Bitcoin Backers Debate Whether False Founding Claims Hurt the Virtual Currency

The about-face of the Australian entrepreneur who claimed to be Satoshi Nakamoto, the mysterious pseudonymous creator of bitcoin, is the latest embarrassing controversy for a virtual currency that has become increasingly popular among serious techies and financiers.

On Thursday, three days after the entrepreneur, Craig Wright, presented persuasive but incomplete evidence to support his claim, he changed his mind and said he would not produce more information, as he had promised, to quiet a chorus of skeptics who questioned him.

"I believed that I could do this. I believed that I could put the years of anonymity and hiding behind me," Wright wrote in a blog post titled "I'm Sorry." "But, as the events of this week unfolded and I prepared to publish the proof of access…I broke. I do not have the courage. I cannot."

The move was a bizarre twist in what many believed was the end of the search for Satoshi, who is credited with authoring a 2008 academic paper that laid the groundwork for bitcoin. News organizations from Newsweek to The New Yorker have investigated the person or team of people who created the virtual currency and come up dry, though Wright had been floated more than once as a probable candidate.

Now many bitcoin enthusiasts are debating why Wright stepped forward and then retracted his claims and whether he had harmed bitcoin's image.

"Will the real Satoshi Nakamoto please stand up?" joked Mark Williams, an executive-in-residence at Boston University's business school and a former bank examiner at the Federal Reserve.

Williams nor anyone else VICE News interviewed knew whether Wright was Satoshi or not. But Williams noted that Wright — a computer scientist, author, and business owner who has run afoul of the Australian tax authorities and was once held in contempt of court — had raised his profile around the world with potentially lucrative consequences. "This individual is extremely well known now," said Williams. "He's developed quite a brand in a short period of time."

But many folks don't welcome the buzz that Wright is generating.

"It's just unfortunate," said Patrick Murck, a fellow at Harvard University's Berkman Center for Internet & Society and a co-founder of the Bitcoin Foundation. "It's just another piece of senseless drama that is a distracting from the really important stuff that's happening."

It's not the first incident that has cast a bad light on bitcoin.

In 2013, authorities shut down Silk Road, an online marketplace that used the dark web and bitcoins to let users trade in legal goods as well as illicit drugs and other contraband. Silk Road's founder, Ross Ulbricht, has since been sentence to life in prison without parole. In 2014, a founding member of the bitcoin Foundation, Charlie Shrem, pled guilty to money laundering. That same year, Tokyo-based bitcoin exchange Mt. Gox collapsed after "losing" $460 million in customers' money, leading to the arrest of its chief executive, Mark Karpeles, a year later on embezzlement charges.

"It continues to hurt the credibility," Williams said, referring to Wright's change of heart. "It remains a fringe technology. Not the blockchain, but the use of the bitcoin as a currency."

The blockchain is the public ledger that records all bitcoin transactions and ensures that everyone has the same record of who possesses how many coins. bitcoin owners must have keys, or codes, to transfer money to and from bitcoin addresses, which are like accounts. Those addresses are encrypted so nobody knows their owners' identity. Additionally, bitcoin owners can receive more bitcoins by "mining," or helping to update the blockchain's public ledger, with their computers.

Many people believe the invention of the blockchain was a stroke of genius, a public but anonymous way to track secure transactions online that has applications in finance and beyond.

Wright provided a few news organizations with codes linked to some of the earliest bitcoin addresses that had mined the blockchain. The evidence was good enough for preeminent bitcoin developer Gavin Andresen to confirm that he believed Wright was Satoshi.

But skeptics questioned whether the codes Wright presented were authentic — they said he cut and pasted them from a publicly available online source — prompting Wright on Tuesday to pledge that he would move bitcoins out of the early blocks to prove without a doubt that he had access to some of the first bitcoin addresses in existence. He's now decided he won't move those bitcoins.

"It's certainly possible I was bamboozled," Andresen told WIRED magazine after Wright published his blog post, though Andresen added that Wright privately showed him other evidence that suggested he was Satoshi.

To bitcoin advocates like David Berger, the chief executive of the Digital Currency Council, a trade association of bitcoin professionals, focusing on the Wright controversy ignored how bitcoin finance and technology was now a legitimate industry. Whether or not Wright is Satoshi doesn't really affect the work of the council's more than 1,500 members, he said.

"I can understand why the search for Satoshi is of interest to journalists and observers of bitcoin," Berger wrote in an e-mail to VICE News. "That said, Satoshi's true identify is irrelevant to the future of the industry."

Follow John Dyer on Twitter: @johnjdyerjr