The conspiracy resurfaces

In a viral post, journalist Alexander Muse recently wrote that the NSA found out the true identity of Bitcoin’s inventor, “Satoshi Nakamoto,” and that his DHS source hinted “Satoshi” was multiple people, maybe working for a foreign government (which inspired the NSA to get involved). There’s no proof and even few straightforward claims in the post, but it raises the question: is Bitcoin a government project, and how concerned should we be about that?

I first remember seeing this theory from YC’s Paul Graham in 2013. It’s a good thread, but I’ll quote just his theoretical goals for this government:

1. To finance their own black operations.

2. Because they thought digital currencies were inevitable, and they preferred bitcoin to some potentially more malevolent form. (Could bitcoin have been worse from a government’s point of view?)

3. A friend suggested this: because they felt their currency would never become the standard reserve currency, and they felt it was better that no one’s be if theirs couldn’t be.

4. A variant of the above: the US did it because it seemed inevitable that the dollar would eventually lose its place as the standard reserve currency, and better to have it replaced by bitcoin that the yuan.

Does it matter?

Detractors love the government theory for two reasons: it makes Bitcoin users look dumb (for trusting a privacy tool built by The Man) and it makes trading evil (if it might be hiding billions for a corrupt state).

Some people like this idea because it explains the secrecy. Keep in mind: in the beginning no one could know that a Bitcoin was going to be worth anything! Satoshi was smart, and even after his email and forum accounts were hacked, there was no trace back to the real world. Other anonymous programmers (TrueCrypt) and marketers (Silk Road) have been found out by US authorities and arrested. Though I’m not sure what crime Satoshi has committed? He might be identified and allowed to walk free.

I think that it does matter, because it helps us understand if Bitcoin was created as a toy research project, or with a specific purpose, especially if you wonder if the billions of dollars worth of Bitcoin held by the inventor might be cashed in someday. If the inventor is still alive and has those keys… he is extremely patient.
Also, some cryptocurrency experts have raised money for new projects and made claims which become much more credible and profitable if they were known to be Satoshi’s Bitcoin 2.0 project.

Narrowing the suspect list

I doubt that an American or EU government was involved with developing Bitcoin, at least not closely, because it is such an odd fit. Why would this secret research project exist, and how would it be quietly published? Aren’t there easier ways for us to do secret stuff (like paying spies)?
Also Satoshi’s first blockchain message contains a financial crisis headline The Times 03/Jan/2009 Chancellor on brink of second bailout for banks. In context, it sounds like a loss of confidence in American and European banks.

Since 2013, China, Russia, and North Korea have all become increasingly linked to Bitcoin:

  • Chinese companies hold the majority of Bitcoin mining power. New power plants, built in rural areas to support future demand, can provide cheap electricity and allow miners to have significant profits.
  • Putin recently met the inventor of Ethereum, and now national banks have started to experiment with blockchain tech. There was a Russian zirconium factory which raised millions via an “ICO” rather than typical venture funding. So Bitcoin/blockchain is no longer viewed as too private or threatening to the state. With recent sanctions and freezing of Russians’ offshore accounts, it’s possible that oligarchs are buying Bitcoin or considering Bitcoin capital to separate from banks.
  • North Korea is rumored to be linked to the ‘WannaCry’ ransomware attacks, which request a Bitcoin ransom, and other hacks on banking systems. Their leadership would also be interested in a method to store and transfer large amounts of money without worrying about accounts getting tracked and frozen.
  • Iran also has done some hacking of Saudi companies, and difficulties interacting with US sanctions / US dollar / banking system.

It’s hard to think of another country which has a highly-skilled, secretive technical team and no reservations about urging on the flames of a financial crisis in the US / EU system.

Edit: later I was thinking the use of a Japanese name (Satoshi Nakamoto) makes it unlikely as a Korean or Chinese-sanctioned project, unless it is a peculiar misdirection or hired hacker.

Did one of these countries take an early lead or interest in Bitcoin, like they had decided in advance to accept it? I don’t think that we’ve seen evidence of this. Unfortunately that means the most-likely government sponsor would be North Korea. They can’t get money, they can’t move money, but maybe they have found a new money, with no concern for leaks or blockchain apps inside of their country.

Does the NSA know who Satoshi is?

I’ve thought about this before, and I would bet that they have enough internet traffic analysis, email metadata, server-compromising hacks, and other tools to solve this. If Bitcoin is a government project, that could be revealed during conventional intelligence, too. The security necessary to avoid being identified by a targeted NSA project would be astounding, especially considering that no one knew that Bitcoin would be valuable from the beginning.

The government has no known reason to name or arrest Satoshi, so it’s possible that they have identified the source, questioned people, and then moved on. The intelligence community can do some noisy and salacious things without being reported on. Keep in mind, the Trump ‘dossier’ circulated in the government and press for weeks before Buzzfeed spelled out the claims or posted them publicly.

Here’s why I think that Alexander Muse or his source made up their linguistic analysis, though:

  • People have tried this analysis before, and naturally came up with a list of cryptographers with public cryptography papers. A super-secret government hacker could be clever or secretive enough (encrypted email, etc) not to be caught in the NSA’s full-text email analysis.
  • Andreas, one of the programmers who first took over from Satoshi, has said that the initial code was imperfect and buggy, and believes that the code was written with only one person’s intricacies.
  • How would linguistic analysis uncover a team with multiple people? Why has no one seen evidence of multiple writers before? Unless Satoshi (the writer) was one person who has other English emails and his LinkedIn profile says he works for SecretGovAgency, the conclusive evidence would come from tools beyond linguistic analysis.

Was Satoshi four people?

The comments on the Muse and Graham posts are amazing… every Bitcoin-promoter is quick to promote their own theories (perhaps cheekily) and dismiss the government claim.

My bet would be on Nick Szabo or Dave Kleiman.