Welcome to the CoinDesk Weekly Review 7th March 2014 – a regular look at the hottest, most thought-provoking and most controversial events in the world of digital currency through the eyes of scepticism and wonder.
Your host … John Law.
There’s a clue in the name
Even in the Internet hall of mirrors that has replaced much journalism, the story seemed too bizarre to be taken seriously. After years of rumour, speculation and answerless questions – could it really be true? Could this mysterious entity, known only from historical documents, claim and counter-claim, finally have stumbled into the light?
Yes. It is true. Newsweek really does exist.
That’s all that can be said for sure at the moment. Although Newsweek itself has made an equally incredible claim, that it traced Bitcoin’s creator Satoshi Nakamoto by looking up people called Satoshi Nakamoto, actual evidence is thin.
That the paper had found someone by that name living in southern California is undeniable, and he has led the sort of life that someone who invented bitcoin could have led. A 60-something model train obsessive who lives with his mother in secluded retirement after a career in secretive technical engineering? If it wasn’t for the fact John Law knows many equally qualified eccentrics – the tech world has no shortage of the species – it’d be a slam-dunk.
However, having made some initially ambiguous statements when doorstepped by the Newsweek reporter, Mr Nakamoto has most recently denied everything in exchange for sushi. Admirable man. It’s not really the action of someone sitting on a hoard of nearly half a billion dollars’ worth of early-mined bitcoin, which block chain analysis suggests belongs to the creator. But then, there are plenty of stories of threadbare recluses who die leaving enormous and unexpected wealth.
You can, in short, believe what you want to believe. And John Law believes that Newsweek’s mega-scoop falls some way short of sealing the deal it promises.
It would be entirely fitting if bitcoin, an anonymous system that works entirely in the open by hiding nothing, was created by an anonymous genius who lives the same way. But it doesn’t matter. Bitcoin as a once-in-a-lifetime invention stands apart, and it’s not as if there’s any reasonable expectation that its creator can come up with another; nor that, having invented it, the creator will have any particular insight into its subsequent career.
Like the admirable Tim Berners-Lee, who invented the web, the best that can be hoped for is a mild celebrity and a muted amount of influence in subsequent events.
Which means the converse is also true – there is no abdication of responsibility in choosing to exempt oneself, tick the ‘no-publicity’ box and vanish silently away. Privacy seems an awfully small price to ask in exchange for such a valuable gift, although fame rarely works that way.
If Satoshi Nakamoto really is Satoshi Nakamoto and not just Satoshi Nakamoto – or even if he isn’t – then he should be left alone unless he chooses otherwise.
Amid all this confusion, John Law trusts that this at least is clear enough.
That’s torn it
Further to privacy, there is news that a future version of bitcoin will use the Tor network for transactions. This will have the advantage, says the developer, that transactions will be not only encrypted but that their passage across the Internet will be untraceable and untappable – even by the NSA and GCHQ.
There’s a lot of truth in that: Edward Snowden’s copious notes from inside the heart of the NSA (themselves delivered to the Guardian and the New York Times via Tor) revealed that those organisations couldn’t crack Tor, didn’t expect to, and didn’t much like the fact. And Silk Road operated entirely inside the Tor network and proved untraceable – its demise came through poor security in the real world.
Although there have been various semi-successful attacks against elements of Tor, which works by shuffling messages between lots of nodes that only know about their immediate neighbours, it remains a very high quality guarantee of network privacy.
It may not, however, be a good fit for bitcoin. John Law has used Tor from time to time, not to evade detection or commit seditious acts, but by way of experiment. It’s not been a good experience. Despite much work by the Tor Project in building software that disguises the underlying complexity, it can be a frustrating business getting it going and quite slow in operation. You may have 120-Mbps broadband, but expect that to drop by 95%.
It’s also quite nerve-wracking. If you elect to become a node, which means your computer can be used by the network to relay packets, then you run the risk of being the point at which an anonymous, untraceable user’s requests finally decloak and hit the unprotected Internet. Which, if that user is transferring illegal images or other unmentionables, can lead the plod to your door with some awkward questions to answer. But without a lot of nodes, Tor doesn’t work well.
Bitcoin is already robustly secure, most certainly for the vast majority of users who aren’t up to anything interesting or dangerous and just want to use it in their everyday lives.
What it isn’t, yet, is particularly painless to use. It needs more simplicity before it gets more security: the two aspects must be in balance at each stage in bitcoin’s development to get the sort of widespread traction it needs to fulfil its potential.
Adding Tor right now, although John Law completely understands the reasoning, will not help the balance that’s needed right now.
In any case, if you want to use bitcoin via Tor, you can do so – just drop by the Tor Project and download some software. Give it a whirl. It will make your online life more private but – unless you’re a Chinese dissident or like annoying the NSA – not that much better.
As the Dead Kennedys said (ask your grandfather) – “Give Me Convenience or Give Me Death”. Human nature is as much a factor in network privacy as uncrackable encryption. It’s just much harder to engineer.
Space – not quite the final frontier
And further to human nature – it’s not that hard to see why the Winklevii twins attract so much opprobrium. Privileged, handsome and prone to grandiose claims that never quite got tested in court, their rebirth as bitcoin entrepreneurs can be seen either as far-sighted techno-economic acumen or another monstrous ego trip. Feel free to choose.
“I hope it’s one-way”, grumbled one of John Law’s less generous colleagues on hearing that the Winklevii had not only bought two tickets on Richard Branson’s “this year, I promise” Virgin Galactic space tourism plane, but they’d done so with the world’s favourite cyber-cash. Although he hates to disappoint the disaffected, John Law had to point out that since the craft wasn’t going into orbit, the one thing that is guaranteed is that it and all aboard will return to Earth quite swiftly – although in what state remains to be seen.
It’s a bit worrying, however, that the number of things one cannot buy with bitcoin is dwindling rapidly, which could lead to a price crash as the free publicity available to anyone in commerce in exchange for setting up a bitcoin wallet disappears completely. If you can buy cars, cannabis, politicians, plots of land, space trips, wine, women and song – what on earth is left in life?
So far, the only major asset not yet exchanged for the demon digital dosh seems to be companies. John Law ardently recommends this to Cameron and Tyler, once they return safely to land, as it may be their last chance to be really, really annoying in an innovative way. It’s probably best to pick an organisation beloved by the liberal chatterati: the Guardian newspaper, perhaps, or a micro-finance company working in developing nations with an explicit social remit.
The finder’s fee will be modest by Winklevossian standards – a mere handful of million dollars.
Bitcoin, naturally, is entirely acceptable.
John Law is an 18th Century Scottish entrepreneur, financial engineer and gambler. Having reformed the French economy, invented paper currency, state banks, the Mississippi Bubble and other ideas essential to modern economics, he took 300 years off in a small cottage outside Bude. He has returned to write for CoinDesk on the foibles of digital currency.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.