Bitcoin is soaring.
The digital currency is on a powerful upward trajectory, jumping in value by well over 30% in the space of a month. On Monday, the price peaked at $US719 — far, far above the $US200-mark it was languishing at in August 2015. (As of writing, it sits a little below this week’s high, at $US690.)
This bullish period — which comes shortly before the supply of new bitcoin is due to be halved due to a programmed rule — is making a lot of bitcoin-owners very happy, with the value of their holdings increasing by significant double-figures percentage-points. The value of the digital currency hasn’t been this high since February 2014, when it was trending downwards from all-time highs of around $1,100. (All data comes via CoinDesk’s price analysis tool.)
But few people are likely to be profiting more (on paper, at least) from the price spike than Satoshi Nakamoto, the mysterious creator of bitcoin — whoever Satoshi is.
Nakamoto disappeared from the scene years ago, back when the digital currency was still in its infancy, and his or her (or their) identity has never been ascertained. Theories abound, from the relatively credible (Nick Szabo, a veteran developer in the digital currency space) to the totally outlandish (Dorian Satoshi Nakamoto, a Japanese-American collector of model trains).
But consensus about Satoshi’s true identity has never been reached, and there’s no indication Satoshi will ever come forward to solve the mystery.
But if Satoshi were to come forward, what would happen?
For starters, they would have an awful lot of bitcoin to play with. Bitcoin is anonymous, meaning you don’t know who holds which bitcoin — but you can track the path of every bitcoin through the network, via a public ledger called the blockchain.
Satoshi Nakamoto, the first person on the bitcoin network and the first person to “mine” for bitcoin (the process by which new bitcoin are created) is guaranteed to have very substantial holdings. Bitcoin developer Sergio Lerner estimated back in 2013 that Satoshi may have around 1 million bitcoin.
At $US700 per bitcoin, that translates to a fortune worth around $700 million.
What’s also significant is the sheer scale of Satoshi’s holdings relative to the total number of bitcoin. Because of the way the digital currency is coded, there will only ever be a maximum of 21 million bitcoin. Right now, there are 15.6 million bitcoin in circulation.
This means Satoshi holds 6.4% of all bitcoin in currently in circulation. And he will hold 4.8% of all bitcoin created, ever.
To put that latter figure into context: As of June 1, 2016, there is $US1.46 trillion in circulation, according to the US Federal Reserve. It’s the equivalent of one person holding $US70.1 billion in USD cash (rather than tied up in stocks, property, and theoretical wealth).
However, the Satoshi’s mountain of bitcoin might not actually be worth that much. Because if they were to start selling off their holdings, it would drive down the price of bitcoin due of the sheer scale of the holding. It’s like flooding the oil market with a fresh supply of oil: No-one expects it, and it will reduce demand relative to supply — pushing down prices.
We also don’t know if Satoshi still has access to any of their bitcoin fortune. It’s possible to effectively “destroy” bitcoin, by destroying all record of the digital wallets they are in. Without the appropriate cryptographic key, the bitcoins are rendered permanently unusable. If Satoshi decided that they never planned to spend their bitcoin fortune after retiring from public life, it’s not inconceivable that they did this, to ensure they couldn’t be used at a later date.
Satoshi Nakamoto might even be dead, and the cryptographic keys lost with them. One theory is that Hal Finney — the second person to use bitcoin after Satoshi, was in fact Satoshi himself. Finney suffered from ALS, or Motor Neurone Disease, and died in 2014.
The return of Satoshi would also have significant non-financial implications. As the father (or mother) of bitcoin, Satoshi carries significant moral weight. There has been debate between bitcoin users and miners about the future of the digital currency and potential technical changes to help the network scale up to meet demand. If Satoshi came out unequivocally on one side, they would likely have a powerful influence.