The Satoshi Revolution - Chapter 2: Was Satoshi a Libertarian and Anarchist? (Part 4)

The Satoshi Revolution: A Revolution of Rising Expectations.

Section 1: The Trusted Third Party Problem

Chapter 2: Monetary Theory

by Wendy McElroy

Was Satoshi a Libertarian and Anarchist? (Chapter 2, Part 4)

I’ve been working on a new electronic cash system that’s fully peer-to-peer, with no trusted third party….We very, very much need such a system, but the way I understand your proposal, it does not seem to scale to the required size. For transferable proof of work tokens to have value, they must have monetary value. To have monetary value, they must be transferred within a very large network – for example a file trading network akin to bittorrent. To detect and reject a double spending event in a timely manner, one must have most past transactions of the coins in the transaction, which, naively implemented, requires each peer to have most past transactions, or most past transactions that occurred recently. If hundreds of millions of people are doing transactions, that is a lot of bandwidth…

—Satoshi Nakamoto

Was Satoshi a Libertarian and Anarchist?

On October 31, 2008, Satoshi Nakamoto published a White Paper entitled “Bitcoin: A Peer-to-Peer Electronic Cash System” on the Cryptography Mailing List at metzdowd.com. It spelled out the reasoning behind bitcoin and the design of bitcoin’s instrument of implementation: the blockchain. The White Paper also solved a problem that had haunted cryptocurrency: double spending. Satoshi’s brief explanation is a defining document of our century.

It is all the more remarkable, therefore, that no one seems to know Satoshi’s identity or even whether he is an individual or a team of programmers. Clearly, he coded from a love of the technology rather from than a desire for fame. Since the code was open source, unpatented and offered widely to all, acquiring wealth does not appear to be the driving goal either. By process of elimination, political motivation becomes more probable. But arriving at that conclusion requires an examination of the evidence and background surrounding Bitcoin.

Let There Be Blocks…

Satoshi began writing Bitcoin code in 2007. When he published the White Paper on the Cryptograpy mailing list in 2008, it was also available on a website he created, named bitcoin.org. — both sites function to this day.

The mailing list consisted of experts in math, statistics and cryptography who immediately argued against the viability of Bitcoin. It will not scale, they claimed; it requires too many resources to work well. Moreover, “bad” nodes could control most CPU power on the network, and so generate a longer chain than “honest” nodes; this means attackers could control the blockchain. Satoshi’s patient and polite responses gradually convinced them that Bitcoin might just work.

Developments quickly followed. Specific highlights include:

• January 9, 2009, version 0.1 of bitcoin software is released on Sourceforge.

• January 12,2009, the first bitcoin transaction occurs.

• January 3, 2009, the first block, called the Genesis Block, is mined.

• October 5, 2009, an exchange rate of $1 US = 1,309.03 BTC is established.

• October 12, 2009, the #bitcoin-dev channel is registered for open source development communities.

• December 16, 2009, version 0.2 is released.

• March 6, 2010, dwdollar establishes a Bitcoin currency exchange.

• May 22, 2010, first real-world transaction occurs when a pizza is purchased for 10,000 bitcoins.

• July 7, 2010, version 0.3 is released.

• October 16, 2010, the first escrow transaction occurs.

In mid-2010, Satoshi transferred bitcoin.org to Gavin Andresen. Andresen explained, “I started to submit code to Satoshi to improve the core system. Over time he trusted my judgment on the code I wrote. And eventually, he pulled a fast one on me because he asked me if it’d be OK if he put my email address on the bitcoin homepage, and I said yes, not realizing that when he put my email address there, he’d take his away. I was the person everyone would email when they wanted to know about bitcoin. Satoshi started stepping back as leader of [the] project and pushing me forward…”

In 2010, Satoshi went silent.

Listening to Evidence of Satoshi’s Political Motives

Great debate revolves around Satoshi’s drive for designing Bitcoin, with many people seeming to project their own motives for using Bitcoin onto Satoshi. In fairness, the programmer offered only indications of a political motivation rather than an explicit statement. As indications mount, however, it becomes very probable that Satoshi was a libertarian or an anarchist, or both.

Evidence of Satoshi’s political slant dates back to the Genesis block. It contained a message: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.” January 3, 2009 was the blockchain’s birthday. The message was a headline from the front page of The Times, a UK newspaper. But why did Satoshi choose those words?

Some people think the wording was randomly plucked from the January 3rd, 2009 issue of the Times for the sole purpose of authenticating the date. They claim the message could as easily have been “ten sex workers arrested in Soho sting.” That contention defies credibility. Satoshi was a methodical programmer who went directly to the heart of matters, without frivolity or caprice. He was releasing a masterpiece of coding and it is not plausible that he would slap a random message onto the Genesis block.

An entirely different scenario is likely. Imagine Satoshi at his computer, preparing to drop the first block like a seed on the wind. He knows its power and he wants people to know its purpose. He has just read the morning paper with its continuing news of financial turpitude on the part of elites acting for their own benefit. Aha, there is a perfect snippet about the two agencies responsible for the economic rape of average people: government and the banking system. Eight words capture the collusion between them. Satoshi carefully types, “Chancellor on brink of second bailout for banks,” and embeds this message to send to the world. The intent is anti-Chancellor, anti-bank, anti-bailout. The digital currency and payment system to which the message is attached are the antidote to the corruption of governments and banks. From Bitcoin’s first words, it returned power to the people.

A key reason why debate on Satoshi’s political intention continues is because his White Paper is politically neutral. It even states that a system of financial institutions consisting of trusted third parties “works well enough for most transactions”. The Paper states only practical objections to the existing banking system; for example, reversible transactions and the inevitability of fraud resulting in high processing costs. In short, the White Paper does not read like a political manifesto. Nor should it.

A white paper is technical. It is an authoritive explanation of an idea or an experiment and of results or conclusions presented to experts in the same field of study. Its purpose is to explain a concept, to solve a problem or to present a finding. Beliefs and politics are most definitely not appropriate in a White Paper; if they are included, then the paper is called “gray” and it is much more likely to be dismissed. Rather than express the author’s opinion, the goal is to elicit reactions from others.

The list where Satoshi posted the White Paper was composed of experts in math, statistics and cryptography who wanted the bare technical facts, not the politics surrounding them. Moreover, members of the Cryptography Mailing List undoubtedly held a variety of political views, and they might have stumbled over ones with which they disagreed, and it was not the time, it was not the place to be political.

The White Paper, however, makes at least one indirect political reference. Footnote [1] gives a nod of approval to the 1998 b-money proposal developed by cypherpunk Wei Dai with whom Satoshi had a history of exchanging email. The b-money proposal opens, “I am fascinated by Tim May’s crypto-anarchy. Unlike the communities traditionally associated with the word ‘anarchy’, in a crypto-anarchy the government is not temporarily destroyed but permanently forbidden and permanently unnecessary. It’s a community where the threat of violence is impotent because violence is impossible, and violence is impossible because its participants cannot be linked to their true names or physical locations.”

To further assess Satoshi’s motives in creating Bitcoin, it is useful to listen to his voice in venues that invite political expression and to consider choices that express his political preferences. These venues include the features embedded in Bitcoin, Satoshi’s posts on forums, and his personal associations.

The features of Bitcoin directly express libertarian and anarchist sentiments:

• Decentralization. “A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.” Bitcoin operates without leaders, without a position of power beyond that of the individual.

• Privacy. “As an additional firewall, a new key pair should be used for each transaction to keep them from being linked to a common owner.” Bitcoin is pseudonymous. While it does not provide perfect privacy, the anonymity is far more effective than other forms of online payment that rely on trusted third parties.

• Pro-capitalism. The White Paper stresses Bitcoin’s advantages to commerce and merchants as a free-enterprise payment system. Peer-to-peer transfer is a pure expression of the free market, with no intervention.

• Anti-government. Although government is not mentioned in the White Paper, Bitcoin usurps a “vital” governmental function which has been badly corrupted and misused. Perhaps it is significant that Satoshi does not mention government in discussing an area that is deemed to be its bailiwick.

• Anti-banking. The entire purpose of Bitcoin is “online payments…without going through a financial institution.” Banks are rendered irrelevant.

• Anti-inflation. “Once a predetermined number of coins have entered circulation, the incentive can transition entirely to transaction fees and be completely inflation free.”

The foregoing is economic anarchism.

It is generally recognized as such. A CoinJournal article entitled “Op-Ed: Satoshi Nakamoto is Clearly an Anarchist” refers to a 2014 presentation by Daniel Krawisz of the Satoshi Nakamoto Institute. Krawisz stated, “Someone who promotes bitcoin who is not an anarchist is a crypto-anarchist because bitcoin is inherently anarchistic.”

Satoshi’s forum posts are further evidence of his politics. The remarks are anti-banking and critical of government while acknowledging Bitcoin’s appeal to libertarians:

• Anti-banking. “Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with hardly a fraction in reserve.

• Anti-government: “Yes, [we will not find a solution to political problems in cryptography,] but we can win a major battle in the arms race and gain a new territory of freedom for several years. Governments are good at cutting off the heads of a centrally controlled networks like Napster, but pure P2P networks like Gnutella and Tor seem to be holding their own.”

• Pro-libertarian. “[Bitcoin is] very attractive to the libertarian viewpoint if we can explain it properly. I’m better with code than with words though.”

And, finally, Satoshi’s personal associations also indicate his political slant. First and foremost is Hal Finney. A developer for the PGP Corporation, Finney was the first recipient of a bitcoin transaction when Satoshi sent a payment to him on January 12, 2009. Obviously, Finney co-operated closely with Satoshi, which makes his political views of interest. In the early 1990s, Finney contributed regularly to the cypherpunk’s listserv. He stated, “Naturally, in today’s society, with power allocated so disproportionately, such ideas are a threat to large organizations. Balancing power would mean a net loss of power for them. So no institution is going to pick up and champion Chaum’s ideas. It’s going to have to be a grass-roots activity, one in which individuals first learn of how much power they can have, and then demand it.”

Significantly, Satoshi posted a link to his White Paper on the P2P Foundation’s cypherpunk website, probably because he was a list member. When a 2014 Newsweek cover story “outed” Dorian S. Nakatomo of Temple City, California as the inventor of Bitcoin, the real Satoshi posted 5 words on a P2P Foundation page; “I am not Dorian Nakamoto.” The Foundation confirmed that the White Paper post had originated from the same email account, but it is widely believed that the account had been hacked.

Nathaniel Popper’s book Digital Gold: Bitcoin and the Inside Story of the Misfits and Millionaires Trying to Reinvent Money described the journey of Martti Malmi to Bitcoin. Popper wrote:

A student at the Helsinki University of Technology, Martti enthused about Bitcoin on anti-state.org, a forum dedicated to the possibility of an anarchist society organized only by the market. Using the screen name Trickster, Martti gave a brief description of the Bitcoin idea and asked for thoughts.

When he reached out to Satoshi, Martti included the link to his post. “What do you think about this?” he asked Satoshi. “I’m really excited about the thought of something practical that could truly bring us closer to freedom in our lifetime. :-)”

Satoshi replied, “Your understanding of Bitcoin is spot on.”

Satoshi also realized how revolutionary his system would be. This is evidenced by his response to Wikileaks when it enabled bitcoin donations as a way to side step an ongoing bank blockage. This propelled Bitcoin to a new level of popularity. Satoshi posted, “It would have been nice to get this attention in any other context. WikiLeaks has kicked the hornet’s nest, and the swarm is headed towards us.” He pled with Wikileaks not to spotlight Bitcoin because the project was young enough for governments to destroy it. Indeed, Satoshi’s decision to stay anonymous testifies to his understanding of Bitcoin’s power and attendant danger; the danger was government which had prosecuted earlier creators of digital money as money launderers.

The preceding argument does not prove definitively that Satoshi was either a libertarian or an anarchist, but it comes close. It becomes far more plausible to call him “libertarian” than to deny the label.

Next, let the White Paper speak for itself.

[To be continued next week.]

Reprints of this article should credit bitcoin.com and include a link back to the original

Wendy McElroy has agreed to ”live-publish” her new book The Satoshi Revolution exclusively with Bitcoin.com. Every Saturday you’ll find another installment in a series of posts planned to conclude after about 18 months. Altogether they’ll make up her new book ”The Satoshi Revolution”. Read it here first.