Photo: Jonathan Waller
On paper, the technology is as elegant as it is promising. Bitcoin's big innovation is that it offers a system of verification that relies on math, not middlemen, to broker trust. That's a big deal, but it's also a little bewildering.
Among other things, Bitcoin undoes the internet's logic of copying and pasting: it proves that transactions have happened through math alone, which can, among other things, obviate the need for central financial institutions. It may not turn out to be a very good currency, but it's already looking like an interesting way to change the way we handle and send money.
Some regulators and banks are now taking it very seriously. A report out today from Goldman Sachs says Bitcoin isn't a very good store of value, but its payment technology could force "existing players to adapt or coopt it." In a December report, Bank of America Merrill Lynch predicted that Bitcoin could “become a major means of payment for e-commerce and may emerge as a serious competitor to traditional money transfer providers.” Other industry stalwarts remain puzzled: “Wow... It’s totally surreal," was how James P. Gorman, the head of Morgan Stanley, put it the other day. And yet, for all of its futuristic mystery, the technology rests on self-evidence and hard logic. It aims to replace messy human trust with rigid mathematical proof.
It's on a similar basis that Bitcoin's supporters (and many others) have balked at the unmasking of Satoshi Nakamoto in Newsweek last week. They question how the magazine could offer a solution to a mystery without offering some kind of hard cryptographic-like evidence. Even if she says she's not sure she would fully believe her own story, journalist Leah McGrath Goodman is very certain that she doxxed the right man. But she won't make all her evidence public—which is a big no-no to an internet that prizes proof, and lots of it, be it in pics, secret documents, or math.
Even on Planet Bitcoin, though, all that proof only goes so far. Recent weeks have shown that Bitcoin is subject to some very weak human links: hackers can steal it, scammers can betray the trust of its users, and, as with other currencies, unscrupulous people can use it to do unlawful things. All the while, the media goes bonkers whenever it locks onto a Bitcoin story. (And perhaps that's because stories about Bitcoin mean traffic and more publicity for your publication.) Case in point: when reporting on the apparent suicide of Autumn Radtke, a Bitcoin entrepreneur who was living in Singapore, the New York Post chose to connect the dots on its own before many circumstances were known about her death: "It appears bitcoin's recent turmoil has claimed its first life," read the lede.
Bitcoin isn't always threatened by sketchy, messy human interference and misinterpretation: actually, its massive growth has relied on it. The Silk Road and the media attention it drew may have lent Bitcoin a great deal of notoriety, but it also gave the currency a visibility and buzz that propelled it to dizzying heights. The human shenanigans in an otherwise cryptological system have made it inevitable that the currency will be subject to another human intervention, which is government regulation—one of the very things that the champions of a decentralized currency have long opposed on principle.
Bitcoin's defenders also know the risk that these bad actors pose to their project. As I wrote amidst the exasperating collapse of Mt. Gox, the currency system built on digital trust is only as powerful as its weak human links. It's a problem with all technologies, especially the invisible ones. The cryptologist Bruce Schneier recently pointed me to a similar human flaw underlying our digital security: we are the weakest link. Good cryptography really works—it's just the people (and their stupid passwords, for example) that don't.
Newsweek’s story and the explosive reaction it inspired told a very interesting story about Bitcoin, just not the story that Newsweek had intended.
At first glance, Newsweek's story was compelling and convincing. Between Dorian Nakamoto's background, source testimonies, and "forensic analysis," a lot seemed to line up. As the day and the internet ran its course—and as a bemused model train collector explained this was all a misunderstanding—the story's logic began to wear thin. Even the "real" Satoshi appeared on a message board to deny it. Of course Satoshi would deny being Satoshi. But would Satoshi have used his (former) real name while trying to remain anonymous? Would he have a grasp of English and cryptography far weaker than his original bitcoin white paper would suggest?
Then again, while his Amazon reviews were written in poor English, his spoken English isn't so bad, as you can see in a city council appearance he made recently and posted on YouTube. Some Bitcoiners speculated on a forum that, of course, the mastermind behind Bitcoin would use dumbfounded ignorance as a ruse. The back and forth of hypotheticals reminded me of another conspiracy theory I heard recently about the ill-fated Bitcoin exchange Mt. Gox, which, while we're at it, I'll repeat here: its bankruptcy was carefully crafted to drop the price of bitcoins in a fire sale to a new buyer who intends to restart the exchange sometime in the future. At least, I think that was it, but the point is, who knows. (What we do know now at least, according to new bankruptcy papers: Mt. Gox's CEO continued running his exchange well after he knew it had been compromised.)
By the end of Thursday, Newsweek’s story and the explosive reaction it inspired told a very interesting story about Bitcoin, just not the story that Newsweek had intended. It was summarized by a string of words Dorian Nakamoto told the AP, as quoted in its follow-up: "Peer-to-peer can be anything. That's just a matter of address. What the hell? It doesn't make sense to me."
Even in its certitude, the article's compelling mosaic of circumstances read like another uncanny bit of code in a chain of details that have propelled Bitcoin into a strange middle-ground between economics, cryptography, and myth. By the time a scrum of reporters had begun a low-speed car chase after Satoshi through the suburbs of LA, the Newsweek story wasn't a story about the secret hacker who invented a futuristic economy, but about another hacking—a kind of mental blitzkrieg on our grasp of reality. This is where it's hard to tell the difference between being cyberpunk and getting cyberpunk'd.
The story of Bitcoin has always also been about the stories surrounding Bitcoin: the head-spinning hype borne out of Silicon Valley startup culture, a common confusion about what Bitcoin actually is, and the kind of belief that it inspires. Some Bitcoiners, focused as they may be on the code and the technology, argue that the mythologizing is just distraction, and they're mostly right. Even the real Satoshi protested the myth-making in an email to Gavin Andresen, who became Bitcoin's lead developer (and who, for the record, has denied to Motherboard that he is himself Satoshi). “I wish you wouldn’t keep talking about me as a mysterious shadowy figure," Satoshi wrote. "The press just turns that into a pirate currency angle. Maybe instead make it about the open source project and give more credit to your dev contributors; it helps motivate them.”
But while some Bitcoiners bill the currency as open-source and transparent and self-evident, its mechanism remains obscure to most people. This is perhaps why, as I've heard Bitcoiners lament, the media doesn't get Bitcoin. The geeky libertarian culture surrounding it and the murky companies that have tainted its reputation don't exactly lend themselves to comprehension. It can be a mind-twister to write about (much less to make a documentary about, which we're working on), and to write about in a way that might lead to productive conversations about the future of money.
Some Bitcoiners might worry that Bitcoin needs more positive publicity. Some might argue that in an age of short attention spans, any publicity is good publicity. For everyone's benefit, though, maybe what Bitcoin needs is simply what a lot of new technology and ideas need: not more hits but more clarity and less mystification.
Photo: Via Newsweek, edit by Digital Trends
The story of Bitcoin is a cipher for a lot of weird, important stories we tell about the future, whose signals are hard to hear amidst all the noise.
In that sense, the story of Bitcoin is a cipher for a lot of weird, important stories we tell about the future, whose signals are hard to hear amidst all the noise. The supposed unmasking of Satoshi lands amidst a stream of other big Bitcoin headlines that only add to the confusion; in just the past few weeks, hacks, arrests, regulators, bankruptcies, and massive losses have shaken the market. All of this has left many puzzling over Bitcoin's future, even as it's emboldened the believers. (In the slipstream of nebulous, fleeting facts, belief can be tested but it can also become very reassuring.)
Some believe in the political and social promise of a decentralized currency; some believe in the power of the technology to revolutionize how we transact digitally, making micropayments and charity easier. (I really like this idea.) Some just believe in the mathematical beauty of decentralized trust. Again, this is perhaps the most oft-cited point of Bitcoin: you don’t have to rely on a central financial institution to broker trust because the math will do it for you.
At least, isn't it pretty to think so? This is Bitcoin's rub: on an internet ruled by memes, traffic, and speed—not to mention surveillance and data mining—it’s not so easy to know whom to trust. The market seems to rely on transparency too, but you need only look at the history of markets, from tulips to Wall Street derivatives, to know that the market is subject to human passion, error, and worse. Trust in the marketplace has as much to do with trustworthiness as it has to do with belief.
Like a lot of promising new technologies, excitement about bitcoin isn't always just about logic and math but about obsession too. It's tends to be an obsession rooted in libertarianism, what economist Charles Stross calls "a fascinating, internally consistent political theory with some good underlying points that, regrettably, makes prescriptions about how to run human society that can only work if we replace real messy human beings with frictionless spherical humanoids of uniform density (because it relies on simplifying assumptions about human behaviour which are unfortunately wrong)." Not surprisingly, for various environmental, ethical, economic and political reasons, Stross declares he "wants Bitcoin to die in a fire."
Bitcoin rests on code, yes, but it’s always also rested on a sort of science fiction storyline too, on an uncanny reality where time runs together, full of rabbit holes and glitches and the kind of randomness that rules the web. Bitcoin was built by a mysterious genius, it has been used to make drug dealing digital, and has made people unimaginably wealthy using computer power (until they've been hacked); it has been used to send donations to Ukrainian activists, to power an assassination market, to buy things at big online stores; soon it will help propel the Winkelvoss twins into orbit. To make things more head-spinning, other cryptocurrencies have gained real world value too; one of the most popular, Dogecoin, was inspired by an ironic Internet meme involving a dog.
It's often been hard to find some kind of ground in Silicon Valley, to comprehend its young, weird money and the valuations that turn 24 year kids into billionaires on the basis of a few thousand lines of code, and the same holds true for bitcoins. The Bitcoin effect reminds me of "David After Dentist"; it's not unusual to find yourself looking around through a narcotic haze, dazed and wondering "is this real life?"
How can we gain a bit of clarity here? Bitcoin's bad guys are a problem, and they’re being flushed out in larger numbers, something that can only be good for the health of bitcoin and the sanity of those struggling to fit it into a global economic worldview. But while Bitcoin may have its Bernard Madoffs and Al Capones, there’s no Steve Jobs of Bitcoin, no Zuckerberg, and that may be a good thing, or not. Satoshi isn't in charge anymore really and might not matter to the essence of Bitcoin. But truly unmasking him might go a long way toward demystifying the currency for many others. Weak proof of Satoshi's identity, however, doesn't necessarily help us understand Bitcoin any better. Amidst the noise it doesn't offer much in the way of signal.
And the noise makes it hard to think cogently about Bitcoin and the future it represents, to know what to think. The same obscurity surrounds a lot of other questions of our time—think of surveillance, for instance, which is mired in a murk not only of ethics and law but of secrecy itself. Secrecy isn't categorically bad—it can be used by governments to conceal sensitive information just as it can be used by us to protect our identities. But secrecy can also cover up bad things and breed a risky kind of confusion. Bitcoin has secrets too, and the more we can diminish the dangers of that secrecy the better. For the NSA as for Bitcoin, the problem might be helped by government oversight and the scrutiny of the media.
Well, sometimes. The confusion surrounding the Newsweek article echoes the confusion around Bitcoin. Reporting on already shaky ground, "the responsible thing to do, from Newsweek’s perspective, would have been to present a thesis, rather than a fact," Felix Salmon wrote.
It could have said “here’s a theory”, and then let the world decide. Many people would have believed the theory; others wouldn’t. And lots of us would probably have changed our minds a few times as we weighed the evidence and as Dorian’s own words came out.
But Newsweek didn’t want a theory, it wanted a scoop. And so, faced with what was ultimately only circumstantial evidence, it went ahead and claimed that it had uncovered Satoshi — that, basically, it was 100% certain.
Salmon notes that the probability that Dorian is Satoshi and the probability that Dorian is not Satoshi seem to be equally true. This is "the Satoshi paradox," he says, but it stands for a larger paradox, the tensions that pull Bitcoin between fantasy and reality, depending on where you're standing. For journalists, it's nice to have a scoop and to reap the pageviews that follow. For readers, even those who might scoff and say Satoshi doesn't really matter anymore, it's nice to think we know his identity, and not just because it reveals something, finally, tangible.
Knowing who Satoshi is and what he looks like and where he's come from satisfies some of the same human narrative impulses that have powered Bitcoin all along. To think that Satoshi could be a mild-mannered 60-something guy with libertarian leanings, a love of model trains, millions in cash hidden away, a desire to never be found, and the courage to hide in plain sight... The story I suppose fits into the dream of a digital future, unbound by the conventions we're used to. In the heady future, it doesn't matter who you are or where you came from: anyone building software could create the next big thing or simply get rich, literally, overnight, on code. Bitcoin is just one sign of that future, a time when mining fantasies for some bit of reality is a problem that keeps getting harder, and a problem that no math can solve.