According to modern mythmaking, a mysterious and reclusive programmer invented Bitcoin in 2008 and within five years the currency had transformed itself from a valueless experiment into a half-billion dollar juggernaut—the most impressive economic explosion in the history of humanity. It was shocking, inexplicable, and entirely without precedent. People weren’t sure if they should be worried or delighted. Bitcoin seemed to be a huge technological leap forward, and its anonymous creator, who called himself/herself Satoshi Nakamoto, slotted neatly into our cultural stereotype of the loner genius.
It’s a nice story, but that’s not really how it happened. It’s worth looking at an early (and far more valid) example to see how revolutionary technological advancements actually occur. In 1877 Thomas Edison invented something so outlandish and “obviously” absurd that before the day he presented it to the shocked world nobody had seriously investigated whether or not it was possible—they all assumed it wasn’t. From the most advanced physics department to the lowliest shepherd’s hut, nobody (and I mean nobody) thought it possible to record sound and play it back with reasonably high fidelity. Yet Edison rather trivially, using supplies purchased at a local hardware store, created the first instance of recorded sound, and stunned those hearing it for the first time to a degree almost metaphysical. This, more than anything else, stuck in the public’s consciousness and made Thomas Edison a household name—he was the man who invented the phonograph and kickstarted a new niche market: recorded music.
This is a (possibly the) canonical example of an unforeseen technological advance with a clear application and worldwide impact. Within the year phonographs were in the houses of the wealthy playing symphony recordings to rapt families. Assumptions and certainties had been overturned by the relentless drive of progress.
This is a comic book story made real, the tale of a lone genius tinkering in the basement and coming up with something both bizarre and revolutionary. It’s an inspiring anecdote found in pedagogical texts scattered everywhere across America.
But it’s not a good parallel to Bitcoin’s development.
Way back in the ’80s and early ’90s, a group of computer geeks and encryption nerds banded together in an informal online community known as Cypherpunks, a really lame pun based on author William Gibson’s “Cyberpunk” sci-fi novels. Their goal was simple, and laid out in what became known as The Cypherpunk Manifesto: “Privacy is necessary for an open society in the electronic age … Privacy is the power to selectively reveal oneself to the world … Privacy in an open society requires anonymous transaction systems … Privacy in an open society also requires cryptography. We are defending our privacy with cryptography, with anonymous mail forwarding systems, with digital signatures, and with electronic money.”
The Cypherpunks had an aggressively antagonistic view of government and its (ever-expanding) desire to meddle with, control, and spy upon its citizenry. They wanted to fight back, and Cypherpunk legend John Gilmore put it this way: “I want a guarantee—with physics and mathematics, not with laws—that we can give ourselves things like real privacy of personal communications. Encryption strong enough that even the NSA can’t break it.”
A full 15 years before Bitcoin existed, the Cypherpunks were talking about and hoping to create an anonymous transaction system using cryptography and digital signatures, which would function, in part, as “electronic money.” This is a perfectly valid and no-nonsense description of the current Bitcoin network.
They didn’t just talk about such systems; they were active in theorizing how such currencies might work and busy creating prototypes. The problem was computing power: in the early ’90s, the Internet was neither widespread nor robust, and computers were relatively slow and expensive. Technology had not yet caught up to the Cypherpunks’ dream of an encrypted, anonymous, online currency. But in 1996 an interesting alternative appeared, E-Gold, which was described by its creator, Douglas Jackson, as “a Libertarian dream… [spurring an] epochal change in human destiny… probably the greatest benefit to humanity that’s ever been thought of.”
E-Gold had several significant disadvantages: It was centrally controlled (by a corporation); it was not truly anonymous (the corporation could track the flow of the currency in granular detail); and it was certainly not free. But it was a reasonable alternative to the status quo, which for many people was a hated fiat currency, the U.S. dollar. E-Gold had a short-lived burst of enthusiastic growth, embraced warily by Cypherpunks and more openly by Libertarians of all stripes, before it was shut down—by the government—in 2007 for lack of FinCEN (Financial Crimes Enforcement Network) regulatory compliance. That seemed to signal the end for alternative currencies, but for those shocked by what they viewed as the government’s heavy-handed regulatory destruction of an upstart alternative currency, it acted as a spur to the flank.
As computing power grew cheaper, and the Internet expanded into a majority of households, ongoing experimentation was constant, resulting in various new digital currencies popping up every year or two—b-money (1998), bit gold (1999), and Karma (2003)—with plenty more scattered between. Far from being unexpected, a cryptocurrency like Bitcoin was the explicit focus of research and development, and when the technological pieces were finally available somebody calling himself Satoshi placed them into the already-mature conceptual framework. Cryptocurrency fans and Cypherpunks and anyone interested in alternative currencies for political or theoretical reasons all viewed Bitcoin for what it was—the latest of a long string of experiments and (mostly) failures, and the fulfillment of a longstanding dream: a mathematically secure and anonymous online currency.
For those who were paying attention, Bitcoin wasn’t a lightning bolt out of the blue—which was everyone’s reaction to Edison’s phonograph. A currency like Bitcoin had been envisioned 20 years previous, and had evolved from early prototypes in order to fill an obvious need. While it is true that Satoshi was both a brilliant programmer and theoretician, and his concept of a Block Chain was central to the new currency’s stability, it wasn’t the first implementation of such an idea, only the most efficient and successful one.
In many ways Bitcoin’s “invention” is much like the “invention” of the original iPhone, which required the latest technology (of the time) in order to be viable. An iPhone didn’t do anything we hadn’t seen from other devices: email, messaging, browsing, video playback, application stores … and of course phone calls. What the iPhone did was put it together in a fast, simple, and sturdy package, expertly designed and branded. It was a “new thing” that consisted of packaging together a bunch of old things. If the iPhone had not been released in 2007, something very similar would have been released in 2008, or 2009, or 2010 at the very latest, if not from Apple than another company. It probably wouldn’t have been so slick, but it would have had similar capabilities.
In an analogous way, the world was primed for Bitcoin. It might have taken a few more years before a currency popped up (Satoshi might have been a bit ahead of the curve), but something would have been created to fill the vacuum. This isn’t to say just anyone could have “invented” the iPhone or Bitcoin; but it’s also not the same as presenting something completely unexpected, like the phonograph, which forces the entire world to stop moving for a second and listen.
Bitcoin was the longed-for advance; Bitcoin presented us with the robust and elegant Block Chain; Bitcoin opened the door to many other cryptocurrencies now in development. Bitcoin fulfilled the goals and desires of the Cypherpunks, and represents a culmination of decades of research, and certainly deserves praise and admiration. Satoshi Nakamoto, who pushed Bitcoin past the finish line, has been financially rewarded beyond anyone’s wildest dreams (Satoshi retains a huge trove of bitcoins worth tens of millions of dollars). But Satoshi Nakamoto is without doubt the least interesting part of Bitcoin’s ongoing story. Frankly, I think everyone would be better off in the long run not worrying about Satoshi’s identity, and instead concentrate on what Bitcoin birthed: exuberant innovation in a field long considered dusty and dead—secure and anonymous online Cryptocurrencies.
Eric Geissinger is the author of Virtual Billions: The Genius, the Drug Lord, and the Ivy League Twins behind the Rise of Bitcoin (Prometheus Books). He has worked as a technical writer for Silicon Valley software companies for 17 years, and his short fiction and poetry have appeared in several literary journals.