Bitcoin's Health May Hinge on a Legal Feud in Norway

Some developers say a lawsuit from pseudonymous bitcoiner Hodlonaut against Craig Wright, who claims to be Satoshi Nakamoto, is vital to the cryptocurrency’s growth.

AccessTimeIconSep 12, 2022 at 7:36 p.m. UTC
Updated Sep 12, 2022 at 10:12 p.m. UTC

Alyssa Hertig is a programmer and journalist specializing in Bitcoin and the Lightning Network. She's currently writing a book exploring the ins and outs of Bitcoin governance. Alyssa owns some BTC.

Though deeply rooted in Bitcoin’s past, a court case beginning in Norway this week could have serious implications for the cryptocurrency’s future, according to the plaintiff’s supporters.

Hodlonaut, a pseudonymous bitcoiner who edits Bitcoin magazine Citadel21, filed the lawsuit against businessman Craig S. Wright, who has repeatedly claimed – but failed to prove – that he is the digital currency’s pseudonymous creator Satoshi Nakamoto. The duo became entangled several years ago when Wright accused Hodlonaut of defamation for tweets calling Wright a "fraud" for claiming to be Nakamoto, starting a complex legal battle.

Hodlonaut is far from the only bitcoiner ensnared by Wright in court. Last year, for instance, Wright served claims against 16 Bitcoin developers, asking them to turn over funds to him that aren’t likely his. Developers argue that the threat of legal action from Wright is dissuading their peers from working on bitcoin (BTC), the original cryptocurrency, depriving its blockchain network of improvements needed to one day bring the crypto to the masses.

Hodlonaut’s ambitious aim is to reverse that trend by stopping – or at least slowing down – Wright's lawsuits.

"This community campaign aims to make sure my fight is brought to its successful conclusion, with court judgments that effectively put an end to any further bullying of bitcoiners, developers and companies," Hodlonaut said on Twitter.

When CoinDesk reached out to Wright through a publicist, he responded that "Hodlonaut is the only bully here," because Hodlonaut is the one pursuing legal action this time around. (Hodlonaut filed the suit in Norway after Wright’s attorneys sent him a legal notice in the U.K., and weeks after Wright placed a $5,000 bounty on Hodlonaut’s real identity.)

Hodlonaut's case has aroused widespread support in the bitcoin community, with his donation campaign raising nearly $1.5 million and thousands of users changing their profile pictures to his icon of an astronaut cat. In another show of support, CryptoCloaks, a company that prints a variety of bitcoin gear in 3D, is now selling a 3D-printed space-cat helmet in an effort to raise funds for Hodlonaut.

Wright's claims

Wright's claim to be Bitcoin’s inventor is dubious. When he first came out saying he was Satoshi back in 2015, he said he could prove it with cryptography. But cryptographers shot that claim down. Security expert Dan Kaminsky called him the "world's first cryptographically provable con artist," and other experts echoed that analysis. Shortly after Wired published an article stating Wright was “probably” Satoshi, it wrote another article admitting “he may be a hoaxer.”

Since then, Wright has been caught lying on other occasions. In a parallel court case with the estate of his former business partner, Dave Kleiman, Wright claimed he was the owner of some particular bitcoin.

During the case, the actual owner of the coins – whoever they are – signed the following message: "Craig Steven Wright is a liar and a fraud. He doesn't have the keys used to sign this message." Only the owner of the coins can "sign" a message, which anyone can then verify with cryptography.

In another defamation case Wright waged against podcaster Peter McCormack, U.K. High Court Judge Martin Chamberlain ruled that Wright put forth "false evidence."

And though Wright initiated legal action in the U.K. against Hodlonaut, Hodlonaut later filed a suit against Wright in Norway as a shield, "claiming a declaratory judgment that my tweets were lawful, covered by truth and freedom of speech and that I am not liable to pay damages to Wright."

Consequences for Bitcoin

The wider concern for many Hodlonaut supporters is that the threat of legal action from Wright makes other bitcoiners (whether developers, journalists or companies) not want to work on the digital currency out of fear that they will be sued as well.

Former Bitcoin Core developer and cryptographer Greg Maxwell said in a Reddit thread: "His actions have contributed to at least four of some of the most prolific and longest standing developers discontinuing or substantially curtailing their involvement with Bitcoin."

Maxwell is one of the 16 developers targeted by Wright in the U.K., though a judge has since rejected Wright’s claims, according to financial media outlet Blockworks.

Bitcoin Core developers work on the key software underpinning Bitcoin, churning out a variety of improvements (privacy, security, user experience, etc.) at the base layer of Bitcoin. The best-known recent example is Taproot, a change that will pave the way for substantial privacy improvements in Bitcoin.

By serving claims against these developers, Wright tangles them up in legal proceedings rather than allowing them to focus on the technology they want to improve. Further, it discourages other developers from getting involved.

"The deck is stacked enormously against [Hodlonaut] and Wright's other targets: Wright's laughable claims across multiple countries should have been possible to discharge in a summary judgment, limiting the legal costs to merely hundreds of thousands [of dollars] instead of millions – but since he has nothing to lose he'll tell whatever lies are required to keep the litigation going for as long as possible,” Maxwell said.

“And with Wright burying his opponents under a hundred of thousands of documents (a substantial percentage of which are forgeries), he easily can drive trial costs into the millions or tens of millions of dollars,” Maxwell added.

Uphill battle

Supporters hope a Hodlonaut victory will impede Wright. That said, many Hodlonaut backers aren’t under any illusion that Hodlonaut's case will fully undermine Wright's legal strategy.

"Helping [Hodlonaut] continue his fight is merely necessary, it's not sufficient. It's unlikely that Wright will be stopped by even a complete victory by [Hodlonaut], only slowed by it," Maxwell said.

Against that backdrop, at least two legal funds have opened so developers don't have to figure out how to respond to Wright's (and others’) litigation on their own. In January Twitter co-founder Jack Dorsey opened a legal defense board to defend developers against legal action. Nonprofit OpenSats opened a similar fund last month.

But even with this legal aid, a Bitcoin developer who wished to remain anonymous told CoinDesk that the litigation can be draining.

"Despite the excellent legal representation that we developers have right now, the lawsuits still consume time and emotional energy, for some more, for some less,” the anonymous developer said. “Personally, I am not too much affected by the lawsuits, but I suspect for other developers it was one of many reasons to reduce or completely cut their involvement.”

Even if battling with Wright is an uphill battle, Maxwell remains optimistic.

"Wright's fraud is an attack on Bitcoin,” he said. “Not a conjectural or hypothetical attack, but a real one that has already done significant damage. I'm confident that this is an attack Bitcoin will survive because I'm confident that when people will stand up to fight for it."

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Alyssa Hertig is a programmer and journalist specializing in Bitcoin and the Lightning Network. She's currently writing a book exploring the ins and outs of Bitcoin governance. Alyssa owns some BTC.

CoinDesk - Unknown

Alyssa Hertig is a programmer and journalist specializing in Bitcoin and the Lightning Network. She's currently writing a book exploring the ins and outs of Bitcoin governance. Alyssa owns some BTC.