The Satoshi Revolution: A Revolution of
Rising Expectations.
Section 1: The Trusted Third Party Problem
Chapter 2: Monetary Theory
by Wendy McElroy
Was Satoshi a Libertarian and Anarchist?
(Chapter 2, Part 4)
I’ve been working on a new electronic cash
system that’s fully peer-to-peer, with no
trusted third party….We very, very much
need such a system, but the way I
understand your proposal, it does not seem
to scale to the required size. For
transferable proof of work tokens to have
value, they must have monetary value. To
have monetary value, they must be
transferred within a very large network – for
example a file trading network akin to
bittorrent. To detect and reject a double
spending event in a timely manner, one
must have most past transactions of the
coins in the transaction, which, naively
implemented, requires each peer to have
most past transactions, or most past
transactions that occurred recently. If
hundreds of millions of people are doing
transactions, that is a lot of bandwidth…
—Satoshi Nakamoto
Was Satoshi a Libertarian and Anarchist?
On October 31, 2008, Satoshi Nakamoto
published a White Paper entitled “Bitcoin: A
Peer-to-Peer Electronic Cash System” on
the Cryptography Mailing List at
metzdowd.com. It spelled out the reasoning
behind bitcoin and the design of bitcoin’s
instrument of implementation: the
blockchain. The White Paper also solved a
problem that had haunted cryptocurrency:
double spending . Satoshi’s brief explanation
is a defining document of our century.
It is all the more remarkable, therefore, that
no one seems to know Satoshi’s identity or
even whether he is an individual or a team
of programmers. Clearly, he coded from a
love of the technology rather from than a
desire for fame. Since the code was open
source, unpatented and offered widely to
all, acquiring wealth does not appear to be
the driving goal either. By process of
elimination, political motivation becomes
more probable. But arriving at that
conclusion requires an examination of the
evidence and background surrounding
Bitcoin.
Let There Be Blocks…
Satoshi began writing Bitcoin code in 2007.
When he published the White Paper on the
Cryptograpy mailing list in 2008, it was also
available on a website he created, named
bitcoin.org. — both sites function to this
day.
The mailing list consisted of experts in
math, statistics and cryptography who
immediately argued against the viability of
Bitcoin. It will not scale , they claimed; it
requires too many resources to work well.
Moreover, “bad” nodes could control most
CPU power on the network, and so generate
a longer chain than “honest” nodes; this
means attackers could control the
blockchain. Satoshi’s patient and polite
responses gradually convinced them that
Bitcoin might just work.
Developments quickly followed. Specific
highlights include:
• January 9, 2009, version 0.1 of bitcoin
software is released on Sourceforge.
• January 12,2009, the first bitcoin
transaction occurs.
• January 3, 2009, the first block, called the
Genesis Block, is mined.
• October 5, 2009, an exchange rate of $1
US = 1,309.03 BTC is established.
• October 12, 2009, the #bitcoin-dev
channel is registered for open source
development communities.
• December 16, 2009, version 0.2 is
released.
• March 6, 2010, dwdollar establishes a
Bitcoin currency exchange.
• May 22, 2010, first real-world transaction
occurs when a pizza is purchased for
10,000 bitcoins.
• July 7, 2010, version 0.3 is released.
• October 16, 2010, the first escrow
transaction occurs.
In mid-2010, Satoshi transferred bitcoin.org
to Gavin Andresen. Andresen explained, “I
started to submit code to Satoshi to
improve the core system. Over time he
trusted my judgment on the code I wrote.
And eventually, he pulled a fast one on me
because he asked me if it’d be OK if he put
my email address on the bitcoin homepage,
and I said yes, not realizing that when he
put my email address there, he’d take his
away. I was the person everyone would
email when they wanted to know about
bitcoin. Satoshi started stepping back as
leader of [the] project and pushing me
forward…”
In 2010, Satoshi went silent.
Listening to Evidence of Satoshi’s Political
Motives
Great debate revolves around Satoshi’s drive
for designing Bitcoin, with many people
seeming to project their own motives for
using Bitcoin onto Satoshi. In fairness, the
programmer offered only indications of a
political motivation rather than an explicit
statement. As indications mount, however, it
becomes very probable that Satoshi was a
libertarian or an anarchist, or both.
Evidence of Satoshi’s political slant dates
back to the Genesis block . It contained a
message: “The Times 03/Jan/2009
Chancellor on brink of second bailout for
banks.” January 3, 2009 was the
blockchain’s birthday. The message was a
headline from the front page of The Times,
a UK newspaper. But why did Satoshi
choose those words?
Some people think the wording was
randomly plucked from the January 3rd,
2009 issue of the Times for the sole
purpose of authenticating the date. They
claim the message could as easily have
been “ten sex workers arrested in Soho
sting.” That contention defies credibility.
Satoshi was a methodical programmer who
went directly to the heart of matters,
without frivolity or caprice. He was
releasing a masterpiece of coding and it is
not plausible that he would slap a random
message onto the Genesis block.
An entirely different scenario is likely.
Imagine Satoshi at his computer, preparing
to drop the first block like a seed on the
wind. He knows its power and he wants
people to know its purpose. He has just
read the morning paper with its continuing
news of financial turpitude on the part of
elites acting for their own benefit. Aha,
there is a perfect snippet about the two
agencies responsible for the economic rape
of average people: government and the
banking system. Eight words capture the
collusion between them. Satoshi carefully
types, “Chancellor on brink of second
bailout for banks,” and embeds this
message to send to the world. The intent is
anti-Chancellor, anti-bank, anti-bailout . The
digital currency and payment system to
which the message is attached are the
antidote to the corruption of governments
and banks. From Bitcoin’s first words, it
returned power to the people.
A key reason why debate on Satoshi’s
political intention continues is because his
White Paper is politically neutral. It even
states that a system of financial institutions
consisting of trusted third parties “works
well enough for most transactions”. The
Paper states only practical objections to the
existing banking system; for example,
reversible transactions and the inevitability
of fraud resulting in high processing costs.
In short, the White Paper does not read like
a political manifesto. Nor should it.
A white paper is technical. It is an
authoritive explanation of an idea or an
experiment and of results or conclusions
presented to experts in the same field of
study. Its purpose is to explain a concept,
to solve a problem or to present a finding.
Beliefs and politics are most definitely not
appropriate in a White Paper; if they are
included, then the paper is called “gray” and
it is much more likely to be dismissed.
Rather than express the author’s opinion,
the goal is to elicit reactions from others.
The list where Satoshi posted the White
Paper was composed of experts in math,
statistics and cryptography who wanted the
bare technical facts, not the politics
surrounding them. Moreover, members of
the Cryptography Mailing List undoubtedly
held a variety of political views, and they
might have stumbled over ones with which
they disagreed, and it was not the time, it
was not the place to be political.
The White Paper, however, makes at least
one indirect political reference. Footnote [1]
gives a nod of approval to the 1998 b-
money proposal developed by cypherpunk
Wei Dai with whom Satoshi had a history of
exchanging email . The b-money proposal
opens, “I am fascinated by Tim May’s
crypto-anarchy. Unlike the communities
traditionally associated with the word
‘anarchy’, in a crypto-anarchy the
government is not temporarily destroyed but
permanently forbidden and permanently
unnecessary. It’s a community where the
threat of violence is impotent because
violence is impossible, and violence is
impossible because its participants cannot
be linked to their true names or physical
locations.”
To further assess Satoshi’s motives in
creating Bitcoin, it is useful to listen to his
voice in venues that invite political
expression and to consider choices that
express his political preferences. These
venues include the features embedded in
Bitcoin, Satoshi’s posts on forums, and his
personal associations.
The features of Bitcoin directly express
libertarian and anarchist sentiments:
• Decentralization . “A purely peer-to-peer
version of electronic cash would allow
online payments to be sent directly from
one party to another without going through
a financial institution.” Bitcoin operates
without leaders, without a position of power
beyond that of the individual.
• Privacy. “As an additional firewall, a new
key pair should be used for each
transaction to keep them from being linked
to a common owner.” Bitcoin is
pseudonymous. While it does not provide
perfect privacy, the anonymity is far more
effective than other forms of online
payment that rely on trusted third parties.
• Pro-capitalism. The White Paper stresses
Bitcoin’s advantages to commerce and
merchants as a free-enterprise payment
system. Peer-to-peer transfer is a pure
expression of the free market, with no
intervention.
• Anti-government. Although government is
not mentioned in the White Paper, Bitcoin
usurps a “vital” governmental function
which has been badly corrupted and
misused. Perhaps it is significant that
Satoshi does not mention government in
discussing an area that is deemed to be its
bailiwick.
• Anti-banking. The entire purpose of Bitcoin
is “online payments…without going through
a financial institution.” Banks are rendered
irrelevant.
• Anti-inflation. “Once a predetermined
number of coins have entered circulation,
the incentive can transition entirely to
transaction fees and be completely inflation
free.”
The foregoing is economic anarchism .
It is generally recognized as such. A
CoinJournal article entitled “Op-Ed: Satoshi
Nakamoto is Clearly an Anarchist” refers to
a 2014 presentation by Daniel Krawisz of
the Satoshi Nakamoto Institute. Krawisz
stated, “Someone who promotes bitcoin who
is not an anarchist is a crypto-anarchist
because bitcoin is inherently anarchistic.”
Satoshi’s forum posts are further evidence
of his politics. The remarks are anti-banking
and critical of government while
acknowledging Bitcoin’s appeal to
libertarians:
• Anti-banking. “Banks must be trusted to
hold our money and transfer it
electronically, but they lend it out in waves
of credit bubbles with hardly a fraction in
reserve.
• Anti-government: “Yes, [we will not find a
solution to political problems in
cryptography,] but we can win a major
battle in the arms race and gain a new
territory of freedom for several years.
Governments are good at cutting off the
heads of a centrally controlled networks like
Napster, but pure P2P networks like
Gnutella and Tor seem to be holding their
own.”
• Pro-libertarian. “[Bitcoin is] very attractive
to the libertarian viewpoint if we can
explain it properly. I’m better with code
than with words though .”
And, finally, Satoshi’s personal associations
also indicate his political slant. First and
foremost is Hal Finney. A developer for the
PGP Corporation, Finney was the first
recipient of a bitcoin transaction when
Satoshi sent a payment to him on January
12, 2009. Obviously, Finney co-operated
closely with Satoshi, which makes his
political views of interest. In the early
1990s, Finney contributed regularly to the
cypherpunk’s listserv. He stated, “Naturally,
in today’s society, with power allocated so
disproportionately, such ideas are a threat
to large organizations. Balancing power
would mean a net loss of power for them.
So no institution is going to pick up and
champion Chaum’s ideas. It’s going to have
to be a grass-roots activity, one in which
individuals first learn of how much power
they can have, and then demand it.”
Significantly, Satoshi posted a link to his
White Paper on the P2P Foundation’s
cypherpunk website, probably because he
was a list member. When a 2014 Newsweek
cover story “outed” Dorian S. Nakatomo of
Temple City, California as the inventor of
Bitcoin, the real Satoshi posted 5 words on
a P2P Foundation page; “I am not Dorian
Nakamoto.” The Foundation confirmed that
the White Paper post had originated from
the same email account, but it is widely
believed that the account had been hacked.
Nathaniel Popper’s book Digital Gold:
Bitcoin and the Inside Story of the Misfits
and Millionaires Trying to Reinvent Money
described the journey of Martti Malmi to
Bitcoin. Popper wrote:
A student at the Helsinki University of
Technology, Martti enthused about Bitcoin
on anti-state.org, a forum dedicated to the
possibility of an anarchist society organized
only by the market. Using the screen name
Trickster, Martti gave a brief description of
the Bitcoin idea and asked for thoughts.
When he reached out to Satoshi, Martti
included the link to his post. “What do you
think about this?” he asked Satoshi. “I’m
really excited about the thought of
something practical that could truly bring us
closer to freedom in our lifetime. :-)”
Satoshi replied, “Your understanding of
Bitcoin is spot on.”
Satoshi also realized how revolutionary his
system would be. This is evidenced by his
response to Wikileaks when it enabled
bitcoin donations as a way to side step an
ongoing bank blockage. This propelled
Bitcoin to a new level of popularity. Satoshi
posted, “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.” He pled with
Wikileaks not to spotlight Bitcoin because
the project was young enough for
governments to destroy it. Indeed, Satoshi’s
decision to stay anonymous testifies to his
understanding of Bitcoin’s power and
attendant danger; the danger was
government which had prosecuted earlier
creators of digital money as money
launderers.
The preceding argument does not prove
definitively that Satoshi was either a
libertarian or an anarchist, but it comes
close. It becomes far more plausible to call
him “
Next, let the White Paper speak for itself.
[To be continued next week.]
Thanks to editor/novelist Peri Dwyer Worrell
for proofreading assistance.
Reprints of this article should credit
bitcoin.com and include a link back to the
original