Blain’s Morning Porridge 10^th October 2024: I’m Satoshi Nakamoto and so is my wife.

“Always look on the bright side of life…”

The Media think they’ve identified Satoshi Nakamoto, the inventor of Bitcoin. While I doubt it, it raises enormous questions about the credibility of Bitcoin, its adoption, and casts doubt on the foundation myths Crypto Shills push. Satoshi’s bitcoin wallets are currently worth over $67 bln! If the Truth emerges, Bitcoin could pop.

I know I really should be writing about real market stuff, like the chaotic weather and the damage Storm Milton inflicts on Florida, why BlackRock is set to buy private credit firm HPS, the expectations reversal bust in China (as the CCP falls short on delivery), the coming UK budget (yawn), or the collapse of Boeing’s negotiations with striking workers..… but these stories are all over the front pages this morning.

Instead, since Halloween is just 3 weeks away, let’s open the Crypto vaults, prise the lids off a few of the sarcophagi and see if we can work out which one is the undead body of Satoshi Nakamoto, the mythical founder and inventor of BitCoin. We will know which is his – it will be the empty one.

The identity of Satoshi matters.. but first a little bit of BTC history:

Bitcoin was invented back in January 2009 by Satoshi Nakamoto (whoever he is). The first 22,000 blocks of Bitcoin, each of 50 Bitcoin, were “mined” by Satoshi – that’s 1.1mm out of a possible maximum of 21mm Bitcoin. They are held in multiple wallets, and not one of them has ever been accessed or any Bitcoin ever sold from them according to the Blockchain. The very first “genesis” wallet, initially comprised the first 50 Bitcoins ever mined. Over the years, usually in January, unidentified BitCoin miners/holders have transferred small numbers of BitCoin into the account – so it now has 99.9 BC in it. In those early days Satoshi was a prolific commentator and explainer of Bitcoin, but then he disappeared – no one has heard from him since 2013.

It’s a bit like peering back through a telescope at the stars looking for evidence of Big Bang when looking at the early days of Bitcoin. About 2 months after Satoshi mined his bitcoin, other accounts were starting to emerge. These accounts also acquired millions of bitcoin at a price of practically nothing – and many have never transacted. Recently one very early wallet transferred 10 Bitcoin mined in early 2009 to the Kraken exchange for $610k. The account had been dormant since its inception – and there are still nearly 1200 BTC left in that wallet. The fact they haven’t sold explains the scarcity aspect of the demand/supply imbalance that has driven BTC pricing.

Behind Nakamoto there are six other big anonymous early holders of anything between 100-50k Bitcoins. The next largest 97 holders of Bitcoin hold nearly 3 million Bitcoin – 15% of the total that can ever be issued. I would love to know whose and from when these wallets date from. The intentions of these “Whales” to sell/hold is unknown. (To add to the mix: the “charming” Winklevoss twins of didn’t-invent-Facebook fame hold 70k coins.) I suspect many of these Whale accounts belong to members of the Satoshi collective.

BitCoin proponents, the crypto-shills, never cease to bang on about the use cases: that its decentralised and not controlled by any government, therefore better money than fiat money. They are very quiet about the number of dormant Bitcoin, the risks that creates, and who controls them. Instead, you can read the crypto press to learn all about spurious RSIs and Option strategies on Crypto – it’s a Wild West out there. (But, just like the Wild West the blockchain crypto-sphere is being civilised and regulated as stable coins and tokenisation find real world use cases.)

The thing about Bitcoin – which it holds in common with any Ponzi scheme – is it’s all about adoption. It’s the ability to persuade the next “Greater Fool” to buy into the market that matters. The price of bitcoin has risen as adoption has risen – major boosts coming from the approval of ETFs and ultra-low interest rates stimulating yield tourism. As long as more greater fools are queuing up to buy, no problem.

What makes Bitcoin more interesting is why have 1.1mm coins held in the name of Satoshi and millions held in other wallets never traded? What do the know the rest of us don’t. (Or is the truth more prosaic – most of them have died or simply lost their keys/codes?) Or… does the Satoshi collective actually control far more of the Whale Wallets, and has been quietly living off trading them? (Inferring there was very little early adoption of Bitcoin till something changed? And that they don’t want hit by the tax, legal and scam problems that could follow – think a bank heist movie, when the apparently poor garage owner is actually sitting on billions of stolen banknotes he can never use as it would give him away?)

The origin story of the Crypto Coin, and the motivations that drove its development are entirely unclear. Ever since it was launched in 2009, the identity of Satoshi Nakamoto (who most suspect is an invented name for a group of like-minded developers) has never been revealed.

To really understand the glamour Bitcoin seems to hold over the market, we really do need to know the identify of Satoshi, the motivations behind the development and launch of BitCoin, and study its’ adoption history – the early adopters, how it was hijacked as the means to transact on the dark web, and how Libertarian philosophies about financial freedom, unfathomable riches from mass adoption, untrustworthy government and the “lies” behind fiat money, now dominate the BitCoin sales bejazzle.

If we knew what the early BitCoin inventor/developers were really thinking, we’d have a much better understanding of the crypto reality. That probably terrifies the Whales behind the Crypto market. There are very many vested interests who are likely to want to ensure Satoshi’s identity and the foundation story of Bitcoin remains mythical. (I shall personally be very cautious standing near any open windows after writing this…)

So who is Satoshi?

Many names and theories around the genesis of Bitcoin have been proposed – that he was name adopted by a bunch of gifted cyber-cryptopunks who invented it almost by accident. For its first few years it was a mathematically interesting but worth the square root of diddley-squat. Famously an early adopter of BitCoin, Laszlo Hanyecz, bought 2 Pizzas worth $40 for 10,000 BTC in May 2010 – the first ever BitCoin purchase in the real world. The first Bitcoin trade between a seller and buyer transferring coins between wallets didn’t happen till July 2010 – at 6 cents!

Others have suggested BitCoin was commissioned by bad actors, such as Ross Ulbricht the founder of Dark-Web market Silk Road (which ran from 2011-2013), to enable trading on sites dealing in illegal goods to remain hidden.

Certainly, there is very strong evidence, which is available from analysis of the blockchain itself, that Bitcoin’s sudden explosion into the public consciousness and its first rise in value only came after bad actors like Ulbricht persuaded criminals that BitCoin was a traceless and foolproof way to trade and create markets in illegal goods and commodities. (How wrong that sense of security proved to be – Ulbricht is serving life plus 40. Seizures by the FBI of illegal crypto assets have made the USA one of the largest holders of bitcoin, regularly dumping BTC on to the market.)

I suspect the Satoshi collective were actually the only holders among themselves of Crypto until Silk Road and other bad actors stumbled on it as a exchange solution for non-cash transactions. They would be in all kinds of legal hell if it becomes common knowledge they enabled Silk Road. While the wallets in Satoshi’s pot are untouched, many other Whales have ridden the market successively higher – trading it. If the truth were ever known, the implications would be enormous.

The latest news, which is causing considerable excitement in the cryptosphere, is Satoshi has been unmasked as a nerdy-looking Canadian Software developer called Peter Todd. He has absolutely denied he is Nakamoto, but that only fulfils the prophesy (first revealed in Monty Pythons Life of Brian, from 1979):

BRIAN: I’m not Nakamoto! Will you please listen? I am not Nakamoto, do you understand?! Honestly!

GIRL: Only the true Nakamoto denies His divinity.

BRIAN: What?! Well, what sort of chance does that give me? All right! I am Nakamoto!

FOLLOWERS: He is! He is Nakamoto!

Guess what, in the HBO programme that outed him, Todd says the suggestion he was Nakamoto is ludicrous, before breaking down and admitting: “Yeah, Yeah, I am Satoshi Nakamoto..” Yep, all aspects of the prophesy fulfilled. The evidence Todd is Satoshi is circumstantial. Apparently, he once replied to an email sent to Satoshi from his personal Peter Todd email – the inference being he is Satoshi but sent it from the wrong email? Case proven beyond reasonable doubt?

Oh dear… Poor Peter Todd… Whatever he says, he is now Satoshi Nakamoto – even though he would only have been 23 when BitCoin emerged. Every single scam artist, cyber criminal, and the guys behind Ulbricht and Silk Road wanting their confiscated BitCoin back from Uncle Sam, will now be chasing him.

Even worse, every single regulator, tax-inspector and senior anti-organised crime chief will be wanting to have a “little-chat” about the tax implications and trades behind the $69.4 billion Nakamoto’s Bitcoin holdings are presently worth. (It is US Law that all citizens must declare all crypto transactions over $10k, so when BTC was sent to Satoshi’s genesis wallet, he was breaking the law by not declaring it!)

I suspect Todd is a careless, junior member of the Satoshi collective. Recently, Dr Craig Wright, tied to prove in the UK High Court that he is Satoshi Nakamoto. He lost. Not only was he an Australian, but he looked like a bad-un!

When the truths about Bitcoin emerge – the bubble will pop. However, what is now emerging from crypto, Stable Coins, and Tokenisation, is genuinely interesting.

Out of time, and back to the day job…..

Bill Blain

Author of the Morning Porridge, founder of Wind Shift Capital

www.morningporridge.com

www.windshift.capital

billblain@morningporridge.com