electronic cash, on the other side of the aisle was the small blockers they saw bitcoin as a store of value so transaction speed and efficiency didn't matter as much, in their eyes the original one megabyte limit was fine, why risk messing with it according to the small blockers having large blocks would make it hard for some computers to handle, they stated that eventually only large companies with powerful computers would dominate the network forming a monopoly.
In 2015 Gavin Anderson whom Satoshi left in charge after vanishing, and a google developer by the name of Mike Hearn would team up together to tackle this problem their solution was the release of Bitcoin XT equipped with a two megabyte block size that was set to increase over time, and capable of 24 transactions per second, it looked promising and the miners in the community were on board, if the majority of the bitcoin community downloaded the Bitcoin XT software and decided to run it on their nodes the community would have voted with their machines and the issue would have been settled.
But there was strong opposition, the small blockers saw this as a betrayal, the technical experts should determine the direction of bitcoin and not a populist campaign, from here things got bizarre, strangely due to a multitude of reasons and some possible foul play Bitcoin XT ultimately didn't reach mass adoption.
Strangely online the main reddit bitcoin forum would ban anyone that talked about Bitcoin XT, Mike Hearn in 2016 stated
"Why has bitcoin failed?, It has failed because community has failed. What was meant to be a new, decentralized form of money that lacked "systematically important institutions" and "too big to fail" has become something even worse:
A system completely controlled by just a handful of people."
There was now some obvious contention within the bitcoin community
Within the community of bitcoin developers, the search to fix the scaling problem was still taking place, the idea of a segwit or segregated witness was introduced, activated in 2017 its aim was to store transaction data in a smarter way so more data could fit onto a given block. Basically they removed the cryptographic signature from the block only leaving the receiver and sender information, this process made room for more data.
In august of 2017 some bitcoin developers weren't happy with the proposed segway method, so they worked on a new version of bitcoin and split it off from the main chain, a process known as a hard fork, the result was Bitcoin Cash. Bitcoin Cash had none of the data saving techniques of segwit, and an increased block size of 8 megabytes, at this point things start getting a little messy, after some time the developers of bitcoin cash wanted to include even more changes.
A man by the name of Craig Wright thought that this would cause bitcoin to stray from its original purpose, interestingly some people believe that Craig Wright is Satoshi, but more on him later.
In 2018 Craig led the charge to split from Bitcoin Cash into what would be called Bitcoin Satoshi Vision, or Bitcoin SV for short, it has no block size limit and features super low transaction fees, there is a belief among the Bitcoin Satoshi Vision community, that Bitcoin SV is the real bitcoin, according to them Bitcoin SV is technically superior to the mainstream Bitcoin, and it can do more than 2 000 times the amount of transactions per second, it's more flexible, yet only trades at a small fraction of the price.
On the other side of the fence, the entity Coin Geek, currently controls over 51% of the computing power available for mining Bitcoin SV, which critics says, can lead to manipulation, others such as Vitalik, the creator of Ethereum, calls Bitcoin SV a complete scam
So as it stands today, due to infighting and differing opinions, Bitcoin is split into three:
-mainstream Bitcoin
-Bitcoin cash
-Bitcoin Satoshi Vision
But what if all of this fracturing should have never happened?, What if there was more going on behind the scenes?
In 2014 while the scaling problems were being discussed in full swing, a company by the name of Blockstream was founded the stated purpose of Blockstream was to "sell sidechains to enterprises charging a fixed monthly fee and taking transaction fees", in other words its aim was to relieve the stress on the bitcoin network by doing transactions off-chain, and pocketing the fees instead of miners, it's important to note that a side chain is not a blockchain at all, side chains are typically used to patch holes in the capabilities of the underlying protocol, therefore the better bitcoin becomes, the more obsolete companies like Blockstream get, in my opinion it was in Blockstream's interest to keep bitcoin slow and therefore with a small block size, it's worth noting that Blockstream isn't a foundation, but a for-profit corporation, interestingly Blockstream's ceo is Adam Back who some also believe is Satoshi Nakamoto, but more on this later.
During the researching for this chapter I could see that a large part of the bitcoin community was suspicious of block stream many take issue with Blockstream's lightning network for example it promises to boost bitcoin's transactional speeds to faster than visa, but at what cost, the original bitcoin system promised no middlemen and no trust required suddenly the Blockstream corporation had broken these promises.
"so the lightning hubs were required to be set up for financial regulation and reporting laws, require massive amounts of liquidity to keep multiple well funded open channels, offer fraud departments to watch the blockchain constantly and prevent theft, all while taking small fees for every transaction you route through them, does this system sound familiar, just replace the term open channel with checking account, these lightning network hubs will be ran by the same financial institutions the bitcoin was made to challenge the banks aren't fighting bitcoin because bitcoin will be the new banking system, bitcoin needed no middleman, there was no fraud to detect, no permission to give, no transaction to revers, no fees to collect so it had to be broken to need them, the truth is the one megabyte blocks restricting bitcoin are purposely kept there by the developers, the absurdly high fee and long waits created demand for a solution, and the solution they give us is the banking industry.
to make things worse the entities funding Blockstream are antithetical to the original bitcoin vision, Blockstream has received 55 million dollars of investment from Axa Insurance, the ceo of Axa at the time was Henry de Castris, a french billionaire and the president of the Bilderberg group at the time, a group known to have global banking and corporet ties, critics also point out that Blockstream has received funding from the digital currency group, many higher-ups within the company, have ties to the federal reserve, world bank, and MasterCard, not exactly the crowd who you would expect to spearhead a grassroots movement, they also own CoinDesk, one of the biggest news outlets in the crypto space, Adam back has also been criticized for hiring all the early bitcoin devs into Blockstream to reshape the bitcoin protocol.
To many it seems that Blockstream has crippled Bitcoin's full potential through their group of developers only to seek to fix its shortcomings for a profit, so through Blockstream, Have the banks taken over bitcoin? It's not quite a smoking gun, but it's all very curious.
Satoshi Nakamoto the pseudonym for the inventor of bitcoin, has gone to great lengths to hide his identity, he created an anonymous email, account and never shared any personal details, he's left such few clues that the best one can do is point out the facts that lead to the most likely candidates and then I'll leave it up to you to make up your own mind, firstly for Nakamoto we need to lay some groundwork with two basic clues:
-Number one Bitcoin's original code was written in the programming language C++
-Number two Satoshi had two language quirks, he would use British English over American English, and consistently used two spaces after a period
this common writing style hints that Satoshi is not a group but a single person, our first candidate isn't the most serious, but he's worth mentioning because he ties into our second candidate, the least likely candidate is Dorian Nakamoto, a Japanese-American physicist and engineer in 2014, a news week article published a photo of him as well as his home, which could be easily found via a google search, the article claimed that he was the founder of Bitcoin solely due to his name, basically lazy journalism.
When accused Nakamoto stated that he had never heard of Bitcoin before, and it would seem completely strange that someone as obsessed with cryptography and anonymity would just go ahead and use their legal name as an alias, the media attention Dorian received was unnecessary and dangerous, thankfully the Bitcoin community came to Dorian's aid and collectively donated 102 bitcoins, a donation now worth close to 5 million dollars.
As we saw in episode 1 Satoshi didn't work alone he worked closely with Hal Finney, a cryptographer and part of the cypherpunk movement, before going public Satoshi spent a year and a half coding sharing his work privately among a select few, Hal Finney would also receive the very first bitcoin transaction, coincidentally Hal lived just down the road from Dorian Nakamoto, perhaps they had bumped into each other and Hal decided to use Nakamoto's name as an alias.
In 2009 Hal was diagnosed with Als, this coincides with when Satoshi would slow down posting in email forums, on the flip side if he was testing code for Satoshi, why would he put bugs on his own code, and then solved them himself, in hindsight with bitcoin's popularity, one might think that it was a sophisticated ploy to throw people off the scent, but you must remember these were the earliest days of bitcoin and it could have flopped over and disappeared a week from then for all they knew, this would suggest that it wasn't him.
Hal would post as himself on other forums and even on his deathbed he denied being Satoshi and even stated that he didn't really understand bitcoin at first, sadly Hal Finney died in 2014 and was cryogenically frozen, he decided that he wanted to be cryogenically frozen because one day he still wanted to see the future, since we're still talking about him today in a way he's made it.
the next candidate is our old friend Nick Szabo, he's a first generation Hungarian and his father fought in the 1956 Hungarian revolution, Nick would have a unique perspective on governments abusing their power, he has a computer science degree from the University of Washington, and was proficient in law and economics, as you saw throughout the previous episode Nick has been an active participant in almost every stage of cryptocurrency history, and was close to a complete breakthrough with his invention of Bit Gold, Szabo had also worked for David Charms Digicash, an early attempt to bring cryptocurrency digital payments, he has the knowledge, experience and a decade's long passion for cryptography based money, he's even credited with pioneering the concept for smart contracts in the 1996 paper, before bitcoin wallets were used the protocol was to use IP addresses to send Bitcoin to each other, Satoshi's IP address was in California and Nick did indeed work in the area.
What i find most interesting is that there was an exchange between Satoshi and another cryptographer, in the exchange Satoshi remarked that his Bitcoin address also happened to have his initials in it, looking through all of the initials combinations out of all the candidates that could be Satoshi only one of the initials match, N S, although these initials could just be Satoshi Nakamoto reversed on the opposing side though Nick Szabo has denied Satoshi claims, in addition bitcoin was coded in C, and Wei Dai the inventor of B-money states that Nick didn't code much in C or C, Nick also doesn't match the british linguistic clues.
Craig Wright is probably the most controversial of the bunch, he's a well-accomplished Australian scientist who also holds a bunch of other degrees, he was first accused of being Nakamoto in 2015, the difference between him and the other suspected founders, is that while denying it first he eventually claimed the accusations to be true, Greg Anderson who worked closely with Satoshi believed Craig was the real deal after Craig performed a digital signature on an address known to be owned by Satoshi, Craig would also fit the British English clue, because both Australian and British English are pretty much interchangeable.
Wired magazine had collected a number of interesting coincidences that led them to their conclusion, they include, posts on wright's blog, that coincide and predict the release of the initial bitcoin paper, there is also said to be leaked correspondences between wright and attorneys where he states that he's been running bitcoin since 2009.
On the flip side it wasn't long before Wyatt and the crypto community began pointing out inconsistencies in Craig's story, the timeline became even more blurry when new evidence seemed to prove that Craig's blog post had been backdated, it also seems unlikely that Nakamoto would spend seven years being anonymous just to take credit when accused.
Further in 2020 Craig wright had provided a list of early bitcoin addresses which he claimed to own in an ongoing court case these addresses were briefly inadvertently made public, 145 of these addresses were used by an individual who did own them to sign a public message to prove that Craig was not the owner, the message read "Craig Stephen wright is a liar and a fraud. He doesn't have the keys to sign this message", this was a major blow to the theory that Craig was Satoshi, but many bitcoin sv supporters wholeheartedly believe that Craig is Satoshi.
Thanks to a 2020 documentary by the Youtube channel Barely Sociable the most recent candidate during the rounds is Adam Back, Adam ticks the majority of the boxes and seems almost a perfect match apart from one thing but more on this later Adam was an early pioneer in digital currency research along with everyone in episode 1 Wei Dai, David Charm and Hal Finney.
Adam has a PHD in distributed computer systems, a perfect match in 1997 he invented HashCash, a similar system is used in the proof-of-work mining algorithm in Bitcoin, both Satoshi and Adam wrote in British English and used the unique double spacing in writing, this can be seen by comparing Adam's writings and forums with Satoshi's papers, Satoshi never showed any emotion or clues into his personality, but in one post in July of 2010 he described that, Bitcoin was "bloody hard to describe", and that's a very British thing to say.
other evidence that points to Adamus Satoshi is the fact that messages between the creator of bitcoin and Adam are not available to the public, there exists email exchanges between Satoshi and almost everyone else apart from Adam, in addition Adam codes very well in C++ the same language that bitcoin was written in.
in the first episode we saw that the first block of bitcoin included a headline from the times paper, the times is a British publication which would make sense because Adam was from London, Adam was also known for starting the trend of making political statements in code.
In 2013 when the wealth of Nakamoto was revealed in a blog article, Adam registers to sign up to the bitcoin forum on the very same day, in forum posts Adam states that the blog authors are "getting too close to the dealings of Nakamoto", despite only just joining the forum he knows obscure details of early bitcoin bugs that were never public in change logs, if you're interested in digging more into Adam check out Barely Social's Youtube documentary it has some compelling arguments.
But adam would deny all claims made in the video, and for me though there's one thing that stops me from believing Satoshi is Adam, if Satoshi's vision for Bitcoin was to have ever increasing block sizes, Why would Adam through Blockstream be actively trying to keep bitcoin's block size small for a profit?, why would Adam want any money at all he'd probably be one of the richest people in the world if he was Satoshi? am I missing something here? the only thing I can think of is maybe Adam worked extremely close with Satoshi, but for one reason or another ended up selling out to the big banks
So who is Satoshi? I'll be honest, I'm stumped for this one, if you guys think you have any clues for me hit up i the comments.
In truth, discovering the identity of Satoshi Nakamoto is not necessary for the success of bitcoin, he or she could be one of these candidates, or just someone who is truly unknown until this day, and with that that pretty much brings us to the end of our bitcoin series.
In part one you saw how free thinkers took digital cryptography seriously in the 80s and 90s, their efforts allowed bitcoin to exist in this episode you saw that the story of bitcoin may not be as simple as it first seems, in the end another cryptocurrency may come and take its place as the global leader no matter what happens bitcoin will always be known as the pioneer.