Satoshi's millions: gone for good?

Tuesday 24 March 2015

Satoshi Nakamoto, anonymous creator of bitcoin, is believed to have mined somewhere in the region of 1 million bitcoins in the virtual currency’s early days. Satoshi’s stash accounts for around 7% of all bitcoins in existence: a huge proportion compared to even the wealthiest of bitcoin whales. So, where are they - and is he ever likely to use them?

Read also: Whose money is it anyway?

Little has been heard from Satoshi for years. Back in 2014, Newsweek’s Leah Mcgrath Goodman kindly doxxed a man called Dorian Nakamoto. Based on his name, some vague statements he had made about working for the government and the fact that he was a model rail enthusiast, she concluded he was bitcoin’s shadowy creator (her theory was that the frustration of paying exchange fees when sending money for Hornby to ship parts from the UK might have catalysed his interest in a universal currency for the web). Suffice to say there’s a lawsuit that says otherwise, but the most intriguing detail of that whole sorry saga was that the real Satoshi did apparently come forwards and make a terse statement on his P2P Foundation account, which had been unused in 5 years: ‘I am not Dorian Nakamoto’. Otherwise, Satoshi Nakamoto seems to have stepped back from bitcoin, handing it over to others entirely. Does that mean he’ll ever move or cash out his 1 million BTC - worth a quarter of a billion dollars at the time of writing?

My guess is that won’t, for the sole reason that he doesn’t have control of them any more. It’s possible that Satoshi owns a few bitcoins today - maybe even a few thousand or tens of thousands - but it seems likely that the vast majority of that million is out of circulation forever and will never be recovered.

The evidence?

Think back for a moment to the early days of bitcoin. It’s an intriguing experiment, but at that point, nothing more than a proof of concept. It’s of interest to a tiny number of enthusiasts. Bitcoin has no monetary value: literally none, because no exchanges exist and there is no demand for the currency, because barely anyone knows it exists. For those who do, getting hold of some is easy: you just mine some on a normal computer.

That’s what Satoshi did. In fact, in the early days of bitcoin, he was one of the only people to mine it at all. The ‘network’ was effectively him, and occasionally the odd other person chipping in with a bit of processing power here and there. Every ten minutes, he mined another 50 BTC. 300 per hour, 7,200 per day, day after day after day.

One-time addresses

Where did these coins end up? In the same address, or a small number of addresses? That would be most people’s choice. But if you read the bitcoin white paper, Satoshi draws attention to the fact that bitcoin is not anonymous, only pseudonymous, and that transactions can be linked to each other. The way to avoid that is to use new addresses for every transaction. Assuming he practised what he preached, there’s a good chance he did exactly the same with his early efforts - mining each block of coins into a brand new address (which is the bitcoin-qt's default behaviour) and leaving them there.

50 coins per block. 1 million coins in total. 20,000 addresses.

Did he keep the private keys to every single one of those 20,000? Perhaps. But it seems a little unlikely. Why go to the trouble for something that was worthless? Perhaps he consolidated a quantity of coins in a few larger addresses and kept the keys to those in case anything became of bitcoin - in fact, he once remarked something to the effect that it would be smart to hold onto a few in case they become valuable. But all of them? Did he just mine vast majority of coins into addresses that were simply used to maintain the network while he waited for something to become of it?

Show me the money

Is there any evidence for all this? Thanks to John Ratcliff and his Code Suppository, yes. John has built a blockchain parser, and used it to find data for all bitcoin addresses by age, against the value of each.

Address chart

As you can see, in bitcoin’s early days, few addresses are used. There are just a handful over 1,800 days old (as of January 2015) on the chart. Some have thousands of bitcoins in, some just a few - evidence of very early transactions (it looks like you can see the Finney transaction right there: 10 coins, very early on - the first bitcoin transaction ever made). But take a look at that broad band that sits along the 50 coin line, about two-thirds up between 10 and 100 on the y-axis (remember, the chart uses a log scale). That’s evidence of exactly 50 coins being mined, day after day, for perhaps 3 years before they’re lost in the noise of other transactions. None of them have moved since (otherwise there would be breaks in the line.) For much of that time, not a lot else is happening. Of course, there are probably other people who mined coins in those early days, and didn’t move them afterwards, but most of these will represent Satoshi’s addresses.

If that’s true, then it’s unlikely those coins will ever be moved. Their keys are probably lost for good, thrown away because there were so many and they were worthless at the time. Perhaps Satoshi kept a few thousand or tens of thousands of coins in other addresses, but the majority look as though they’re consigned to the oubliettes of the blockchain.


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