Satoshi Nakamoto is a pseudonym for the person or people who helped develop the first bitcoin software and introduced the concept of cryptocurrency to the world in a 2008 paper. Nakamoto remained active in the creation of bitcoin and the blockchain until about 2010 but has not been heard from since.
Nakamoto was not the first to hit on the concept of cryptocurrency but was the one to solve a fundamental problem that prevented its adoption: Unlike paper currency, cryptocurrency could be duplicated. This was known as "double-spending," and Nakamoto solved it by creating the blockchain system of verification.
- Satoshi Nakamoto is the pseudonym for whoever penned the original Bitcoin whitepaper and is the identity credited with inventing Bitcoin itself.
- Several people have claimed or were thought to be Satoshi, but their true identity has never been verified or revealed.
- Given the price of BTC today, Satoshi would be a billionaire because it is rumored they hold nearly 1 million BTC.
What Is Cryptocurrency?
What Is Known About Satoshi Nakamoto
The Satoshi Nakamoto persona appeared to be involved in the early days of Bitcoin, working on the first version of the software in 2007. Communication to and from Nakamoto was conducted via email. The lack of personal and background details meant it was impossible to find out the actual identity behind the name.
Nakamoto’s involvement with Bitcoin, however, ended in 2010. The last correspondence anyone had with Nakamoto was in an email to another crypto developer saying that they had "moved on to other things." The inability to put a face to the name has led to significant speculation about Nakamoto’s identity, especially since cryptocurrencies have increased in number, popularity, and notoriety.
Satoshi Nakamoto published a paper in 2008 that introduced cryptocurrency to a much wider audience, initiating its rise to popularity.
The paper, Bitcoin: A Peer-to-Peer Electronic Cash System, described the use of a peer-to-peer network as a solution to the problem of double-spending. Cryptocurrency was not a new idea at the time; there had been more than a few attempts to create a digital currency. However, Bitcoin addressed a significant issue.
A digital currency or token could be duplicated in multiple transactions—this is not found in physical currencies since a physical bill or coin can only exist in one place at a single time. Because a digital currency does not exist in physical space, using it in a transaction does not necessarily remove it from someone’s possession. As a result, it could be spent more than once, causing it to be termed the "double-spend" problem.
Solutions to combat the double-spend problem had historically involved using trusted, third-party intermediaries that would verify whether a digital currency had already been spent by its holder. In most cases, third parties, such as banks, could effectively handle transactions without adding significant risk.
However, this trust-based model still results in additional costs and the risk of fraud—in the past, trusted third parties have proven to be unworthy of the trust placed in them. It is not necessarily the institutions that provide the third-party validation services that are untrustworthy—it is the people involved in the transactions that cannot be trusted.
Thus, there is a need to remove the human factor altogether. Cryptography and automated group consensus mechanisms are currently the only way to get around human intervention in finances.
Nakamoto proposed a decentralized approach for transactions using ledgers, a network, Merkle roots and trees, timestamps, incentives, cryptography, and a consensus mechanism. In a blockchain, timestamps are added to transaction information, and cryptographic techniques are used to encrypt the data. The encrypted data cannot be changed but must be validated. The network must verify the authenticity of the transactions based on a majority consensus mechanism called proof-of-work.
Because the record of transactions is distributed across many nodes in the system, it is difficult, if not impossible, for a bad actor to gain enough control of the system to rewrite the ledger to their advantage. The blockchain records are kept secure because the computational power required to reverse them discourages small-scale attacks. Hackers would need a network that could validate and create blocks faster than the current network and then would need to introduce the new blockchain into the main network at the right time to overwrite it. They'd also need to deploy several other blockchain attacks at the same time.
Analysis of Bitcoin's blockchain has helped deduce which addresses are likely Satoshi Nakamoto's to a relatively high degree of certainty. According to chain analysis from Sergio Demián Lerner, the chief scientist of RSK Labs, Satoshi has around 1 million bitcoin. These addresses date back to the beginning of Bitcoin in 2008.
Anonymity was likely the only choice for Bitcoin's creators. If identities were known, it is likely the creator's lives would be upturned by the publicity. It is also very possible they would be targeted by criminals, so it might be best if they remained anonymous.
While the identity of Nakamoto has not been attributed to anyone, it is estimated that the value of bitcoins under Nakamoto's control—which is thought to be about 1 million in number—is very significant. Given that the maximum possible number of bitcoins generated is 21 million, Nakamoto's stake of 5% of the total number of bitcoin has considerable market power. Several people have been put forward as the "real" Satoshi Nakamoto, though none have been definitively proven to be Nakamoto.
People Thought to Be Nakamoto
Dorian Nakamoto is an academic and engineer in California who was named as the creator of Bitcoin by Leah McGrath Goodman in a Newsweek article in March of 2014. McGrath's report says, "The trail followed by Newsweek led to a 64-year-old Japanese-American man whose name really is Satoshi Nakamoto," but subsequent investigation ruled this Nakamoto out.
Hal Finney was active in the Bitcoin community before and after its launch and was the first person to receive Bitcoin in a transaction. He also coincidentally lived a few blocks from Dorian Nakamoto, who, it has been surmised, might have been the inspiration for a pseudonym invented by Finney.
Nick Szabo, an early cypherpunk, was friends with many people in that circle. In 2005, he wrote a blog post hypothesizing a digital currency called "Bitgold" that would not depend on the trust of third parties. Szabo has also been ruled out as a possibility.
Craig Wright is one of the more colorful characters to be nominated as the person behind Satoshi Nakamoto. Dr. Wright, an Australian academic and businessman, has claimed to be Satoshi on several occassions—even to the point of being involved in legal actions regarding ownership of the identity. In December 2021, a jury rejected a civil lawsuit against Wright brought by the estate of a former colleague, the late David Kleiman. Kleiman's estate argued that Wright and Kleiman together co-created Bitcoin and was thus owed half of Wright's alleged 1.1 million BTC stash.
However, the Kleiman estate was awarded $100 million, indicating that the jury and court believed that Wright and Kleiman worked on the project together in some capacity. Also in 2021, a court in the United Kingdom ordered Bitcoin.org to take down the Bitcoin whitepaper because the website was violating Wright's copyright of the whitepaper, indicating the court's opinion that Wright had intellectual rights to the paper in some way.
How Much Is Satoshi Nakamoto Worth?
Nakamoto reportedly holds 1 million bitcoins. The total value depends upon market conditions and Bitcoin's price. For example, if Bitcoin had a market value of $29,000, the total value would be $29 billion.
Is Satoshi Nakamoto a Real Person?
No one knows if Nakamoto is one person or a group using a pseudonym. However, it is safe to say that real people were behind Bitcoin's design.
Did Satoshi Nakamoto Disappear?
Because Satoshi chose to be anonymous, it cannot be determined if the person or group using the name disappeared or not.
The Bottom Line
Because Satoshi Nakamoto was a crucial player in the development of cryptocurrency, it is natural for people to want to know who might be behind the pseudonym. The changes brought about by this person or group's ideas have revolutionized many aspects of modern life. It is possible that Bitcoin will not exist in the future, but blockchain technology introduced by Nakamoto and the advancements made using it are likely to be around for a long time.
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