Bitcoin is back on top. This week, the original cryptocurrency hit an all-time high, boosted by new ETFs backed by BlackRock and others that have elevated its status as a mainstream investment. That doesn’t mean, of course, that Bitcoin is totally safe. Aside from its historical volatility, Bitcoin is exposed to some unique risks that are highly unlikely but potentially devastating if they materialize. The biggest of these is the return of its pseudonymous creator, Satoshi Nakamoto, who has controlled a large number of Bitcoins since the early days of the currency and who could shock the market in unprecedented ways.
It is widely assumed that Satoshi will never return, but recent events (including a mysterious deposit of $1.2 million in one of his wallets and an ongoing trial in the United Kingdom focused on his identity) are a reminder that it is unlikely that he will not return. means impossible. Here’s a closer look at the odds that the Bitcoin creator could make a comeback and what it would mean if he did.
Satoshi’s fortune
Satoshi Nakamoto first flirted with fame by publishing a white paper laying out the arguments for Bitcoin in 2008. After that, he was active in one of the first online Bitcoin forums and regularly emailed others. developers until 2011 before disappearing. Satoshi last appeared briefly in 2014 to refute a news story that purported to uncover his identity, but it’s been crickets since then.
By disappearing from the scene, Satoshi also left a large trove of Bitcoin wallets intact. These were accumulated during a time when Bitcoin was trading for less than $1 and when each new piece added to the blockchain produced 50 coins (up from three starting next month). The transparent nature of the blockchain makes it easy to guess which wallets Satoshi controlled.
“We estimate that Satoshi’s funds total 1.124 million Bitcoin in approximately 36,000 wallets. That total has not changed over time,” forensics firm Chainalysis said. Fortune.
The company added that the wallets have been “dusted” with minimum amounts from time to time, reflecting the fact that, because the wallet addresses are public, anyone can send them Bitcoin.
In January, however, one of the Satoshi wallets received a gift that was decidedly not minimal: around $1.2 million in Bitcoin. The reason for the donation is a mystery. It’s possible that it was simply a tribute from a wealthy cryptocurrency lover to commemorate Bitcoin’s 15th anniversary, but others have more disturbingly speculated that the size of the gift reflected an attempt by a government tax authority to catch Satoshi giving the authorities legal reasons for issuing subpoenas.
But even if this were the case, the authorities would need to know whom to quote, which raises the age-old question of who Satoshi is. Even 15 years later, the topic appears in the media on a semi-regular basis, most recently as a result of a pretender named Craig Wright who is currently in the middle of a trial seeking to have a UK judge rule that he invented Bitcoin. .
Although Wright is clearly not Satoshi, the trial has forced one of Bitcoin’s early developers to provide hundreds of emails between him and Satoshi. While the emails don’t contain smoking gun evidence about the latter’s identity, they do provide plenty of additional evidence in the form of timestamps, as well as quirks in spelling and syntax.
These additional clues are likely to reinforce the strongest existing hypothesis: that Satoshi is the libertarian scholar Nick Szabo, who likely created Bitcoin while working closely with Hal Finney, the late cryptographer whose body was cryogenically frozen and whose interest in Bitcoin may have diminished. partly because he wanted to have access to the money if he came back to life.
While widespread speculation tends to overlook the Szabo-Finney theory in favor of more familiar names (Elon Musk is currently a hot choice), most of those involved in cryptocurrencies from the early days will quietly admit that the theory it’s true. However, the topic is somewhat taboo among long-time Bitcoin believers, both because they prefer to treat the coin’s origin story as a religious mystery and because of the consensus that nothing good would come from exposing Satoshi.
As for Satoshi deciding to show up on his own, the chances of that happening are extremely unlikely. Pete Rizzo, a Bitcoin historian who was one of the first editors-in-chief of CoinDesk, says Fortune that Satoshi’s resurgence is about as likely as “an astroid hitting Earth,” with the odds decreasing even further as time goes on.
Rizzo is likely right for two reasons. The first is ideological: Satoshi was a fervent believer in a decentralized monetary system and, for Bitcoin to succeed, he had to withdraw from the scene. Returning would be like proclaiming yourself king or, even worse in the eyes of crypto believers, central banker. The other reason Satoshi is highly unlikely to reveal himself is more practical: doing so would attract a global swarm of criminals, crackpots, and tax inspectors… and who needs that?
However, Satoshi’s failure to voluntarily reveal himself does not eliminate the risk that a state authority could try to force him or one of his associates to reveal who created Bitcoin. But given that 15 years have passed (and the fact that Satoshi is probably too cunning to be caught this way) it also makes this scenario unlikely.
Some have also raised the possibility that Satoshi could return to exert control over Bitcoin’s core code. However, that scenario is almost impossible given the decentralized way in which the currency is maintained, and for the simple reason that if Satoshi had an ideological objection to how Bitcoin has evolved, they would have spoken by now.
All of this, however, doesn’t take into account one final wild card: Satoshi’s eventual death.
A dead man’s switch?
Satoshi may be a true believer in the decentralized financial project known as Bitcoin, but he is also a human being who most likely has family and loved ones. And like anyone with a large fortune, he is likely to arrange to pass the wealth on to him.
This raises the question of what will happen to all of Satoshi’s Bitcoins (a fortune estimated at at least $75 billion) when he passes away. Seth Ginns, a partner at prominent cryptocurrency investment firm Coinfund, says he’s given the matter some thought and guessed the most likely outcome.
According to Ginns, Satoshi likely controls other wallets from the early days of Bitcoin that are not counted among the group associated with him as assessed by Chainalysis and other forensic firms. Ginns suggests that Satoshi will quietly deliver them to his loved ones, and he probably already has.
What if Ginns’ assumption is wrong? What if Satoshi now, or after his death, decided to liquidate his entire stash (“dump his bags” in crypto lingo)? The mass download of more than 1 million Bitcoins would certainly upset the market and sink prices.
Ginns, however, predicts that the market would absorb the impact and eventually strengthen further as the liquidation would result in Bitcoin becoming even more decentralized. But he also posed another intriguing scenario: that Satoshi has a so-called “dead man’s switch” to announce his death.
The idea of the dead man’s switch is quite simple. It could involve a monthly or even annual online activity (sending an email, updating a website, or whatever) that, if not performed, would trigger an automated scenario. In Satoshi’s case, it could be an email from his long-abandoned email address or an update from the original Bitcoin forum that he died and chose to burn the keys to his wallets.
If this were to happen, Ginns says, the market reaction would likely be euphoria and a massive spike in price as investors received confirmation that Satoshi’s enormous fortune was gone forever.
This is all hypothetical, of course, since at this point no one knows for sure who Satoshi is or what they plan to do (if anything) with his massive stash of Bitcoins. However, the fact is that when evaluating the risks of owning Bitcoin, investors must take into account the future actions (and death) of its creator (and potentially a $75 billion swing).
