A virtual interview with the Bitcoin Founder
By George Gilder
Founder and Partner at The Gilder Technology Fund
Wandering the streets of Cypherville, standing on the corner of Bitcoin and Gold, peering in all directions, I hankered for a hero for my still hollow tale. Forlornly noting no heroines in view, I circled the cenotaph of what they call the “bitcoin space.” I contemplated the tattoos and ponytails, the suits and ties, the electronic cigs and medicinal smokes, the credentials and the cringelys of the worldwide “bitcoin community.” They were mostly a peer-to-peer display. Mark Andreessen or Gavin Andresen, Hal Finney or Chamath Palihapitiya, Jed McCaleb or Nick Szabo could all move a scene or animate a meeting or keynote a coinsummit. But from venture capitalists to complementary coders to bit players or even legendary titans, none seemed to have the proof-of-work to hash into the Genesis block of a heroic Bitcoin history.
Finally I gave up on this accessible circle and resolved to find and interview the Genesis man himself. Why not? Satoshi Nakamoto was the architect of Bitcoin and the prime mover of the plot. True, no one seemed to know who he was or where he had gone. No one could report on his fleshly contours or countenance. He was the John Galt of this saga, the source and symbol of the new Galt’s Gulch of Bitcoin, the satyr on the tee shirt Who Is Satoshi? I decided to mount my steed and ride up the arroyo to the ultimate crypts and redoubts, mines and mints of the bitcoin idea.
The first thing I discovered was that the guy is a writer, author of at least 150 pithy and aphoristic posts on the cypherpunks list, the peer-to-peer foundation page, the bitcoin forum, and other cryptographic bulletin boards. I collected his words and printed them out. He presented himself as a now 39-year-old Japanese programmer in the canonical C++ language, with an ostensible British idiom and education, full of “bloody” thises and thats and gratuitous “u”s (favour).
Never reportedly pinned in the flesh, he was an accessible avatar until December 11, 2010. Then, poof, he disappeared. On March 7, 2014, suddenly, he returned, issuing a post of four words, which reduced the universe of possible Satoshis by one man. Dismissed as a possible Bitcoin author was an elderly former CIA coder in Fortran bearing the actual name, Dorian Satoshi Nakamoto, and living at Temple City in Los Angeles. “I am not Dorian Nakamoto,” declared Satoshi on the Peer-to-Peer Foundation site. Then he withdrew even his Internet persona.
On the Internet boards, Satoshi’s followers were deliriously grateful. He lives. Don’t disturb him. As Chase Perkins responded: “If nothing else, by process of elimination—albeit however tiny—you have enlightened us again.” In the spirit of the naming of a 100 millionth of a bitcoin a micropayment Satoshi, Perkins wrote, “I shall call this absolute minimum amount of help a Satoshi in your honor.” Among these mists of incense, I knew I was treading on delicate ground. But ever so gently, I planned my approach.
On May 30, 2014, three months after Satoshi’s last post, I left my wife and children in the Berkshires in western Massachusetts and retreated to Europe. I would visit the Tuscan palazzo of the prolific economist-author and investor impresario from Dallas, John Mauldin, who was known to lure to his lair not only members of his millionfold blog following but also the likes of Niall Ferguson and Newt Gingrich.
Perched in the hilltop town of Trequanda, the villa La Casa dei Fiordalisi is an opalescent span of golden brick and glowing limestone arches, walls and terrazzos from the 13th century, spread among radiant red flowers, rolling green vistas, and amphitheatrical sunsets. Here in Tuscany Ethan Hawke set his most recent romanza Before Midnight, Woody Allen evoked his commedia del arte To Rome With Love, and suave British scrivener John Mortimer sited his hilarious detective saga Summer Lease. Every poet from Petrarch to Leigh Hunt, Robert Browning to Lord Byron has sojourned here. It seemed the place to find muses and fathom mysteries for Bitcoin and Gold.
Far from Washington and its NSA, and across Europe from London with its GHCQ, I might even discreetly summon the secretive Satoshi for an interview. Why not? He would be safe. Who would know he was there or recognize him if they knew? Just another Japanese tourist in Tuscany. It gave me a shot.
I settled in by the azure waters of the palazzo pool with my MacBook Air tuned to the Bitcoin beat and with voluminous piles of printouts of Satoshi’s Internet posts, soothed by the soporific susurrus of his new kind of money. I leaned back in my chair and gazed toward the Tuscan sun. I closed my eyes…and then—SHAZAM—in a cascade of excited neurons, he popped into my mind.
There before me, more vivid than life, was a dapper, articulate Nipponese nerd with an English accent, a libertarian bent, and an epigrammatic style. He conveyed a certain oblique sagacity that reminded me of John P. Marquand’s Mr. Moto, an abbreviated Nakamoto, who punctiliously solved a number of almost equally intriguing Byzantine mysteries in the 1950s, both in novels and on screen.
“Satoshi at your service,” the man announced with a crisp bow. I was so taken aback that I could scarcely muster words.
“Why did you disappear?” I stammered, thinking he might dissolve before I could question him. “Where did you go?”
“I don’t recall ever making an appearance,” he said, with a sigh of cryptic disdain.
“Well, your avatar surely did,” I said. “Why did you stop posting?”
“Don’t you remember the time?” he asked. “I won’t ever forget it. It was December 2010. Julian Assange, my virtual cohort on the cypherpunk list, blazed on the covers of all the news magazines. People talked of bitcoin as an important facilitator for Wikileaks. It would have been nice to get all this attention in any other context. But Wikileaks had kicked the hornets’ nest and now the swarm was headed towards us.”
“We had to get away from the swarm. Bitcoin’s success depends on being distributed and peer-to-peer,” concluded Satoshi. Bitcoin relied, so I surmised, on the absence of billionaire embodiments and hierarchical handles.
Satoshi explained: “Governments are good at cutting off the heads of centrally controlled networks like Napster, but pure peer-to-peer networks like Gnutella [music] and Tor [encrypted email] seem to be holding their own.”
So can Bitcoin, I reflected, if the tantalizing titan Satoshi gets out of the way. As cypherpunk poster James Donald put it soon after Satoshi announced Bitcoin, “To avoid pressure, the network has to avoid any central point at which pressure can be applied. Recall Nero’s wish that Rome had a single throat that he could cut. If we provide them with such a throat, it will be cut.”
I asked, “Aren’t the properties of Bitcoin—its uncontrollable peer-to-peer and distributed architecture—incompatible with all modern money systems. Monies are created and maintained to do precisely what can’t be done in Bitcoins—adjusting money supplies and exchange rates to changing economic conditions. Aren’t you a threat to the entire monetary world, of central banks and G8 summits and International Monetary Fund mandates, of preening financial strategists in Washington, New York, London and Davos, Tokyo and San Francisco, of tax collectors and financial regulators around the world?”
“We do not want to lead with ‘anonymous currency’ or ‘currency outside the reach of any government.’” Satoshi said. “I am definitely not making such a taunt or assertion. Some people say, ‘Bring it on Wikileaks. I say, ‘No, don’t bring it on Wikileaks!’ The Bitcoin project needs to grow gradually, so the software can be strengthened along the way.”
“But in the initial ‘Genesis block’ of Bitcoin, you did put a headline from a UK paper saying the Chancellor was bailing out the banks again…” I said.
Satoshi only smiled.
“Anyway, I understand what you are doing,” I said, “but how can you have monetary policy if the money supply is beyond the control of bankers?”
Satoshi answered: “Indeed in Bitcoin there is nobody to act as a central bank or federal reserve to adjust the money supply as the population of users grows.
“It’s more [like] a precious metal. Instead of supply changing to keep the value the same, the supply is predetermined and the value changes. As the number of users grows, the value per coin increases.”
With a gnomic gleam of mischief in his eye, he concluded: “It has the potential for a positive feedback loop; as users increase, the value goes up, which could attract more users to take advantage of the increasing value. We would rather depend on this process than on needless provocations.”
“Why do you use the plural? Are you a composite character?” I inquired rather boldly.
“No. I’m fully singular. But Bitcoin is an implementation of the work of many. Wei Dai’s b-money proposal on Cypherpunks in 1998 and Nick Szabo’s bitgold proposal, among others. Adam Back’s Hashcash supplied the Proof-of-Work concept, along with Hal Finney’s Reusable Proof-of-Work as a digital coin.”
“Ah, that all makes sense. I understand why you disappeared now. But why did you post again almost four years later? After all, there had been repeated Satoshi suspects vented by the net, including Wei Dai and Nick Szabo. Some said you were Jed McCaleb, who created an array of encryption protocols, then set up Mount Gox and Ripple, the international money networking scheme that has its own currency. Forbes even tracked down Hal Finney, deep in the throes of Lou Gehrig’s disease, communicating only with his eyebrows.”
“Yes, I was happy to see Finney get some credit from Forbes. He deserved it. No need to interfere. The others could take care of themselves. But I felt sorry for that poor bloke Dorian, beset by Newsweek obtusely reporting that he was me. What a humiliation it must have been for a former CIA spook. I had to do something. I only sent four words: ‘I am not Dorian Nakamoto.’ It seemed to suffice.”
“Well then,” I said, “let’s get beyond the gossip and into the heart of the matter, the nub of the mystery. None of your disciples, from Mark Andreessen to Nick Szabo—has fully explained it. They prefer to talk of the Byzantine Generals problem or the double spending conundrum or remembered lessons and lemmas from computer science classes. Even, if I may say so—my time with you being limited—even you yourself. You fail to illuminate the inner sanctums of your system.”
“The inner sanctums? Bitcoin is a currency and a payment network, not a religion. What do you mean by sanctums?”
“I mean the place or the process—I don’t know which—where your empty bits become valuable coins. Where and how does the transubstantiation occur? Is it in the ‘mine’? Or in the ‘mint’? How does it happen? Alchemy? Magic? Hope and change? Overclock your CPUs and GPUs, plunge them into the ice of liquid nitrogen, and prove your useless work. Then you just may win some chump change of coins that don’t even clink or tinkle?”
Satoshi leant back and looked dismissive. “If you don’t believe me or don’t get it, I don’t have time to try to convince you. Sorry.” He glanced toward the door and began to rise.
I gasped. “But you just arrived! Don’t leave yet.”
I hurried to reassure him that I was not a hostile klutz. “I know the system works. I have studied it closely. I am in awe.” Was I overdoing it? Satoshi looked bored. I rushed on. “But all of us have to respond to our critics. Paul Krugman in the New York Times…”
“Don’t bring up that name,” he said. Denouncing Bitcoin as both “evil” and “reactionary,” Krugman had drilled in on the mining process where volunteers mobilize computer power in the petaflops (thousands of trillions of floating point operations per second), sucking up electricity, swilling fossil fuels, and pumping out CO2—all to solve problems of a hashing algorithm called SHA 256 for compressing data from multiple transactions into specific sized slots where it is time stamped and verified cryptographically.
“These people know nothing about Bitcoin,” he said, with a curt wave of his hand. “The utility of the exchanges made possible by Bitcoin will far exceed the cost of the electricity used, about a dollar a day per miner. Therefore not having Bitcoin would be the net waste.”
“All right then, me. I don’t understand how miners can create real value retreating to hotels near power stations in Reykjavik in a race to solve computer puzzles. It seems symbolic that the index of degree of difficulty is leading off solutions with increasing numbers of zeroes. No real value comes from using these hopped up machines centered on application-specific puzzle-solving microchips. I don’t care if they are organically cooled by icebergs…You can’t create value that way any more than you can create value racing to dig holes and fill them up again in the Keynesian model or digging up gold from deep in the ground and then hiding it away again, in other holes, in the gold standard model. None of this can create real worth.”
He gazed at me quizzically. “Except that in the case of bitcoin it does,” he said calmly. “None of these objections are of any interest to me. I worked out all the details over five years. Much more of the work was designing than coding. Fortunately, so far, all the issues raised have been things I previously considered and planned for. I have responded many times. I am tiring of it. ”
I pushed on: “Isn’t churning away on computer ‘hashing’ algorithms rather like a high tech version of digging holes and filling them up again?”
“No,” responded the enigmatic inventor. “Digging holes you make progress. Your hole grows larger shovel-full by shovel-full. Then you refill it step by step. It’s a linear process, with results measurable by scales, rulers, and levels. This is nothing at all like my system of proof-of-work.”
“Why not?” I asked, scarcely disguising my confusion. “Your computers advance step-by-step, cycle by cycle, to solve the puzzle.”
“No they don’t,” said Satoshi. “You don’t understand at all, do you?”
“So what else is new?” I asked in exasperation.
Ignoring my comment, Satoshi explained, “There is no such thing as being one percent toward solving a block. You don’t make progress toward solving it.”
“What do you mean?” I asked, baffled.
“After working on a block or a puzzle for 24 hours your chances of solving it are equal to what they were at the start, or at any moment.”
“Huh?” I grunted.
“Yes, you are scanning for solutions to the hash. It’s like flipping coins, heads and tails. You try to flip 36 coins and have them all come up heads. Each time you try, your chances are the same.”
“Great,” I said sardonically. “It’s a Bernoulli lottery. And, with enough incense and mumbo-jumbo, that somehow creates value?”
“Yes,” said Satoshi, “that, and only that, can create value.”
“It just seems to waste time,” I said.
“In creating value, time is of the essence,” he said.
“Well I think that a system based on flipping coins and wasting time needs to be reformed. Don’t get me wrong. I admire your system and all you have accomplished. But this is a flaw. Couldn’t this proof-of-work by futile endeavor be replaced by the problem of computing complex protein folds for medical advances or searching for extraterrestrial life like SETI or curing cancer through DNA mapping or halting the spread of AIDS. You have said this is just release 0.1.”
Satoshi looked pained. “All those activities are already deemed valuable, and maybe they are. Though I have some doubts about SETI. But you cannot create a standard of value by importing other examples of valuable things. Measuring, sorting, prioritizing the myriads of value claims is the problem we are trying to solve with money. What we want to do is gauge value rather than merely present putatively valuable things.”
“Well, money has to be related to valuable things in the world. Gold is intrinsically scarce and valuable. It makes beautiful jewelry. It is compact and ductile. It is a superb conductor of electricity, and love. Dollars are backed by the full faith and credit of the US government and by the world’s largest economy. Bitcoin is backed by what. Aimless computer cycles producing additional numbers of zeroes?”
Satoshi waved his hand and asked me to listen. “I will only explain this once,” he said. “As a thought experiment, imagine there was a base metal as scarce as gold but with the following properties: boring grey in color, not a good conductor of electricity, not particularly strong but not ductile or easily malleable either, not useful for any practical or ornamental purpose. And—this is the key—one special magical property: it can be transported over a communications channel. If it somehow acquired any value at all for whatever reason, then anyone wanting to transfer wealth over a long distance could buy some, transmit it, and have the recipient sell it. Maybe it could get an initial value circularly as you’ve suggested, by people foreseeing its usefulness for exchange. I would definitely want some.”
“I get it,” I said. “That substance would be the most valuable element in the world. It would be bits and atoms at once. It would link value and its measurement together. It would spur an information revolution.”
“You are beginning to understand,” he said. “But there is more…”
He continued: “The way to measure value—proof-of-work—is through the pure expenditure or sacrifice of time. As my friend Nick Szabo put it: ‘We can arrange our affairs around the measurement of sacrifice rather than of its results…’”
“I wish you good luck,” I said. “Many people are going to be trying to change it and reshape it. They will say they are trying to improve it.”
“They are the ones who will need luck,” said Satoshi, with a dispositive smile, “The nature of Bitcoin is such that once version 0.1 was released, the core design was set in stone for the rest of its lifetime.”
“What do you mean?” I asked, “Set in stone? Really!”
“The block chain of transactions incorporates hashes of all the previous transactions and is set to be incorporated in all future transactions. It is set in cryptographic stone,” he said. “I believe I worked out all the little details over the last year and one half while coding it. In ten years, it will either attain huge volumes of transactions or no volume.”
“Okay, I am beginning to get it,” I said. “In order to have a standard of value it must stand outside all existing value schemes. It must be valueless in itself.”
“Now you are getting somewhere,” Satoshi said.
“The mining process,” I said, “combines the two key facets of time. The time domain, set by the ten-minute limit for solving the problem, and the frequency domain, set by the computer cycles devoted to the problem, measured in gigahertz, billions of cycles per second.
“Thus at the heart of Bitcoin is a process that combines the irreversible passage of time with the exponential advance of technology through Moore’s law: the ever increasing number of cycles per second of computation. It is the epitome of value creation in a world of abundant goods and services and a scarcity of time. Linear time reflects the span of life—the time domain. The frequency domain is bounded by the speed of light. Together they can represent the sources of value in the world.”
“You’re getting somewhere,” Satoshi repeated. “But, in fact, the system is much better than that. It does not merely measure value. It enables transactions and verifies them and thus can vastly enhance the world’s creation of wealth and expansion of liberty.”
Then I opened my eyes. It was dark. And Satoshi was gone.