You don’t need to own cryptocurrencies to trade
Find out more about trading on bitcoin with IG.
The identity of the pioneering cryptocurrency’s founding father(s) has remained a mystery since a whitepaper published by a programmer going by the pseudonym Satoshi Nakamoto surfaced in 2008. However, there are plenty that have worked with the bitcoin founder to make it a success.
‘What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party’ – Satoshi Nakamoto, 2008.
For a cryptographically secured digital currency built on a system that requires no central authority, it is unsurprising that its creator has stayed in the shadows. In fact, this is one of the reasons for the success of bitcoin, and the other cryptocurrencies it has inspired since.
Satoshi Nakamoto is the pseudonym of one or more programmers that, in late 2008, began circulating a whitepaper, ‘Bitcoin: A Peer-to-Peer Electronic Cash System’, that outlined a vision to create a purely peer-to-peer version of electronic cash that would allow online payments to be sent directly from one party to another without going through a financial institution.
While there has been numerous individuals suspected of founding bitcoin (including PayPal founder and Tesla chief executive Elon Musk and a Japanese-American who just happened to be named Dorian Prentice Satoshi Nakomoto), the world is no nearer to discovering the creator’s true identity than it was ten years ago.
However, there are some known individuals that have been elemental in turning bitcoin from a low valued cryptocurrency more associated with money laundering and illicit drugs to one that has managed to soar to almost $20,000 in December 2017 and challenged the perception of a world accustomed to ‘fiat’ currencies and financial institutions.
Find out more about who owns bitcoin.
As the first person to use bitcoin after Satoshi, Finney is seen as an instrumental architect of bitcoin and its foundations. He passed away in August 2014 having succumbed to amyotrophic lateral sclerosis, or ALS, which paralysed him in August 2009.
The computer scientist worked closely with the creator of Pretty Good Privacy (PGP), a digital data encryption program developed in the 1990s that would eventually become a key cog in the bitcoin machine. He was so intrigued when the bitcoin whitepaper was released several years later, that he became the first person besides Satoshi to run bitcoin, mining ‘block 70-something’, and was the recipient of the first bitcoin transaction after Satoshi sent 10 bitcoins to him as a test.
Although Finney conversed with Satoshi via email to help filter out initial bugs, he claimed he never discovered Satoshi’s identity, and had to deny that he was the mysterious founder on several occasions.
In a forum post in March 2013, Finney said the true identity of Satoshi was a mystery, but that he believed, when he was interacting with him, he was dealing with a ‘young man of Japanese ancestry who was very smart and sincere’.
Zimmerman was the man behind PGP, which he developed (with the help of Finney) years before bitcoin emerged, after recognising that cryptography ‘is about the right to privacy, freedom of speech, freedom of political association, freedom of the press, freedom from unreasonable search and seizure, freedom to be left alone,’ according to the University of Pittsburgh.
PGP was created when email was, as Zimmerman put it, ‘a novelty’ and not mainstream. PGP is used for signing, encrypting, and decrypting messages and files. With respect to cryptocurrency, PGP allows users to create a pair of keys – a ‘public’ key for encryption and a ‘private’ key for decryption. This is at the heart of the technology that cryptocurrencies are based on, known as blockchain, and is the reason why users can circumnavigate the middle-men like banks that manage traditional transactions in a secure manner.
The computer scientist has had to deny claims he is Satoshi for years, having been considered a likely candidate after creating what is widely seen as the precursor to bitcoin, ‘bit gold’. Bit gold was made in 1998 – a decade before the bitcoin whitepaper – and, in a nutshell, was a mechanism (which never quite took off) designed to facilitate a decentralised digital currency.
Looking at Szabo’s description of the bit gold protocol and why he was pursuing it, it is unsurprising he has and is still seen by many as the founder of bitcoin.
‘It would be very nice if there were a protocol whereby unforgivably costly bits could be created online with minimal dependence on trusted third parties, and then securely stored, transferred, and assayed with similar minimal trust. Bit gold.’
Unlike those who have had to deny claims made by other people, Australian entrepreneur Wright surprised the world when he told the three media organisations he was Satoshi in May 2016. He provided ‘technical proof’ to the BBC by digitally signing messages using keys made in the early days of bitcoin, ones that were synched with the blocks used by Satoshi to send 10 bitcoins to Finney in January 2009.
Although he was backed by two figures from the Bitcoin Foundation (a non-profit aiming to standardise, protect and promote the use of bitcoin), he failed to follow-through on his promise to prove he possessed Satoshi's cryptographic keys by moving bitcoins from the first blocks ever mined by Satoshi.
In a rather undignified fall from grace, Wright later published a blog that said he ‘broke’ as he prepared to publish the proof, stating ‘I do not have the courage. I cannot’. Still, there are many in the community that believe his claim based on the other evidence, but the bottom line is that Wright has failed to undeniably prove he is Satoshi and win round the bitcoin buyers.
Firstly, as a truly independent system free from any central body, the fact it has no official owner or recognised creator beyond the pseudonym is quite fitting. The bitcoin community, therefore, makes decisions and shapes its future through consensus – arguably making bitcoin a truly democratic currency.
Secondly, although Satoshi has barely appeared since vanishing from the internet in 2011, when they had ‘moved on to other things’, it is likely Satoshi walked away with one of the largest wallets of bitcoin in existence to this date. While there have been estimates over the precise figure, it has been reported to be up to 1 million bitcoins, or 5% of all the bitcoin that will ever exist. With that much, Satoshi has the ability to heavily influence the market and anonymity would allow the founder, for example, to sell without sparking havoc amongst other bitcoin users.
To find out more about what moves the cryptocurrency's price, take a look at our ' how to trade bitcoin' guide.
Thirdly, with the legality of bitcoin thrown into doubt over its decade-long life on several occasions, Satoshi may have been keen to not be seen as the creator of something that is designed to operate outside of government control and previously used on sites like Silk Road.
The real person (or persons) behind Satoshi could prove their identity by using the first PGP keys that control access to the bitcoins mined in the early days (no bitcoins have ever left Satoshi’s wallet). But some argue the founder would have to prove they have access to the ‘Genesis Block’ (the first block in the blockchain) to truly convince the community, or move bitcoin from that block.
Still, we know Satoshi is a world-class coder (which is the main argument for it being a group rather than an individual), speaks fluent English, and has disrupted the way the world understands money using a technology that will go well beyond bitcoin and the cryptocurrencies it has gone on to inspire.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.