This is a guest post by Derek Watson.

So, it turns out that Satoshi Nakamoto is not Satoshi Nakamoto. According to Andreas Antonopoulos, who was charged with giving him the bitcoins that had been raised for him as a sort of apology for the Newsweek fiasco (and explaining what they were), he doesn’t know how to use a Web browser. So, assuming that Satoshi didn’t invent the Bitcoin protocol, have a stroke and retire to build model railway engines, what should we think about the Creator?

A lot of effort has been put into trying to work out who Satoshi is. His last words were that he was leaving Bitcoin and had “moved on to other things.” But could someone who was so obsessed (and who must have known that it would need much further development) give it up so absolutely? Wouldn’t we expect that person to continue working on it? It would be difficult to contribute to it under a pseudonym so perhaps Satoshi has revealed himself? Is he hiding in plain sight? It would be difficult for one of the core development team to hide the fact that he was Nakamoto. The temptation to refute any argument with “Don’t you know who I am? I am Satoshi Nakamoto!” would be too great. You can’t really feign ignorance and re-learn your own subject with a peer group.

Another alternative is that Satoshi is maintaining an active interest from the sidelines (this is pretty much a given, assuming he is alive), but is worried about the repercussions both on the currency and on him if his identity were to be discovered. Initially, the thought probably crossed his mind that he might be assassinated. He had been entrusted with the means to bring down governments, notwithstanding that it was his own brain that had entrusted him with it. Anyone who realises that they are more powerful than the government, the CIA, the FBI and any number of three-letter initialisms is going to worry about their personal liberty at the very least. At that point he had very few friends and his options were to keep very quiet, to get squashed like a bug or book a one-way ticket to Guantanamo Bay.

He? What makes us think that Satoshi is male? The inventor of the ultimate geek currency – are you joking? You may think he’s almost certainly male, but that is an assumption. What else do we actually know? We know his email address – it’s satoshin@gmx.com. We know that he still has access to it, because he used it to tell the world’s media that they were barking up the wrong tree with Dorian Nakamoto. The email address was verified as the same one that had been used routinely when Satoshi was active. That tells us that Satoshi is still alive and still watching Bitcoin. Why did he send an email saying that Dorian Nakamoto was not him? If Dorian was not Satoshi, that fact would have come out eventually in any case. If Dorian had been him, then sending an email denying that would not have really achieved anything. Nobody’s going to believe a denial, even if it does come from Satoshi’s email address. We can rule out someone else using his email address, the only explanation is that he had some empathy with Dorian’s plight, and in a way he was laughing at the media’s clumsy attempts to unmask him.

Reactivating an old channel of communication was risky, as it provides the only link between Satoshi and the real world. It is tangible evidence that he is still extant and therefore worthy of ongoing research. The fact that he had the confidence to do that over such a minor issue as media misdirection leads me to suspect that he is still communicating with other people in other areas. Satoshi, however, appears to be someone who is confident with encryption and secrecy. Not just a Tor user, not just a PGP user, but someone who is capable of vanishing off the face of the earth. Anyone who can do that has some special skills.

The British are good at keeping secrets. Too good in fact. The valuable work done at Bletchley Park during the Second World War in breaking the Enigma code was kept secret until 1974, by which time many of the staff who could have told the story had died. The machines were scrapped and the plans burnt. As a result, the story that the world wants to hear is an echo of reality. Some staff were so indoctrinated that secrecy was necessary to the safety of the realm that they refuse to discuss their work, even now. Early code-breaking machines are being rebuilt based on guesswork. In the United States, the rule was that everything should be in the public domain, unless there was a good reason to hide it. In the UK, the rule is that everything must be kept secret, unless there is a good reason to reveal it. Snowden has shown us that, in the modern era, there is probably not that much difference between the two and the British GCHQ approach is winning.

Does Satoshi ‘owe it to the world’ to come out of hiding and do some interviews? The first man to step on to the Moon’s surface, Neil Armstrong, was referred to as a ‘reluctant’ American hero. He did not become a celebrity and took a variety of jobs in business. When hearing that his autographs were being sold, he refused to sign any more. Having been trained and paid at the taxpayers’ expense to do something in the public domain, Armstrong was someone who could have done so much to promote science and technology. He inspired generations of children and gave back something of the massive amount given to him, yet he preferred to keep it all close to his chest until the day he died.

Satoshi doesn’t have anything to prove to anyone. His achievements were self-funded and so there is no pressure on him to ‘repay’ any investment in him. That doesn’t mean that vanishing off the radar is the right thing to do. It’s possible that, as things have moved on, he wouldn’t be much help to the core development team, and his writings were so comprehensive that there is barely a theoretical issue that hasn’t been thoroughly explored. In fact, reading his original correspondence you might think that it had been written last week, not several years in advance. Another thing thing we know about Satoshi is that he is good at ‘thought experiments,’ following through on an imaginary scenario as if it existed in real life. Einstein couldn’t experiment with planets or objects moving at light speed; he had to imagine what would happen to those things. Working in the Swiss Patent Office, he was forced to conceive how the many inventions that passed over his desk could or would work—if they were ever to be assembled. Later on, he applied this imagination to things that could not be assembled. Bitcoin existed first in Satoshi’s head, then in writing. The actual Bitcoin system is its third iteration.

There are many things which would happen as a result of Satoshi going public. Some people would deny that it is him. Opponents of the Bitcoin system would point to Satoshi and say that the blockchain was a reflection of his weaknesses. Weaknesses could be invented. There would be an enormous media scrum, not least because he owns 1 million bitcoin. Based on today’s price of USD 600 a coin, that’s USD 600M, not a massive amount. However, if you consider that owning as few as 21 BTC means you could own a millionth of the world’s future money supply, Nakamoto’s future wealth is indescribably huge. That’s assuming that all 21 million bitcoins will eventually be in circulation, which, due to loss of private keys, is impossible. So, when he feels more secure will he come out of the shadows? Is he due for a Scrooge-like conversion? Or, like Neil Armstrong, will his invention be a source of secret satisfaction—until no more satisfaction can be had?

Satoshi has control of 1 million bitcoins. So far, he’s spent 18 bitcoins. What should he do with the rest—and what would be the impact on the rest of us?

Previously, I looked at what we do know about Satoshi Nakamoto—his skill in mind experiments, his compassion for Dorian Nakamoto and most of all, the fact that he is still alive, is watching bitcoin and has a current email address.

In the early days of the Bitcoin system, it was only Satoshi and a very few others who were mining bitcoin. It was a trivial task and it is estimated that Satoshi personally has approximately 1 million coins in his wallet. Apart from eighteen which were ‘spent’ for experimental purposes, these coins have remained untouched. Most people’s first thought is “At today’s valuation, that makes Satoshi a rich person!” Which begs the question—why would someone so wealthy spend none of his money?

There is a theory that Satoshi has lost control of the coins, possibly by losing the private key. It is not likely that the creator of bitcoins would have been technically so inept as to lose control over them. In all of the cases where large amounts of bitcoin have been lost to carelessness, it has been someone who was on the edge of the system who ‘forgot’ that they had bitcoins on (for example) a hard drive and literally threw them away. Satoshi will not have forgotten about those coins. And neither has anybody else.

Having built a system with a finite money supply, Satoshi would not have discounted the first million coins, explaining that there would be 21 million coins ‘minus the first million or so that were experimental.’ Those coins must be regarded as active and likely to come back ‘on-line’ at some point. If he had lost the key, or had decided to permanently exclude them from the money supply, I think he would have told us by now. So, why would someone with half a billion in assets, not touch them?

Assuming Satoshi is a US citizen liable for US taxes, with bitcoin classed as a ‘good,’ disposing of the coins would result in a very happy ending for the US Treasury. The US approach, which is to classify bitcoins as an asset, instead of a foreign currency on which no tax is payable for personal use, is clearly incorrect and will be changed with much confusion in the future. There are very few jurisdictions in the world that would ignore that sort of money, so unless Satoshi wants to move to the Turks and Caicos Islands he’s probably thinking hard about what to do with it.

Another possible explanation for the inactivity on the account is that Satoshi believes that any movement will result in his identity being compromised, and he is probably correct. The opponents of bitcoin would not be above using Satoshi himself as a PR weapon against the currency, and which of us is mathematically perfect? In the future, blockchain technology will eliminate corruption and enable perfect forward privacy for financial transactions, but we are not there yet.

Looking at the furor caused when the FBI decided to sell approximately 30,000 bitcoins by tender, dumping another 1,000,000 on the market is not going to help. Although most people know that bitcoin is deflationary, this is only in the long term. In the short-term—right now—it is inflationary, with the bitcoin supply increasing by 11.5 a year. This will continue until 2016 when the number of new bitcoins per block will halve from 25 to 12.5. Part of the reason that the price is not increasing is that there is no squeeze on supply. This will come when we all stop talking about bitcoin and start talking about how easy it is to send and receive money securely without a bank. Mass adoption will increase demand and may provide the earliest hope of a boost to the price, but the squeeze on supply is not going to bite for a while yet.

There are two dates you need to remember—2140, which is the last bitcoin mining in theory, but more importantly, 2040, which is realistically the last date on which bitcoin mining in any significant sense will become practically impossible (excluding quantum computing). Incidentally, quantum computers work by considering all the possible solutions to a problem simultaneously. That is why they are so fast. This means that a quantum computer will be able to mine every remaining bitcoin the day it is turned on. Put that date in your diary as well.

The problem with bitcoins (and every other virtual currency) is who gets them? When you invent a currency, who do you give it to? Some people’s answer, which we have observed in many alt coins, is you give a few away to your friends, keep a load for yourself and then try to sell the rest. This rarely works well. So, should you just give them away to everyone as they did with AuroraCoin in Iceland?

The new mothers on a big estate all need baby-sitters so they have a meeting and decide to set up a baby-sitting circle. They don’t know each other, but everyone knows someone who knows that other person, and who better to babysit than another mother, right? They decide the most flexible system is using babysitting tokens where each token represents one hour of babysitting. This gets round the ‘coincidence of wants’ and makes the problem of matching sitters with babies much easier. The problem is that new mothers join the circle precisely because they want some babysitting, and because they haven’t done any babysitting, people are reluctant to ask them. Thus, they don’t have any tokens.

So the mothers decide to give everyone who joins the circle five tokens to get them started. It will solve their immediate problem and after that, everyone will get to know them so they can start earning tokens of their own. The problem is that every mother that joins the group increases the money supply by five tokens because they never have to give them back. Soon, everybody has lots of tokens and nobody wants to babysit. The circle collapses and everybody blames it on the new mothers who used their tokens and never babysat in return, but the fact is that it was the rampant inflation that was inadvertently built-in that killed the system. The fact is that you can’t just give money to everyone, because then everyone has got it, so they don’t want it.

The solution which most users will accept, is that the tokens are distributed depending on how early you get into the system. Inventors get the most, providing they have mined them. Simply ‘reserving’ them is not seen as fair. Early miners end up with a lot of tokens. This is because they are ‘early adopters.’ They are effectively being rewarded for risk although another view is that they have been lucky that that their project gained any traction. As more and more people come on board, there are fewer coins to be had and less potential for growth.

So, what do those early adopters do with their coins? This goes to the heart of bitcoin as a deflationary currency, and the often-repeated criticism that bitcoin does nothing apart from encourage owners to ‘hoard.’

What would you do if you discovered a pot of gold buried in your garden? Would you spend some (not all) on a cruise, or would you bury it again, because you believe that the price of gold inevitably rises? If a relative died and left you a wedge of cash, what would you do? Would you spend some (not all) on a cruise, or would you invest it all in property because you believe that the price of property always goes up in the long-term? If you made a killing on the stock market, would you cash some (not all) of it in and go on a cruise, or would you reinvest all of it back into stocks because you think in the long-run stocks are always a good investment?

The world’s cruise ships are full of wealthy people who could tell you the answer. Bitcoin has the potential to be the currency that keeps on giving. Who cares if it is an intelligence test? Is that a bad thing? Don’t make the mistake of mixing up an investment that beats inflation with a deflationary asset.

Critics who say that bitcoin owners ‘hoard’ their bitcoins misunderstand that we are at the beginning of a phase of fiat-to-bitcoin conversion. Converting fiat to bitcoin and keeping it is the name of the game. You don’t have to buy bitcoin from people who are pessimistic about the price; there are many people who are sitting on piles of bitcoin and who are quietly converting them to fiat to pay their day-to-day living expenses. Bitcoin wealth is being used for philanthropic donations. It is being used as investment capital, and it is being put up as rewards for further innovation. In short, it is being used for whatever the owner wants to use it for—but it is being used.

So, what should Satoshi do—when he finally decides to do something? The coolest thing he could do would be to use the funds to increase the adoption of the Bitcoin protocol. There are several ways in which this could be done, but acting as an investor is probably the worst. The simplest would be to set up a Bitcoin Faucet Trust that made every recipient a stakeholder in the new financial system. This could be directed (as in the Bill and Melinda Gates Foundation) at the poorest people in the world and give them an asset that could be used to meet their real-world needs. One million coins might be five per cent of the world’s future money supply, but it is only slightly more than the 870,000 that went walkies from Mount Gox and a lot fewer than the billions of people who are financially disenfranchised. Gavin Andresen’s bitcoin faucet was generally agreed to have had a significant effect on adoption; the only problem was that the pump ran dry. We’re going to need a bigger faucet. The effect on the markets would be minimal, but the direct and indirect effects on world poverty could be significant.

I don’t think anybody would object to the outstanding coins being trickled back into the market in that way. It would help the currency, and it would secure Satoshi’s reputation as a great philanthropist as well as a brilliant conceptual economist and mathematician.

What do you think should be done with Satoshi’s millions?