The Origins of Bitcoin

NJ Bridgewater

5 December 2018

Introduction: Money & The Digital Age

Raw hex version of the Genesis block, 1/3/09  

The Times, 1/3/09

                     

Money is power, and power is energy. Energy is the basis of all existence.  In my previous article, I discussed the history of money and its origins,[1] and I have also written on the history of wealth in general. The origins of money and wealth go back to the origins of humanity itself – to the earliest societies which used shells as a form of proto-money. This was eventually substituted with precious metals, such as electrum, silver and gold. The Lydians began to mint electrum, silver and gold coins with a standard weight and shape, and this innovation was adopted by the Greeks and Persians. The Chinese then invented paper “money” – the first truly fiat currencies – all of which failed and were reduced to a value of zero. Now, in the 20^th and 21^st centuries, we have again experimented with fiat currencies, both in paper and digital form, with the majority of currencies being more than 80% or 90% digital. This has coincided with what is called the dawn of the Information Age. The Industrial Revolution began in Britain sometime around 1760 and ended in about 1840.[3] This was followed by the Second Industrial Revolution, also called the Technological Revolution, which started in 1870 and ended in 1914, with the start of the First World War. The Digital Revolution, also called the Third Industrial Revolution, began sometime in the 1950s and has continued to the present day,[4] coinciding with the Information Age, the Digital Age or the Computer Age.[5] This age is characterised by a shift from industrial production to information technology and computerization.[6]

A ledger from 1828

A digital age requires digital money – but here we must make a clear distinction. As I explained in my previous article on the History of Money, there is a huge distinction between money and currency. Money functions both as a store of value and as a means of exchange, because it is able to retain purchasing power over time. Gold and silver, being scarce, durable and desirable, are able to serve as stable stores of value (SoV) over time. As money, in the form of coins and bullion, gold and silver can also be used as a means of exchange (MoE), meaning that they can be used to exchange value. Precious metals are not merely arbitrary materials. They are limited in supply and take a great deal of energy to produce. They must be mined, collected and refined, melted down and minted into coins, bars or ingots. These, in turn, are exchanged for objects which take time and energy to produce or labour, which is also energy. Money thus serves as a means to transfer energy from one individual to another. Currency also takes a certain amount of energy to produce, being printed on paper notes/bills or as ones and zeros on a digital database. It takes energy to maintain such databases and to process payments via existing payment systems, such as SWIFT, PayPal, VISA and MasterCard. The difference, however, is that existing currencies, all of which are “fiat” currencies (i.e. created by government decree), represent a certain value but do not work as stores of value. Why is that? Why aren’t digital or paper U.S. dollars a store of value?

The main reason is that there is no limitation on the number of modern U.S. dollars which can exist. The Spanish dollar, which was made of silver, was naturally limited by the supply of silver on Earth. Since silver is naturally scarce, Spanish dollars were also scarce, meaning that the supply of Spanish dollars could not be artificially inflated. This means that it was not a fiat currency, but real money. The value of the Spanish dollar was also dependent on the market value of silver, meaning that it was sound money. The value of sound money is not determined by governments – rather, it is determined by the free market. Fiat currencies can be manipulated by the creation of nominal values which do not match real-world assets or purchasing power. A U.S. dollar isn’t pegged to any scarce asset, like gold, so it isn’t scarce. Furthermore, as the number of U.S. dollar bills increases, its value decreases, leading to inflation and depreciation. As Polleit (2010) argues in an article on ‘The Curse of Fiat Money’, “the inflated money stock cannot be brought back toward any rightful level, as fiat money is created out of thin air via circulation credit, not backed by any commodity” meaning that “there is no equilibrium level the fiat-money supply could shrink toward”.[8] The value of a silver dollar, however, would reflect an increase or decrease in the supply of silver, with the discovery of new silver mines being the only way to increase the supply. Sound money, therefore, does reach an equilibrium, which is based on a natural supply limit. For money to work as a store of value, it has to be limited.

Digital Money & Economics

VisiCalc spreadsheet on an Apple II

How can scarcity of money be ensured in a digital age? Nowadays, U.S. dollars can be created at the flick of a button. Even printing has largely been rendered obsolete, as the vast majority of fiat currency in circulation is 100% digital – ones and zeros on a bank’s spreadsheet. In fact, most of it isn’t even created by the Federal Reserve. Whenever banks extend loans to non-banks, e.g. consumers or businesses, they increase the money supply through what Mises calls ‘bank-circulation credit’ – a practice which results from fractional reserve banking.[10] This is where banks lend out more currency than they have in reserve. They are, quite literally, creating currency out of thin air. The result of all this is that the money supply is constantly being increased, reducing the purchasing power of ordinary consumers. Since the digital world is a limitless expanse, and computer memory and computing power grows year-by-year according to Moore’s law, the potential supply of currency is ultimately limitless. That is not good, as it means that people cannot reliably save money. If they cannot save money, they cannot build up the capital needed to start businesses, buy/build a house and improve their standard of living. This results in social stagnation and a lack of upward mobility. The frustration felt by many millennials in the early 21^st century, who are unable to afford to buy a house or live on a single income is a reflection of the deleterious effects of relying on fiat currencies.

It is urgent, therefore, for a new sound money to come into existence. Since governments are unlikely to willingly give up their power to create currency out of thin air, and fractional reserve banking isn’t going anyway anytime soon, perhaps the free market could provide a solution—and it has. “The idea of sound money,” Ludwig von Mises informs us, “was devised as an instrument for the protection of civil liberties against despotic inroads on the part of governments,” is “affirmative in approving the market's choice of a commonly used medium of exchange,” and “is negative in obstructing the government's propensity to meddle with the currency system”.[11] Money must, furthermore, be created by free-market forces, Mises argues, rather than government interventionism.[12] Money itself is, he further argues, a commodity. In a free market, money is the commodity which is most exchangeable.[13] In other words, if the most exchangeable commodity are shells, then shells are money. If shekels of gold or silver are the most exchangeable commodity, then these too are money. What counts as money will vary over time, but, ultimately, the free market will decide what becomes money, and that money is simultaneously a commodity, a store of value and a means of exchange. It would be a mistake, however, to assume that money must be material. As Michael Goldstein argues, the idea that money must be a physical, tangible good made sense up until 2009, as there did not previously exist any form of digital scarcity.[14] Today, he argues, we “do have at least one viable digital commodity, and it also happens to be very useful for the purposes of money”, i.e. Bitcoin.[15] [For an introduction to Bitcoin, see my article(s) entitled ‘What is Bitcoin?’][16]

The CypherPunks and the Origins of Digital Money

Taxonomy of money

If we want to look to the origins of digital money and the genesis of Bitcoin, we have to look a few decades before its actual emergence in 2009. Bitcoin, as we know, was invented in 2008 when someone under the pseudonym Satoshi Nakamoto published a paper entitled “Bitcoin: A Peer-to-Peer Electronic Cash System”.[18] According to Andreas M. Antonopoulos, Nakamoto’s innovation combined several previous inventions such as b-money and HashCash to create a new decentralized electronic cash system, using a Proof of Work algorithm, which was a form of distributed computation system.[19] In 2010, Satoshi Nakamoto himself wrote that “Bitcoin is an implementation of Wei Dai's b-money proposal http://weidai.com/bmoney.txt on Cypherpunks http://en.wikipedia.org/wiki/Cypherpunks in 1998 and Nick Szabo's Bitgold proposal http://unenumerated.blogspot.com/2005/12/bit-gold.html”.[20] The immediate antecedents of Bitcoin, therefore, are known: HashCash (proposed by Adam Back, 1997), b-money (proposed by Wei Dai, 1998) and Bitgold (Nick Szabo, 1998). Moreover, in 2004, computer scientist Hal Finney developed the first reusable proof of work system called, quite simply, ‘Reusable Proof of Work’ (RPOW), which was based on Nick Szabo’s ‘theory of collectibles’.[21] This theory is outlined in Szabo’s essay on the origins of money, published in 2002, which explained that the earliest forms of proto-money in ancient societies were collectibles, and these enabled early humans to solve problems related to reciprocal altruism, kin altruism and mitigation of aggression.[22] Like Mises, Szabo does not regard money as some arbitrary creation of governments. Rather, it has deep evolutionary and societal roots. The earliest proto-money or primitive money, as used by hunter-gatherer tribes, differs significantly from modern money, so he chose to refer to it as a ‘collectible’ or ‘valuable’. These collectibles, according to Szabo, were “low velocity money, involved in a small number of high value transactions” whereas coins were “high velocity money, facilitating a large number of low value trades”.[23]

The philosophical and theoretical origins of Bitcoin, indeed, are best described by Nick Szabo, the inventor of smart contracts, who seems to also be the originator of the economic theory and philosophy behind Bitcoin. He has delivered several talks on the topic of the History of Blockchain (at the Ethereum Developer Conference, November 9^th – 13^th, 2015), and the Origins & Future of Bitcoin (at the Bitcoin Investor Conference, Las Vegas, NV, Oct. 29 – 30, 2015).[24] According to Szabo, Bitcoin (and blockchain) has its origins in libertarianism and the need to create privatised money. This money, by nature, requires trust minimization, or trustlessness, as trusted strangers are ‘security holes’. In his talk on the Origins of Bitcoin, Szabo discusses the Bit gold proposal, stating:

“Bit gold was pretty much a transparent attempt to say, let’s take the properties of gold – the economic properties of gold – such as unforgeable costliness, but let’s improve the security properties of it… gold has been very insecure – the Spanish looted the Aztecs, the English looted the Spanish, FDR confiscated gold – there’s a lot of situations where gold was not secure enough to use, and so the idea was to use a tool from computer science to come up with something better. And so, we can look at when Satoshi came out with Bitcoin, there’s a lot of parallels between that and b-money and Bit gold – it makes it distinct from the traditional financial system which did not, for the most part, use these advanced principles of computer science.”[25]

Due to Bitcoin’s trustlessness, he further argues, Bitcoin serves a number of purposes including: business-to-business transactions (B2B), remittances, routes around capital controls and, interestingly, potential to serve as a reserve currency. In fact, he states:

“This one hasn’t been used for yet but is something which I envisioned when I was thinking of Bit gold – it’s something you can still do with Bitcoin – it’s that governments and banks can use it as a reserve currency. Political distrust arises when wars break out; it’s going to be a lot more secure for them to be holding cryptocurrency than to be holding gold – and especially because much of the world’s gold is held in trust in the United States anyway.”[26]

In his talk at the Ethereum Developer Conference in 2015, Nick Szabo describes two key figures as important “political and philosophical inspirations” behind the Cypherpunk movement: Ayn Rand and Friedrich Hayek. In particular, Russian-American philosopher and writer Ayn Rand (1905 – 1982) created the concept of ‘Galt’s Gulch’, which was a place where individuals could come to together and form their own community independent of corrupt institutions and society. This idea was taken up by Tim May, who conceptualised the concept of ‘Galt’s Gulch’ within cyberspace, which would be protected by cryptography. Austrian economist Friedrich August von Hayek (1899 – 1992), likewise, was influential in the economics behind Cypherpunk movement. The Cypherpunks traced their technical roots, furthermore, to the ideas of cryptographer David Chaum, who wrote about anonymous digital cash and pseudonymous reputation systems in a paper titled "Security without Identification: Transaction Systems to Make Big Brother Obsolete" (1985).[27] In this monumental paper, Chaum writes that “large-scale automated transaction systems of the near future can be designed to protect the privacy and maintain the security of both individuals and organizations” through the use of ‘digital pseudonyms’ created through “a special random process”.[28] The Cypherpunk movement, inspired by these ideas, began to take shape in the early 1990s when Eric Hughes, Timothy C. May and John Gilmore began to meet monthly at Gilmore’s Company Cygnus Solutions in the San Francisco Bay area.[29] Jude Milhon, who attended one of their early meetings, coined the phrase ‘cypherpunk’ as a combination of the words cipher and cyberpunk, and the word was added to the Oxford English Dictionary in 2006.[30] 

DigiCash

Far from being merely theoretical, however, there were attempts, in the early 1990s, to bring an electronic cash system into existence. Chaum had originally conceived of ‘Ecash’, a form of cryptographic electronic money (or ‘cryptocurrency’), back in 1982, but this did not take form until he founded his DigiCash company in 1990, raising $10 million.[32] The new Ecash was tested in only one bank, the Mark Twain Bank in Saint Louis, MO, using it as a micropayment system. Five thousand customers used the Ecash system over a three-year period from 1995 to 1998, when it was dissolved.[33] This coincided with the bank being purchased by Mercantile Bank, a large issuer of credit cards.[34] Ecash’s demise was followed, in 1998, by Wei Dai’s proposed b-money and Nick Szabo’s Bit gold proposal, the latter of which would require users to complete a proof of work function, in which a cryptographic puzzle had to be solved in order to release new currency, rather like Bitcoin does today.[35] One of the key distinguishing features, however, between Wei Dai’s proposal and Szabo’s is the notion of a fixed supply. Wei Dai was interested in “Tim May’s crypto-anarchy”, in which “the government is not temporarily destroyed but permanently forbidden and

permanently unnecessary”. His proposal was not interested in the scarcity of money. As in Bitcoin, he argued that “anyone can create money by broadcasting the solution to a previously unsolved computational problem”.[36] However, “the number of monetary units created is equal to the cost of the computing effort in terms of a standard basket of commodities”, so that, “if a problem takes 100 hours to solve on the computer that solves it most economically, and it takes 3 standard baskets to purchase 100 hours of computing time on that computer on the open market, then upon the broadcast of the solution to that

problem everyone credits the broadcaster's account by 3 units”. While this ties b-money to real-world baskets of goods, it potentially allows for a continuous and uncapped supply of currency.[37]

Wei Dai (b-money)

Szabo’s Bit gold proposal, however, outlined something that was not merely a “a payment scheme, but also as a long-term store of value independent of any trusted authority”, comparing and contrasting it to “the properties of traditional stores of value based on verifiable scarcity, such as precious metals and rare collector's items”.[39] In other words, Bit gold was not intended merely as a payment system, like PayPal or MasterCard. On the contrary, payment systems are conventional systems used by companies and banks to transfer currency from one customer or business to another, or from one bank to another bank. Such systems can always be made more efficient, or more decentralised, but that is completely beside the point. Attempts have already been made to do just that, including the creation of the Ripple cryptocurrency, also called XRP, which was created by Ripple Labs, Inc. While the technology behind Ripple (XRP) might be innovative, it fails as sound money, and this is because, first and foremost, it is a corporate cryptocurrency. Initially, some 100 billion Ripple (XRP) were created, with 20 billion XRP being retained by the founders, and the remaining 80% being held by Ripple Labs. By 2015, Ripple Labs still retained some 67% of their original 80%, and, in May 2017, they placed 55 billion XRP (88% of their holdings) into a cryptographically-secured escrow. Due to its hyper-centralization, therefore, XRP lacks trustlessness, and its fate is intimately tied to that of the company behind it. Bit gold’s purpose was entirely different – to serve as a trustless, decentralised digital gold and settlement layer which did not rely on any trusted third party. Bit gold could not be confiscated, stolen or hacked – and it was to have all the properties of gold which make it sound money, i.e. value determined by the free market, durability, scarcity, verifiability and fungibility. 

Nick Szabo (Bit gold, smart contracts)

Bit gold was never implemented with its original name, but the philosophy behind it, and the innovations which it proposed, were later incorporated into a more developed and mature cryptocurrency, i.e. Bitcoin. Bitcoin, like Bit gold, was not merely a new payment system. It was designed quite specifically to function as both a means of exchange and a store of value, enabling it to serve as a form of digital gold. By 2008, after some ten years of studying the problem, Szabo’s proposal was ready to be implemented, but who would take up the task? In a comment to a blog post he wrote entitled “Bit gold markets” (December 27, 2008), he wrote: “To be useful both gold and bit gold have to end up saving users more in transaction costs than is expended in the gold mining or the CPU running. They both save transaction costs by serving as stores of value and media of exchange, or as backing for fractional reserve currencies that do same, but bit gold will perform these monetary functions with greater security, lower storage costs, etc. than gold… Anybody want to help me code one up?”[41] A few months earlier, on the 18^th of August 2008, the domain name bitcoin.org was registered, and, on the 31^st of October 2008, Satoshi Nakamoto’s Bitcoin whitepaper, “Bitcoin: A Peer-to-Peer Electronic Cash System”, was published on a cryptography mailing list.[42] A few days later, on the 3^rd of January 2009, the Bitcoin protocol was launched as Satoshi Nakamoto mined the genesis block (block number 0), creating the first 50 Bitcoins.[43] Whether or not Szabo was involved in the creation of Bitcoin, Satoshi did credit him, writing that “Bitcoin is an implementation of Wei Dai's b-money proposal… and Nick Szabo's Bitgold proposal”, leading one to the conclusion that Bitcoin is a direct development of Bit gold.

The Bitcoin Whitepaper

Bitcoin has two birthdays, in a sense. One is the date that the whitepaper was published: 31 October 2008 – and the other is when the first block – the Genesis Block – was mined, on 3 January 2009. The latter is more generally accepted as the birth of Bitcoin, as this is the date that the Bitcoin network launched. The Bitcoin whitepaper was the promise, and the Genesis block was the fulfilment. For Bitcoin and BCH-believers alike, the whitepaper has become a gospel of sorts, as it lays out the original vision of Satoshi Nakamoto. It must be remembered, however, that a whitepaper is a visionary document, but it is not infallible, nor can it foresee all the problems or complications that may arise when a protocol is actually launched. The whitepaper, indeed, is formative, but it must also be compared to the actual Bitcoin protocol, as well as the many other e-mails and correspondence of Satoshi Nakamoto, in order to gain a more holistic view of his original vision and purpose. In the whitepaper, Nakamoto sets out a technical description of how Bitcoin would function, as well as the problem that it was aiming to solve, and how it solves that problem. That problem is trusted third parties. He writes that the current financial system works well for most transactions, but, “it still suffers from the inherent weaknesses of the trust based model”, as well as the cost of “mediation” through third parties. Furthermore, truly “non-reversible transactions” are not possible with the existing financial system.[44] What this means it that banks and financial institutions act as third parties, who have control over the eventual fate of our transactions. They can cancel or reverse a transaction, and they must act as trusted third parties. That trust, all too often, proves misplaced, as banks sometimes go insolvent, or governments can use banks to confiscate money, as in the case with Cyprus in 2012-2013. The financial crisis of 2008, in which governments had to bail out failed banks, was also instructive, and, no doubt, may have inspired Satoshi to release his whitepaper and the Bitcoin protocol.

The solution? Satoshi Nakamoto proposed “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”, protecting “sellers from fraud”, while allowing “routine escrow mechanisms” to protect buyers. He also proposed a solution to the “double-spending problem” through the use of “a peer-to-peer distributed timestamp server to generate computational proof of the chronological order of transactions”.[46] The solution referred to is now commonly called the blockchain. Double-spending is when digital transactions allow the same money or units of account to be spent twice. This is not a problem for physical cash, as one cannot spend the same metal coins or notes twice. With digital transactions, however, the problem was how to ensure that a digital ledger could be verifiable. The blockchain solves this by creating an immutable ledger which cannot be changed. This is ensured through a distributed network in which numerous nodes, i.e. computers which each have a copy of the entire list of transactions, each update a distributed ledger whenever new transactions are added. Transactions are bundled together in a block, which does not record the names or details of the people making the transactions. Rather, each person has a digital address, and the transactions from each address are bundled together within each block. That block is then “mined”. This is the process called ‘proof of work’.

There is an algorithm called SHA-256 (SHA stands for ‘Secure Hash Algorithm’). This algorithm is a mathematical operation run on digital data: as computers compare the computed ‘hash’, i.e. the output from executing the algorithm, to a known or expected hash value, the integrity of a set of data can be determined. This takes a certain amount of computing power to complete, and the computer which completes it generates a block on the blockchain and receives what is called the ‘mining reward’. Initially, this was set at 50 Bitcoins. Each block is linked to the block which comes after it, forming a chain of blocks that cannot be altered. Each node is a computer which stores a complete copy of the Bitcoin blockchain and runs the Bitcoin protocol. Since these nodes are distributed across the entire planet, there is no way for transactions to be falsified or deleted. Each new block is mined by running the same SHA-256 algorithm, and each new mining reward incentivises miners to continue running the blockchain and verifying transactions. This ensures that double spending cannot occur, as each transaction can be independently verified using a blockchain explorer, and the computing power necessary to falsify the blockchain would be so immense, and the rewards so low for doing so, that such a falsification is well-nigh impossible. Indeed, as mining difficulty increases, and the size of the network grows, the security of the network grows in tandem. Thus Satoshi wrote that “a key aspect of Bitcoin is that the security of the network grows as the size of the network and the amount of value that needs to be protected grows.”[47]

A Bitcoin is not simply an arbitrary 1 or 0 in a digital ledger. That, more correctly, would be what U.S. dollars or Euros are. They are merely 1s and 0s stored in a bank’s ledger, and are subject to hacking, manipulation or deletion. Transactions of dollars can be easily reversed or stopped because they just represent data, which is not tied to or controlled by any kind of irreversible or immutable protocol. An individual Bitcion, however, according to the Bitcoin whitepaper is “a chain of digital signatures”, with each owner transferring “the coin to the next by digitally signing a hash of the previous transaction and the public key of the next owner and adding these to the end of the coin”, with the payee being able “to verify the chain of ownership”.[48] This is extraordinary, because it means that Bitcoin isn’t merely some kind of ‘magic internet money’ or simply a set of data. Rather, each Bitcoin is a tangible record of immutable transactions, showing the address of both the one making the transaction and the recipient. This means that each Bitcoin carries with it a history, and that history represents a permanent record which is verified and maintained through a network of countless thousands of nodes distributed across the planet. Even if all the nodes in one country are destroyed, the blockchain will remain secure, as it is distributed widely throughout the entire world. Each node is maintaining that tangible history, and each coin is secure from fraud, hacking or deletion. A U.S. dollar, being a simple 1 on a database, can be instantly deleted or created out of thin air. If a bank disappears tomorrow, so do all of its transactions, and so does the credit and debt which that bank created, resulting in a contraction of the money supply. U.S. dollars are really quite ephemeral – created out of thin air and as easily destroyed. Bitcoin is a history, and that history is preserved and maintained through computing power and energy. Like gold, it takes energy to produce, and it takes energy to keep it secure. Bitcoin has, in other words, inherent value.

 The Genesis Block

We have already briefly looked at what a block is. Satoshi explains the process of running the Bitcoin network as follows: “1) New transactions are broadcast to all nodes. 2) Each node collects new transactions into a block. 3) Each node works on finding a difficult proof-of-work for its block. 4) When a node finds a proof-of-work, it broadcasts the block to all nodes. 5) Nodes accept the block only if all transactions in it are valid and not already spent.

6) Nodes express their acceptance of the block by working on creating the next block in the

chain, using the hash of the accepted block as the previous hash.”[50] This is, in simple terms, what Bitcoin does. All of these new blocks trace back to the previous block, and each block traces back, ultimately, to the Genesis Block. They are all beads on a string, so to speak, and they all go back to the first bead on that string. The Genesis Block contained a message within the ‘coinbase’, i.e. the content of the input of a generation transaction.[51] The coinbase can contain any arbitrary data and, in this case, Satoshi included the title of an article from the Times of London: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.”[52] This, in a nutshell, spelled out the reason for Bitcoin’s existence. The Chancellor refers to the Chancellor of the Exchequer in the United Kingdom, who is responsible for delivering the budget of the United Kingdom Government during any fiscal year. The 2008 financial crisis had brought the Western world and the world economy to the brink of financial collapse. Instead of letting the free market repair itself, as they should have done, and allowing natural selection to eliminate banks that were ‘too big to fail’, governments swooped in and propped up failed institutions and a failing system through bank bailouts, thus furthering national debt and ensuring that the burden thereof would be shifted to future generations. The financial system had failed, and Bitcoin was the answer.

One of the key ways in which Satoshi aimed to solve this problem was through the creation of digital scarcity. In the real world, assets are scarce, as they are limited by Nature. There is only so much arable or fertile land on Earth, and there is only so much gold and silver. There is also only so much time that each person has within one lifetime. Everything which is scarce and value, indeed, may be counted as an asset. Governments and financial systems wreck this natural order by creating unlimited amounts of debt and credit, and through the printing of a limitless number of banknotes. Based on Nick Szabo’s Bit gold concept, Satoshi incorporated the notion of digital scarcity by limiting the possible number of Bitcoins which could ever be created. In an e-mail he wrote that, initially, he originally wanted to make prices (of Bitcoins) “similar to existing currencies”, but, since he did not know the future, that would be very hard. Instead, he chose a middle path, with the total number neither being too small nor too high – a fixed amount of 21 million BTC.[53] This would either result in a Bitcoin price that would be very low, if it remained “a small niche”, or “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”, with each coin being divisible to “8 decimal places, so 1 coin is represented internally as ‘100000000’”. This, Satoshi argued, gives Bitcoin “plenty of granularity if typical prices become small”.[54] When asked about why 21 million was chosen as the limit, Satoshi reiterated: “I wanted something that would be not too low if it was very popular and not too high if it wasn't.”[55]

Bitcoin – controlled supply

Deflation and Price

Other key features were added to Bitcoin at its very beginning. These were explained by Satoshi in various e-mails, having not been clarified in the original Bitcoin whitepaper. For example, each block takes about 10 minutes, with the initial mining reward set at 50 BTC. However, he also introduced something called the ‘the halving’. This is the halving of the Bitcoin mining reward every 210,000 blocks, “or around 3.9954 years, which is approximate anyway based on the retargeting mechanism's best effort”.[57] Thus, the first halving happened, as programmed, on November 28, 2012, when block 210,000 was solved, and the mining reward dropped from 50 BTC to 25 BTC.[58] Before the halving, some 10.5 million BTC had already been mined, which is 50% of the maximum total supply.[59] The genius of creating a regular halving of the mining reward roughly every 4 years is that it ensures that the amount of Bitcoins created halves every four years. This means that the inflation rate of Bitcoin is cut in half every time 210,000 blocks are mined, with the supply decreasing rapidly over time, until there are only a maximum of 21 million BTC in existence, including the first 50 BTC of the Genesis block, which cannot be spent (either intentionally or through a fluke of the code). On the surface, since new Bitcoins are mined every block, Bitcoin appears to be inflationary. In reality, however, it is deflationary, and here’s why: with Bitcoin, you can be your own bank. That means that your private key is your responsibility. Every Bitcoin user has a public key, which allows them to receive transactions, and a private key, which allows them to spend their Bitcoins. Whoever holds the private key, owns the Bitcoin. Over time, people lose their private keys, or their hard-drives get trashed and lost, and this was particularly common in the first few years of Bitcoin history. Therefore, as many as 4 million BTC have been lost altogether, or between 2.78 and 3.79 million, representing 17 – 23% of existing Bitcoins.[60] Thus while, by 2017, there were roughly 16.381 million BTC in existence, some 3.789 were potentially lost, resulting in a supply of about 12.592 million BTC.[61]

Bitcoin transactions (January 2009 – September 2017)

In addition to lost coins, which increase the value of circulating Bitcoins, the halving of the mining reward has a notable effect on the value of each Bitcoin. Bitcoin started off at basically nothing, until, by March 2010, it was selling on BitcoinMarket.com for about $0.003, or less than 1 U.S. penny.[63] By July 2010, it had reached about 8 cents, and, between February and April 2011, it reached parity with the U.S. dollar.[64] This brought increased interest in the new currency, with the first speculative bubble resulting in an all-time-high of $31 on the 8^th of July 2011, followed by a crash to $2.[65] Twelve months after the first Bitcoin halving event in November 2012, the Bitcoin price reached an all-time-high of $1000 USD.[66] Since this represented market hype and speculation, of course, the price bubble popped, and Bitcoin fell hundreds of dollars in value. Nevertheless, regardless of the various speculative bubbles and market cycles which Bitcoin is subject to, its price always rises over time. Thus, when the bubble popped in 2013, Bitcoin fell from $1000 to about $200 by March 2015.[67] The second Bitcoin halving occurred on July 9, 2016, when the 420,000^th block was mined. The result? The block reward was reduced from 25 BTC to 12.5 BTC, which is the current reward (as of 2018).[68] Everyone who is reading this now is probably aware of the result. By December 2017, the Bitcoin price had risen to a startling $19,000 USD[69] – something which even Satoshi himself would have found startling, if he is alive to witness it. Of course, this resulted in a steep fall in price thereafter, but, even now, the price of Bitcoin is above $4000. Bitcoin is subject to speculation, but the price of Bitcoin always goes up over time, because of both deflation, rising demand and the 4-yearly halving of the block reward.

Total Bitcoin supply over time

The next halving is only about two years away and will occur in 2020, resulting in a reduction of the mining reward from 12.5 BTC to 6.25 BTC. This, no doubt, will result in another huge price rise followed by a price crash to a higher low than previously. Again, the price of Bitcoin will settle at a price much, much higher than the previous high of $19,000, meaning that Bitcoin could be tens of thousands of dollars in value – or more. This is not written in the spirit of prediction, but merely as an analysis of what has come before. As these 4-yearly halvings go by, Bitcoin will continue to rise and rise in price, eventually reaching $1 million USD – or perhaps much more. The last Bitcoin will be mined on or about October 8^th, 2140 or May 7^th, 2140 (assuming mining power remains constant), after which transaction fees rather than mining reward will be used to maintain the network.[71] However, by the 22^nd century, only tiny fractions of a Bitcoin will be mined at any one time. In fact, the last full Bitcoin will be mined before 2033, when the mining reward will drop from 1.5625 BTC to 0.78125 BTC.[72] By that time, for mining to continue to be profitable, the price of Bitcoin will have to be many multiples of what it is today, perhaps even $1 million USD or several million dollars. Thomas J. Lee, head of research at Fundstrat Global Advisors, estimates that, by the 2030s, Bitcoin could be priced at $10 million USD.[73] This may seem extraordinary, but it is well within the realm of possibility. By 2140, if the U.S. dollar still exists, one BTC would have to be worth tens or hundreds of millions of dollars (in 2018 dollars).

Bitcoin price history

Satoshi Nakamoto – Anonymous Creator

Let us go back a second: what happened to Satoshi Nakamoto? At the beginning, Satoshi was ever-present, answering people’s questions and actively working on the Bitcoin protocol. So, what happened? Bitcoin began in 2009 with a small number of cryptography enthusiasts – the Cypherpunks – but it quickly began to generate interest within a wider circle of adherents. The first Bitcoin transaction occurred when Hal Finney was sent 10 Bitcoins from Satoshi Nakamoto on January 12, 2009.[75] During the early days, Satoshi managed to mine some 1 million BTC, which have remained mostly idle since that time. Mining required relatively little computational power at the time, so there are many stories which arose of people losing thousands of Bitcoins on a hard drive or forgetting/losing their private keys. This is less likely to happen today, as Bitcoins are much, much more valuable. On May 22, 2010, now known as Bitcoin Pizza Day, a computer developer bought two pizzas for 10,000 BTC, which was the first commercial transaction using Bitcoin.[76] This was at a time when each Bitcoin was worth a fraction of a penny. As Bitcoin continued to grow in price and began to gain media attention, however, it seems that Satoshi began to become wary. He was using a pseudonym for a reason – what he was doing was incredibly dangerous. He had created a means to liberate mankind from the existing financial order – a financial order with vested interests consisting of the elites and governments of the world. Satoshi’s ideas were challenging – revolutionary – they bespoke a new world financial order in which everyone could be their own bank, take control of their own finances, and send transactions without the need for any government permission or third party. If his identity were revealed, not only would he become personally liable to potential sanction or personal danger, but it could also potentially endanger the nascent movement itself, as he was central to the original process of designing, implementing and improving the Bitcoin protocol.

A Guy Fawkes mask

In 2011, WikiLeaks began to accept payments in Bitcoin. WikiLeaks was originally founded in Iceland in 2006 and has a database of some 10 million documents collected over 10 years.[78] Its founder and director is the controversial figure Julian Assange, who is currently holed up in the Ecuadorian Embassy in London, where he took refuge in August 2012.[79] Assange is currently wanted in the United States for potentially violating the Espionage Act of 1917. As of 2017, U.S. officials were preparing to file formal charges against Assange.[80] Following WikiLeaks’ release of U.S. diplomatic cables in November 2010, donations to WikiLeaks were blocked by Bank of America, VISA, MasterCard, PayPal and Western Union.[81] In 2011, WikiLeaks turned to Bitcoin to continue accepting donations. This allowed them to bypass the existing financial system and its limitations, allowing people to freely choose who or what they want to support. In the same year, Freenet, Singularity Institute, Internet Archive and the Free Software Foundation also began accepting Bitcoin, and, as of 2012, there were over 1,000 merchants excepting Bitcoin payments via BitPay.[82] In the case of WikiLeaks, accepting Bitcoin donations worked very well. By April 2012, they had collected more than 1,100 BTC in donations (then worth about $32,000, with 1 BTC = $10.00).[83] That same address (1HB5XMLmzFVj8ALj6mfBsbifRoD4miY36v), now contains some 4,042.82316017 BTC, which is currently worth $15,449,365.71 USD (at $3,821.43 per Bitcoin).[84] For Satoshi Nakamoto, however, the controversial status of WikiLeaks was shining an altogether-too-close a spotlight on the early Bitcoin movement. In 2010, he wrote:

“It would have been nice to get this attention in any other context. WikiLeaks has kicked the hornet's nest, and the swarm is headed towards us.”[85]

The Disappearance of Satoshi Nakamoto

When did Satoshi Nakamoto finally disappear (or go quiet)? Gavin Andresen was one of the early Bitcoin Core developers and programmers who closely collaborated with Satoshi Nakamoto via e-mail, and, since he was a public personality, interested parties used to look to him for information on the new cryptocurrency.[86] Andresen also went on to create the Bitcoin Foundation in 2012.[87] He was also responsible for launching the first Bitcoin “faucet” in 2010, called Bitcoin Faucet, which gave out five free Bitcoins to each visitor (it’s no longer active, by the way).[88] His collaboration with Satoshi began in earnest in December 2010, when he wrote that, “with Satoshi’s blessing… I’m going to start doing more active project management for Bitcoin”, being careful to assert that “I am not Satoshi Nakamoto; I have never met him; I have had many e-mail conversations with him.”[89] In 2011, Gavin Andresen was asked to explain Bitcoin to the Central Intelligence Agency (CIA), and he delivered a talk on the topic on the 15^th of June 2011.[90] Before going, Gavin informed Satoshi that he was going to visit the CIA, and Satoshi disappeared shortly thereafter. Whether this was a coincidence or not, only history and time will tell. Gavin explained: “The last email I sent him I actually told him I was going to talk at the CIA. So it's possible, that.... that may have um had something to with his deciding…”[91] Nevertheless, according to Mike Hearn, who writing in 2013, Satoshi Nakamoto “communicated with a few of the core developers before leaving. He told myself and Gavin that he had moved on to other things and that the project was in good hands.”[92] Just what those “other things” were is up for debate. He did, however, send one final message in 2014.

Dorian Nakamoto

In 2014, Newsweek, in an article entitled “The Face Behind Bitcoin”, tried to dox Satoshi Nakamoto by identifying him with a Japanese-American man in California called Dorian S Nakamoto,[94] who has since become an iconic figure within the Bitcoin movement – his, indeed, is the face that has spawned a thousand memes. Dorian Nakamoto himself denied being Satoshi Nakamoto, though he did have a background in financial software.[95] On March 8, 2014, Satoshi’s P2P Foundation account became active again and he posted one final message: “I am not Dorian Nakamoto.”[96] Whether or not this was Satoshi actually posting is debatable. What is clear, however, is that the Bitcoin creator has, for all intents and purposes, disappeared from the public scene, and, with the exception of this brief statement in 2014, has been inactive since about June 2011. Why did he disappear? The exact reasons may not be known now, but the dangers of Satoshi becoming publicly known are clear. The fate of Bernhard Von Nothaus, the creator of the Liberty Dollar, is a telling example. The American Liberty Dollar (ALD) was a private currency created in the United States, which took the form of minted metal rounds (i.e. coins), gold and silver certificates and electronic currency (eLD), with actual precious metals being warehoused at Sunshine Minting in Coeur d’Alene, Idaho.[97] Beginning in 1998, until it was shut down in July 2009, Nothaus’s organization, called ‘Liberty Services’ (originally the National Organization for the Repeal of the Federal Reserve and the Internal Revenue Code, or NORFED), issued commodity-backed currency based on gold, silver, platinum or copper.[98] While not attempting to counterfeit money or create fake currency, opponents of the Liberty Dollar argued that it was in violation of 18 U.S.C. § 486, which threatens anyone who creates coins “intended for use as current money, whether in the resemblance of coins of the United States or of foreign countries, or of original design” with a fine or imprisonment of “not more than five years, or both.”[99]

Liberty Dollars (ALD / eLD) – A Telling Tale

Liberty dollars

As it turned out, Liberty Dollar offices were raided by the Federal Bureau of Investigation (FBI) on November 14, 2007, seizing all the gold, silver, and platinum, as well as two tons of ‘Ron Paul dollars’. Von NotHaus himself was arrested on June 6, 2009 and charged with one count of conspiracy to possess and sell coins in violation of a number of federal statues including: 18 U.S.C. § 485, 18 U.S.C. § 486, 18 U.S.C. § 371, 18 U.S.C. § 1341, 18 U.S.C. § 2, 18 U.S.C. § 485 and 18 U.S.C. § 2.[101] On March 18, 2011, he was convicted of "making, possessing and selling his own coins", after a jury deliberated for a mere two hours. He initially faced up to 15 years in prison, a $250,000 fine and seizure of around $7 million in minted coins.[102] His appeal was denied in 2014, and prosecutors demanded that he face up to 23 years in federal prison, but he was only sentenced, in 2014, to 6 months’ house arrest with 3 years’ probation.[103] Is it any surprise then, that Satoshi Nakamoto, in 2008, decided to use a pseudonym to release his project, and that, in 2011, the same year that Von NotHaus was convicted, he decided to disappear from the scene? If the Federal Government could bring charges against someone for creating independent silver and gold coins, it is not beyond the realm of reason to suggest that similar charges could be brought against Satoshi Nakamoto—if he were a U.S. citizen—for creating something which resembles a currency, which is used in commerce, and which also serves as an asset and commodity. Like gold and silver, Bitcoin is hard money – and it was being used by payment providers across the globe, as well as censured organizations, such as WikiLeaks. As such, Bitcoin not only represents a competitor to the U.S. dollar, but it also represents a censorship-resistant tool which can be used to evade sanctions, currency controls and other government-sanctioned restrictions or capital controls. Satoshi Nakamoto may have felt increasingly under the spotlight, and increasingly threatened, and, as a result, decided to abandon the public sphere, leaving Bitcoin without any centralized leadership figure. Since then, Bitcoin’s claim to decentralization has been reinforced, unlike Ethereum, Ripple, Cardano, NEO, TRON and Bitcoin Cash, all of which have personalities which lead the show. [For more on Ethereum, see my article(s) entitled: ‘What is Ethereum?’][104]

Other Reasons Satoshi May Have Left

Other suggestions for the reason behind his disappearance include the possibility that Satoshi Nakamoto has died. This is usually tied to the idea that Satoshi Nakamoto and Hal Finney are one and the same person. For that to be true, of course, Finney would have had to have created fake correspondence between himself and Satoshi, as there are e-mails to and from these two individuals. He had always denied being the creator of Bitcoin, and he retired from his company, P.G.P. Corporation in 2011.[105] In his last few years, he was only able to move his facial muscles, communicating and writing Bitcoin-related software using a computer that tracked eye movement. He suffered from amyotrophic lateral sclerosis (ALS) – a progressive disease that results in problems swallowing, speaking, and breathing,[106] having been diagnosed in 2009.[107] Finally, he died in 2014 at the age of 58, with his body being preserved by the Alcor Life Extension Foundation in Scottsdale, Arizona, in the hope that he could be revivified at some point in the distant (or perhaps near) future.[108] The progression of his disease, culminating in 2011 with his retirement, as well as his death in 2014, do seem to coincide with Satoshi’s inactivity from 2011 and complete disappearance by 2014, but this is by no means proof of any connection. Another suggestion, by early BitcoinTalk administrator Theymos, was that Satoshi was a minor Cypherpunk hobbyist who came up with the idea for Bitcoin and may not have been an actual “mathematician, cryptographer, or master software engineer”, having perhaps “read a good C++ book” and then “put real effort into following best practices”.[109] He then suggests that “he was having to deal more and more with people, which he didn’t much enjoy”, with some starting “to question his technical decisions” while, at the same time, “Satoshi probably felt like he was losing track of the project, and moreover he didn’t see anything technology-wise that he particularly wanted to work on.”[110] In other words, he gradually felt like he had lost control of his project and abandoned it when it no longer interested him. Both of these suggestions seem quite unlikely, though not impossible.

A Community Without Leaders

Much more likely, in my opinion, is the suggestion that Satoshi Nakamoto felt that increasing public spotlight was endangering his anonymity, leading to the possibility that his real identity might be discovered. In addition to causing potential legal problems, as in the case of Von NotHaus, Satoshi may have also felt that Bitcoin did not ultimately need leadership. Leadership can have negative effects on a decentralised project such as Bitcoin, as it brings undue attention to the personality behind the leader/creator. This has been the case with not only Ethereum, which was founded by Vitalik Buterin, but also other projects, such as Justin Sun’s TRON and Charles Hoskinson’s Cardano.[111] In the case of Ethereum, a hoax on the 4chan internet forum in 2017 stated that Vitalik Buterin had died in a car crash, causing the price of ether (ETH)—the native cryptocurrency of Ethereum—to dip below $300.[112] In 2016, Australian computer scientist, Craig Steven Wright (b. 1970), claimed to be Satoshi Nakamoto, even apparently signing and verifying a message using private keys from block #1 and #9. Security expert Dan Kaminsky, however, said that this was a scam, and Bitcoin developer Jeff Garzik, provided evidence that Wright’s claims were baseless.[113] Wright later went on to support Roger Ver (owner of Bitcoin.com) and Jihan Wu (owner of Bitmain)’s fork of the Bitcoin blockchain called Bitcoin Cash (BCH), which they claim represents the “original vision” of Satoshi Nakamoto. More recently, when disagreements arose between the three over scaling solutions, Wright created his own hard fork called Bitcoin Cash Satoshi’s Vision (BCH SV; BSV),[114] while Ver and Jihan Wu’s version became known as Bitcoin ABC (BCHABC).[115] Meanwhile, Bitcoin (BTC) remains unscathed, free from these personality clashes and disagreements—decentralised and leaderless.

Cryptocurrency logos

Another example: Charles Hoskinson, the CEO of Input Output Hong Kong (IOHK), the company that is building Cardano, recently got into a minor dispute with the Cardano Foundation, the non-profit organization that was set up to drive adoption for Cardano and its cryptocurrency, ADA.[117] Under its remit of overseeing the development of Cardano, the Cardano Foundation hired a firm to audit Cardano’s codebase, costing an estimated $600,000 per year. On September 14, 2018, the Cardano Foundation accused IOHK of not responding to their first audit, while Hoskinson responded, saying that the database in question was just a proof-of-concept, and that it had created two codebases using IOHK’s own method, which should have been audited instead.[118] Such a conflict, pitting the founder against the foundation responsible for the community, does not exist in Bitcoin. Likewise, in the case of Justin Sun, there were accusations (in a Reddit post) that he had sold billions of TRON (TRX) tokens (some 6 billion TRX, in fact), which was followed by a notable dip in the price.[119] Justin Sun denied the allegations, but the damage had been done. This is a classic example of spreading Fear, Uncertainty and Doubt (FUD), which can be seriously damaging to a cryptocurrency community. All of this is quite instructive as to why Bitcoin does not currently need a leader, and the identity of Satoshi Nakamoto is best kept a mystery—at least for now.

As Sun Tzu writes in The Art of War:

“Amid the turmoil and tumult of battle, there may be seeming disorder and yet no real disorder at all; amid confusion and chaos, your array may be without head or tail, yet it will be proof against defeat.”[120]

NJ Bridgewater

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---

[1] Image source: Raw hex version of the genesis block with bank bailout message. 1/3/09, fair use. URL: https://news.bitcoin.com/wp-content/uploads/2017/01/1tmreg.jpg (accessed 05/12/2018). See: Jamie Redman (2017) Bitcoin’s Quirky Genesis Block Turns Eight Years Old Today, Bitcoin.com, Jan 3, 2017. URL: https://news.bitcoin.com/bitcoins-quirky-genesis-block-turns-eight-years-old-today/ (accessed 05/12/2018). For more information on the license, see: https://www.copyright.gov/fair-use/more-info.html ; https://en.wikipedia.org/wiki/Fair_use (accessed 05/12/2018).

[2] Image source: The Times, 1/3/09, fair use. URL: https://en.bitcoin.it/w/images/en/1/1d/Jonny1000thetimes.png (accessed 05/12/2018).

[3] See: Industrial Revolution (Wikipedia article). URL: https://en.wikipedia.org/wiki/Industrial_Revolution (accessed 02/12/2018 07:45 AST).

[4] See: Digital Revolution (Wikipedia article). URL: URL: https://en.wikipedia.org/wiki/Digital_Revolution (accessed 02/12/2018 07:49 AST).

[5] See: Information Age (Wikipedia article). URL: URL: https://en.wikipedia.org/wiki/Information_Age (accessed 02/12/2018 07:49 AST).

[6] See: Julian Birkinshaw (2014) Beyond the Information Age, Wired, 06/2014. URL: https://www.wired.com/insights/2014/06/beyond-information-age/ (accessed 02/12/2018).

[7] Image source: Ledger from 1828, Andreas Praefcke (own work), public domain. URL: https://upload.wikimedia.org/wikipedia/commons/4/49/Hauptbuch_Hochstetter_vor_1828.jpg (accessed 05/12/2018). For more information on the license, see: https://en.wikipedia.org/wiki/Public_domain/ (accessed 05/12/2018).

[8] See: Thorsten Polleit (2010) The Curse of Fiat Money, Mises Daily Articles, 09/14/2010. URL: https://mises.org/library/curse-fiat-money (accessed 02/12/2018).

[9] Image source: An example VisiCalc spreadsheet on an Apple II, Gortu (apple2history.org), 1 September 2005. Public domain. URL: https://upload.wikimedia.org/wikipedia/commons/7/7a/Visicalc.png (accessed 05/12/2018). For more information on the license, see: https://en.wikipedia.org/wiki/Public_domain/ (accessed 05/12/2018).

[10] See: Polleit (2010).

[11] See: The Principle of Sound Money, 08/08/2006, from Ludwig von Mises (1953) The Theory of Money and Credit (New Haven: Yale University Press), originally published: 07/20/1912. URL: https://mises.org/library/principle-sound-money (accessed 02/12/2018).

[12] See: Thorsten Polleit (2009) Ending the Monetary Fiasco — Returning to Sound Money, Mises Daily Articles, 04/17/2009. URL: https://mises.org/library/ending-monetary-fiasco-%E2%80%94-returning-sound-money (accessed 02/12/2018).

[13] See: Polleit (2009).

[14] See: Alexander Lielacher (2018) Bitcoin and its Foundation in Austrian Economics, BTCManager.com, July 27, 2018 19:00. URL: https://btcmanager.com/bitcoin-foundation-austrian-economics/ (accessed 02/12/2018).

[15] See: Lielacher (2018).

[16] See: NJ Bridgewater (2017) What is Bitcoin? Crossing the Bridge, 7 December 2017. URL: https://nicholasjames19.blogspot.com/2017/12/what-is-bitcoin.html (accessed 04/12/2018); Nicholas Bridgewater (2018) What is Bitcoin? Digitex Futures Exchange Blog, last updated Oct 2, 2018. URL: https://blog.digitexfutures.com/cryptocurrency/what-is-bitcoin/ (accessed 04/12/2018).

[17] Image source: Taxonomy of money, based on "Central bank cryptocurrencies" by Morten Linnemann Bech and Rodney Garratt; Stanjourdan (own work), 3 December 2017. CC BY-SA 4.0. URL: https://upload.wikimedia.org/wikipedia/commons/8/86/Money_flower.png (accessed 05/12/2018). For more information on the license, see: https://creativecommons.org/licenses/by-sa/4.0/ (accessed 05/12/2018).

[18] See: Andreas M. Antonopoulos (2017) Mastering Bitcoin: Programming the Open Blockchain (Sebastopol, CA: O’Reilly Media), p. 4.

[19] See: Antonopoulos (2017), p. 4.

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[21] See: RPOW - Reusable Proofs of Work, Satoshi Nakamoto Institute, 2004. URL: https://nakamotoinstitute.org/finney/rpow/ (accessed 02/12/2018).

[22] See: Nick Szabo (2002).

[23] See: Nick Szabo (2002).

[24] See: Nick Szabo - History of the Blockchain, Nov 14, 2015: https://www.youtube.com/watch?v=YpSeOU1VVj4 ; Origins & Future of Bitcoin – Nick Szabo, Nov. 9, 2015: https://www.youtube.com/watch?v=r_yUeuKu7L4.

[25] See: Szabo (2015) Origins & Future of Bitcoin, Presentation from Bitcoin Investor Conference - Oct. 29 - 30, 2015, Las Vegas, NV. Online at BitcoinInvestor.com, published on Nov 9, 2015. URL: https://www.youtube.com/watch?v=r_yUeuKu7L4 (accessed 02/12/2018).

[26] See: Szabo (2015) Origins & Future of Bitcoin.

[27] URL: David Chaum (1985) Security without Identification: Transaction Systems to Make Big Brother Obsolete, URL: https://www.cs.ru.nl/~jhh/pub/secsem/chaum1985bigbrother.pdf (accessed 02/12/2018).

[28] See: Chaum (1985).

[29] See: Cypherpunk (Wikipedia article). URL: https://en.wikipedia.org/wiki/Cypherpunk (accessed 02/12/2018 11:55 AST).

[30] See: Cypherpunk (Wikipedia article).

[31] Image source: DigiCash (David Chaum), 10:01, 7 June 2018. URL: https://en.bitcoinwiki.org/upload/en/images/5/52/David_Chaum_digicash.jpg (accessed 05/12/2018).

[32] See: Ecash (Wikipedia article). URL: https://en.wikipedia.org/wiki/Ecash (accessed 02/12/2018 12:02 AST).

[33] See: Ecash (Wikipedia article).

[34] See: Ecash (Wikipedia article).

[35] See: Cryptocurrency (Wikipedia article). URL: https://en.wikipedia.org/wiki/Cryptocurrency#History (accessed 02/12/2018 12:05 AST).

[36] See: Wei Dai (1998) B-money. URL: http://www.weidai.com/bmoney.txt (accessed 02/12/2018).

[37] See: Wei Dai (1998) B-money.

[38] Image source: Wei Dai, Artillar, 05:45, 3 December 2017. URL: https://en.bitcoinwiki.org/upload/en/images/8/8a/Weidai.png (accessed 05/12/2018).

[39] See: Nick Szabo (1999, 2005) Bit Gold: Towards Trust-Independent Digital Money, Nick Szabo’s Paper and Concise Tutorials. URL: https://web.archive.org/web/20140406003811/http://szabo.best.vwh.net/bitgold.html (accessed 02/12/2018).

[40] Image source: Nick Szabo, Artillar, 14:53, 28 March 2018. URL: https://en.bitcoinwiki.org/upload/en/images/2/21/Nickszabo.jpg (accessed 05/12/2018).

[41] See: Nick Szabo (2008) Bit gold markets. Unenumerated, Saturday, December 27, 2008. URL: https://unenumerated.blogspot.com/2008/04/bit-gold-markets.html?showComment=1207799580000#c3741843833998921269 (accessed 02/12/2018).

[42] See: History of bitcoin (Wikipedia article). URL: https://en.wikipedia.org/wiki/History_of_bitcoin (accessed 02/12/2018).

[43] See: History of bitcoin (Wikipedia article).

[44] See: Satoshi Nakamoto (2008).

[45] Image source: Bitcoin network data, Matthäus Wander (own work), created 22 June 2013. CC BY-SA 3.0. URL: https://upload.wikimedia.org/wikipedia/commons/5/55/Bitcoin_Block_Data.svg (accessed 05/12/2018). For more information on the license, see: https://creativecommons.org/licenses/by-sa/3.0/ (accessed 05/12/2018).

[46] See: Satoshi Nakamoto (2008).

[47] Satoshi Nakamoto (2009) An e-mail to Mike Hearn, Sun, Apr 12, 2009 at 10:44 PM. URL: https://pastebin.com/Na5FwkQ4 (accessed 03/12/2018).

[48] See: Satoshi Nakamoto (2008).

[49] Image source: The main chain (black) consists of the longest series of blocks from the genesis block (green) to the current block. Orphan blocks (purple) exist outside the main chain. Theymos from Bitcoin Wiki (own work), 16 January 2011. CC BY-SA 3.0. URL: https://upload.wikimedia.org/wikipedia/commons/a/ab/Blockchain_landscape.svg (accessed 05/12/2018). For more information on the license, see: https://creativecommons.org/licenses/by-sa/3.0/ (accessed 05/12/2018).

[50] See: Satoshi Nakamoto (2008).

[51] See: Coinbase (Bitcoin Wiki). URL: https://en.bitcoin.it/wiki/Coinbase (accessed 03/12/2018).

[52] See: See: Coinbase (Bitcoin Wiki).

[53] See: Satoshi Nakamoto (2009) E-mail to Mike Hearn, Sun, Apr 12, 2009 at 10:44 PM. URL: https://pastebin.com/Na5FwkQ4 (accessed 03/12/2018).

[54] See: Satoshi Nakamoto (2009) E-mail to Mike Hearn, Sun, Apr 12, 2009 at 10:44 PM.

[55] See: Satoshi Nakamoto (2009) E-mail to Mike Hearn, Wed, Dec 29, 2010 at 10:42 PM. URL: https://pastebin.com/wA9Jn100 (accessed 03/12/2018).

[56] Image source: Graph of the Block Reward halving schedule plotted against a logarithmic scale. CC0. URL: https://en.bitcoin.it/w/images/en/e/e0/Controlled_supply-block_reward_halving.png (accessed 05/12/2018). For more information on the license, see: https://creativecommons.org/publicdomain/zero/1.0/deed.en (accessed 05/12/2018).

[57] See: Satoshi Nakamoto (2009) E-mail to Mike Hearn, Mon, Jan 10, 2011 at 4:34 PM. URL: https://pastebin.com/wA9Jn100 (accessed 03/12/2018).

[58] See: Halving day 2012 (Bitcoin Wiki). URL: https://en.bitcoin.it/wiki/Halving_day_2012 (accessed 03/12/2018 09:51 AST).

[59] See: Halving day 2012 (Bitcoin Wiki).

[60] See: Jeff John Roberts, Nicolas Rapp (2017) Exclusive: Nearly 4 Million Bitcoins Lost Forever, New Study Says, Fortune, November 25, 2017. URL: http://fortune.com/2017/11/25/lost-bitcoins/ (accessed 03/12/2018).

[61] See: Roberts, Rapp (2017).

[62] Image source: Bitcoin transactions (January 2009 – September 2017), Samueldrozdov (own work), created 20 September 2017. CC BY-SA 4.0. URL: https://upload.wikimedia.org/wikipedia/commons/f/fd/Confirmed_Transactions_Per_Day.png (accessed 05/12/2018). For more information on the license, see: https://creativecommons.org/licenses/by-sa/4.0/ (accessed 05/12/2018).

[63] See: History of bitcoin (Wikipedia article).

[64] See: History of bitcoin (Wikipedia article).

[65] See: History of bitcoin (Wikipedia article).

[66] See: Billy Bambrough (2018) A Bitcoin Halvening Is Two Years Away -- Here's What'll Happen To The Bitcoin Price, Forbes, May 29, 2018, 10:17am. URL: https://www.forbes.com/sites/billybambrough/2018/05/29/a-bitcoin-halvening-is-two-years-away-heres-whatll-happen-to-the-bitcoin-price/#5b0faf5286a7 (accessed 03/12/2018).

[67] See: History of bitcoin (Wikipedia article).

[68] See: Fitz Tepper (2016) The reward for mining Bitcoin was just cut in half, TechCrunch, 09/07/2016. URL: https://techcrunch.com/2016/07/09/the-reward-for-mining-bitcoin-was-just-cut-in-half/ (accessed 03/12/2018).

[69] See: Bambrough (2018).

[70] Image source: Total Bitcoin supply over time. Starting in 2009, the Bitcoin supply is created at a rate of approximately 50 bitcoins every 10 minutes. Every 210,000 generations (about every four years), the creation rate is cut in half (i.e. 50, 25, 12.5, 6.25, etc.) and tends to zero, such that there will never be more than 21 million total coins created, created 21 October 2015. CC BY-SA 3.0. URL: https://upload.wikimedia.org/wikipedia/commons/5/54/Total_bitcoins_over_time.png (accessed 05/12/2018). For more information on the license, see: https://creativecommons.org/licenses/by-sa/3.0/ (accessed 05/12/2018).

[71] See: Controlled supply (Bitcoin Wiki). URL: https://en.bitcoin.it/wiki/Controlled_supply (accessed 03/12/2018 10:32 AST).

[72] See: franky1 (2018) Re: What happend (sic) 2140 all BTC are mined, BitcoinTalk.org, May 03, 2018, 07:03:04 AM. URL: https://bitcointalk.org/index.php?topic=3482911.0 (accessed 03/12/2018).

[73] See: Lawrence Lewitinn (2018) Bitcoin will hit $10 million, predicts Wall Street strategist Thomas J. Lee, Modern Consensus, January 17, 2018. URL: https://modernconsensus.com/cryptocurrencies/bitcoin-will-hit-10-million-predicts-wall-street-strategist-thomas-j-lee/ (accessed 03/12/2018).

[74] Image source: Bitcoin Price History Chart, Wikideas1 (own work), created 4 December 2017, CC0. URL: https://upload.wikimedia.org/wikipedia/commons/5/5b/Bitcoin_Price_History.png (accessed 05/12/2018). For more information on the license, see: https://creativecommons.org/publicdomain/zero/1.0/deed.en (accessed 05/12/2018).

[75] See: History of bitcoin (Wikipedia article).

[76] See: Rob Price (2017) Someone in 2010 bought 2 pizzas with 10,000 bitcoins — which today would be worth $100 million, Markets Insider, Nov. 28, 2017, 03:06 PM. URL: https://markets.businessinsider.com/currencies/news/bitcoin-pizza-10000-100-million-2017-11-1009827466 (accessed 03/12/2018).

[77] Image source: A protestor wearing a Guy Fawkes mask, Pierre-Selim (own work), CC BY-SA 3.0. URL: https://upload.wikimedia.org/wikipedia/commons/f/f1/Protest_ACTA_2012-02-11_-_Toulouse_-_05_-_Anonymous_guy_with_a_scarf.jpg (accessed 05/12/2018). For more information on the license, see: https://creativecommons.org/licenses/by-sa/3.0/ (accessed 05/12/2018).

[78] See: WikiLeaks (Wikipedia article). URL: https://en.wikipedia.org/wiki/WikiLeaks (accessed 03/12/2018 07:10 AST).

[79] See: WikiLeaks (Wikipedia article).

[80] See: Julian Assange (Wikipedia article). URL: https://en.wikipedia.org/wiki/Julian_Assange (accessed 03/12/2018 07:10 AST).

[81] See: Jon Matonis (2012) WikiLeaks Bypasses Financial Blockade With Bitcoin, Forbes, Aug 20, 2012, 09:47am. URL: https://www.forbes.com/sites/jonmatonis/2012/08/20/wikileaks-bypasses-financial-blockade-with-bitcoin/#b2df52d7202a (accessed 03/12/2018).

[82] See: Bitcoin (Bitcoin Wiki article). URL: https://en.bitcoin.it/wiki/Bitcoin (accessed 03/12/2018 07:21 AST).

[83] See: Matonis (2012).

[84] See: Blockchain (2018) Bitcoin address: 1HB5XMLmzFVj8ALj6mfBsbifRoD4miY36v ; URL: https://www.blockchain.com/btc/address/1HB5XMLmzFVj8ALj6mfBsbifRoD4miY36v (accessed 04/12/2018 07:26 AST).

[85] See: Satoshi Nakamoto (2010) Re: PC World Article on Bitcoin, Nakamoto Institute, 2010-12-11, 11:39:16 PM. URL: https://satoshi.nakamotoinstitute.org/quotes/general/ ; https://satoshi.nakamotoinstitute.org/posts/bitcointalk/542/ ; https://bitcointalk.org/index.php?topic=2216.msg29280#msg29280 (accessed 04/12/2018).

[86] See: Tom Simonite (2014) The Man Who Really Built Bitcoin, Technology Review, August 15, 2014. URL: https://www.technologyreview.com/s/527051/the-man-who-really-built-bitcoin/ (accessed 04/12/2018).

[87] See: Simonite (2014).

[88] See: Simonite (2014).

[89] See: Simonite (2014).

[90] See: https://twitter.com/gavinandresen/status/80785477342478336?lang=en (accessed 04/12/2018).

[91] See: Atlas (2012) Satoshi dumped Bitcoin right after Gavin announced he was going to the CIA, Bitcointalk, September 28, 2012, 03:44:27 AM. URL: https://bitcointalk.org/index.php?topic=113609.0 (accessed 04/12/2018).

[92] See: Mike Hearn (2013) Re: Could Satoshi come back and tell us what he/her thinks about the block size? Bitcoin Talk, February 25, 2013, 12:48:54 PM. URL: https://bitcointalk.org/index.php?topic=145850.msg1558053#msg1558053 ; https://bitcoin.stackexchange.com/questions/28108/satoshis-final-statement (accessed 04/12/2018).

[93] Image source: IMAGE: DAMIAN DOVARGANES/ASSOCIATED PRESS. Article: Stan Schroeder (2014) Dorian Nakamoto: I Am Not the Creator of Bitcoin, Mashable, Mar 07, 2014. URL: https://i.amz.mshcdn.com/dGYDBWtLaKyUQUrB0jIdBYUs_WE=/950x534/filters:quality(90)/2014%2F03%2F07%2Fac%2FAP407286670.05998.jpg ; https://mashable.com/video/indiegogo-david-mandelbrot-crowdfunding-future/#.go2lapTbiqM (accessed 05/12/2018). For more information on the license, see: http://www.apimages.com/Licenseterms (accessed 05/12/2018).

[94] See: Leah McGrath Goodman (2014) The Face Behind Bitcoin, Newsweek Magazine, 3/6/14 AT 6:05 AM. URL: https://www.newsweek.com/2014/03/14/face-behind-bitcoin-247957.html (accessed 04/12/2018).

[95] See: Kashmir Hill (2014) Bitcoin Creator Returns To Internet To Say, 'I Am Not Dorian Nakamoto', Forbes, Mar 6, 2014, 11:33pm. URL: https://www.forbes.com/sites/kashmirhill/2014/03/06/bitcoin-creator-returns-to-internet-to-say-i-am-not-dorian-nakamoto/#1953f99d76bb (accessed 04/12/2018).

[96] See: Satoshi Nakamoto (2014) RE: Bitcoin open source implementation of P2P currency, P2P Foundation, March 7, 2014, 1:17. URL: http://p2pfoundation.ning.com/forum/topics/bitcoin-open-source?commentId=2003008%3AComment%3A52186&xg_source=activity (accessed 04/12/2018).

[97] See: Liberty dollar (private currency) (Wikipedia article). URL: https://en.wikipedia.org/wiki/Liberty_dollar_(private_currency) (accessed 04/12/2018).

[98] See: Liberty dollar (private currency) (Wikipedia article).

[99] See: Liberty dollar (private currency) (Wikipedia article).

[100] Image source: A promotion photo of liberty dollars. Qualifies as fair use under Copyright law of the United States. URL: https://upload.wikimedia.org/wikipedia/en/e/ef/Liberty_Dollar.jpeg (accessed 05/12/2018). For more information on the license, see: https://en.wikipedia.org/wiki/File:Liberty_Dollar.jpeg (accessed 05/12/2018).

[101] See: Liberty dollar (private currency) (Wikipedia article).

[102] See: Liberty dollar (private currency) (Wikipedia article).

[103] See: Liberty dollar (private currency) (Wikipedia article).

[104] See: NJ Bridgewater (2018) What is Ethereum? Crossing the Bridge, 29 April 2018. URL: https://nicholasjames19.blogspot.com/2018/04/what-is-ethereum.html & Nicholas Bridgewater (2018) What is Ethereum? Digitex Futures Exchange Blog, last updated Oct 2, 2018. URL: https://blog.digitexfutures.com/cryptocurrency/what-is-ethereum/ (accessed 04/12/2018).

[105] See: Nathaniel Popper (2014) Hal Finney, Cryptographer and Bitcoin Pioneer, Dies at 58, The New York Times, Aug. 30, 2014. URL: https://www.nytimes.com/2014/08/31/business/hal-finney-cryptographer-and-bitcoin-pioneer-dies-at-58.html (accessed 04/12/2018).

[106] URL: https://www.ninds.nih.gov/Disorders/Patient-Caregiver-Education/Fact-Sheets/Amyotrophic-Lateral-Sclerosis-ALS-Fact-Sheet (accessed 04/12/2018).

[107] See: Nick Dominguez (2018) 6 Most Logical Theories Why Satoshi Nakamoto Disappeared, Coindiligent, November 20, 2018. URL: https://coindiligent.com/why-satoshi-nakamoto-disappeared (accessed 04/12/2018).

[108] See: Popper (2014).

[109] See: Justin OConnell (2016) Why Did Satoshi Nakamoto Abandon Bitcoin? CCN, Bitcoin Op-Ed, JANUARY 27, 2016 11:53 CET. URL: https://www.ccn.com/why-did-satoshi-nakamoto-abandon-bitcoin/ (accessed 04/12/2018).

[110] See: OConnell (2016).

[111] Hoskins was, BTW, also a co-founder of Ethereum.

[112] See: Stan Higgins (2017) Proof-of-Life: Vitalik Buterin Uses Ethereum to Disprove Death Hoax, CoinDesk, Jun 26, 2017 at 17:25 UTC, Updated Jun 27, 2017 at 11:39 UTC. URL: https://www.coindesk.com/proof-life-vitalik-buterin-uses-ethereum-blockchain-disprove-death-hoax (accessed 04/12/2018).

[113] See: Craig Steven Wright (Wikipedia article). URL: https://en.wikipedia.org/wiki/Craig_Steven_Wright (accessed 04/12/2018).

[114] See: Stephen O’Neal (2018) ABC vs SV: Assessing the Consequences of the Bitcoin Cash War, CoinTelegraph, NOV 26, 2018. URL: https://cointelegraph.com/news/abc-vs-cv-assessing-the-consequences-of-the-bitcoin-cash-war (accessed 04/12/2018).

[115] See: Ian Demartino (2018) Craig Wright Threatens to Crash Bitcoin Cash in Email to Ver, CoinJournal, November 8, 2018. URL: https://coinjournal.net/craig-wright-threatens-to-crash-bitcoin-cash-in-email-to-ver/ (accessed 04/12/2018).

[116] Image source: Various different crypto currencies logos, Voytek Pavlik, 17 February 2016, CC0. URL: https://upload.wikimedia.org/wikipedia/commons/b/b8/Cryptocurrency_logos.jpg (accessed 05/12/2018). For more information on the license, see: https://creativecommons.org/publicdomain/zero/1.0/deed.en (accessed 05/12/2018).

[117] See: Belowsearcher (2018) What’s going on with Cardano? HackerNoon, Oct 22, 2018. URL: https://hackernoon.com/whats-going-on-with-cardano-3f2996841b21 (accessed 04/12/2018).

[118] See: Belowsearcher (2018).

[119] See: Hunain Naseer (2018) TRON (TRX) Dips After Cash Out Allegations; Justin Sun Clarifies Situation, Cryptovest.com, 06 January 2018. URL: https://cryptovest.com/news/tron-trx-dips-after-cash-out-allegations-justin-sun-clarifies-situation/ (accessed 04/12/2018).

[120] Sun Tzu (author), Lionel Giles (translator) (1910) Sun Tzŭ on the Art of War: The Oldest Military Treatise in the World, Translated from the Chinese with introduction and critical notes (London: Luzac & Co.), V, 17. URL: https://en.wikisource.org/wiki/The_Art_of_War_(Sun) (accessed 04/12/2018).