The world’s first trillionaire by USD valuation could quite possibly be the creator of bitcoin, Satoshi Nakamoto. If bitcoin continues to climb the ladder of exponential price appreciation, than once Nakamoto decides to move their money and make transactions with it, there will be a seismic shift in the perceived supply of money.

In the numerous attempts to lift the veil of bitcoin’s mysterious inventor, people have gotten hurt. Homes have been raided. Journalists have been ostracized. Following these chaotic rumours however, seems to be a cultish mantra echoing from the chambers of bitcoin’s disillusioned – that “the identity of Satoshi Nakamoto does not matter.”

This is not only terribly untrue, but dangerous. Naive to the nature of the emerging bitcoin digital economy, the disillusioned will claim that the identity of Satoshi Nakamoto does not matter because the software is open source. Anyone can read the source code of bitcoin. Anyone can identify vulnerability in the protocol’s architecture. Anyone can fork it and create their own implementation. This is well known of bitcoin, and it is not the reason its creator’s identity still holds crucial importance.

The 21st Million

The Nakamoto wallets comprise roughly 5.5% of the total bitcoin which will ever be in circulation and about 9.3% which are available today. If there is one party controlling five percent of all currency that will ever be created in an economy, this poses a huge risk to the integrity of decentralization. One in ten bitcoin today lies dormant, but alive. Truly, the mammoth wallets owned by Satoshi Nakamoto are one of the biggest threats to price stability and the principle of decentralization of bitcoin.

In a world where we rage about the centralization of our current economic circumstances, it is plain to see that bitcoin may not be as different as it initially seems.

Satoshi Nakamoto Wallets

Almost all are owned by a single entity, and that entity began mining right from block 1, and with the same performance as the genesis block. It can be identified by constant slope segments that occasionally restart. Also this entity is the only entity that has shown complete trust in Bitcoin, since it hasn’t spent any coins (as last as the eye can see). I estimate at eyesight that Satoshi fortune is around 1M Bitcoin. – Sergio Demian Lerner

World’s First Trillionaire

At this point, not much can be done about the large volume of bitcoin that lie hidden in Nakamoto’s wallets. We don’t know which addresses they belong to and we only have estimates of the amount they hold. What we do know is that Nakamoto has multiple wallets rather than one, and that they have since discontinued their mining activities.

If bitcoin should continue to challenge the status quo, it is indeed worthwhile to ask the types of questions which would uncover the identity of a party which controls the largest stake in an emerging economy. Satoshi has no obligation to reveal their identity, yet if bitcoin should become worth 10 or 100 times its current value, questions about their identity may haunt those who are deeply invested in this emerging digital economy, both in terms of financial and ideological investment.

Will the Nakamoto funds ever move? Or have they already been purposefully destroyed? If Nakamoto were to take such a route, it would cause a bullish run on the rest of the bitcoin in circulation because of increased scarcity of money supply.

Lost coins only make everyone else’s coins worth slightly more.  Think of it as a donation to everyone. – Satoshi Nakamoto

When it comes down to it, the effect bitcoin has on the world may correlate sharply with the causes Nakamoto dedicates their purchasing power to, if they do eventually move their money. Money has a profound way of influencing people. Business leaders recognize the opportunity to shake up the world that comes with owning massive capital. Nakamoto can either use that ability to power the common good, or for less noble reasons. The causes this money is dedicated to will forever forge the legacy of the great anonymous wizard Satoshi Nakamoto. Regardless, don’t let anyone tell you the identity of Satoshi Nakamoto does not matter.

Author

Travis Patron

Travis Patron is the author of The Bitcoin Revolution: An Internet of Money, a seminal publication in the digital money space which outlines the basics of the bitcoin payment system. As a public speaking authority, he regularly speaks to audiences on the economics & industry trends of bitcoin.

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  • Reply

    Joe

    10 12 2015

    So, you’re predicting a price of $500,000 to $1 million per Bitcoin? (If the creator owns 1 million Bitcoin, the price would have to reach 1 million dollars “per Bitcoin” for him to be a trillionaire.) …just sayin.

    • Reply

      Travis Patron

      11 12 2015

      If bitcoin can reach its fullest potential, then reaching $1M per bitcoin may be possible. It has a long way to go, but it is not entirely out of the question.

      Such a thing would take decades, but it is indeed possible.

  • Reply

    Jon Underwood

    02 02 2016

    Does it ever occur to anyone how immoral this is? Ideally a currency is only a unit of measure, a yardstick which captures our individual productivity and contribution to others. Now, we have currency as a commodity on its own, and fortunes can rise and fall via an electronic instrument that is essentially not stored productivity, and is un-earned. As you point out, power accrues as well.

    If we really want a revolution we need a currency that capitalizes each person’s individual capacities, so they can unfold their skills and contribute to the whole, spreading capital globally where it is needed, and does not allow pooling under the control of one person, because this results in an inordinate ability to influence the whole. It is essentially enslaving everyone else, as the owner of large sums is a free rider. A perfect coin would allow some level of savings, but capital bases that were not constantly in motion and in use would decay, just like a batch of fresh apples, or firewood, or any natural capital. If we could keep capital moving, and forbid it from congealing and being stored in real estate, we could solve most of the world’s problems literally overnight.

    • Reply

      Travis Patron

      03 02 2016

      Interesting notes Jon. Thank you for the comment.

      I will not say Satoshi’s large fortune is inherently negative. I will say however, that the size of the stash makes the bitcoin economy not as dissimilar as one might initially think when comparing it to today’s national economies. Labeling Satoshi’s identity as irrelevant to me is dangerous if we are to uphold the ideal of decentralization. For all we know however, Satoshi could have already destroyed their bitcoin holdings.

      As for incentivizing money to be in motion in order to stimulate economic growth, this is an area of much economic debate. Our current national economies usually target a 2 – 3% inflation rate because that has historically be the rate which keeps unemployment very low while simultaneously stimulating spending (according to Keynes).

      Mises will argue that savings is the cornerstone of economic prosperity in any economy:

      “In talking about inflation, we should not forget that over and above the consequences of destroying a country’s monetary standard, there is the danger that depriving the masses of their savings will make them desperate.”

      I tend to believe that the inflation schedule (read disinflation) of bitcoin’s supply is nothing short of genius. I sincerely hope this does not change with a software fork, nor is the hard cap of 21M lifted. What will surely change however, is the velocity which money changes hands as we move from electronic currency to a fully digitized monetary unit. The seldom discussed factor of money velocity and the advantage cryptocurrency holds in this regard will prove to be a catalyst for growth as the bitcoin network matures.

  • Reply

    Jon Underwood

    04 02 2016

    Travis,

    Thank you for your thoughtful comments.

    One of the main drivers of 2% – 3% inflation is the idea that borrowers are more likely to repay if the asset has gone up in value, and very likely to default if their asset is worth less nominally than what they bought it for. That seems reasonable to me. Also, you hear people say that theoretically if currency supply grows at the same rate the economy is growing, 2%-3%, then inflation is theoretically zero. However, this again leaves out the impact of velocity so does not hold in real world dynamics. What they should say is ‘effective supply, or M*V. The clearest example of this is that QE did not cause inflation, as gold bugs have been claiming for 5+ years. They simply can’t understand how printing massive amounts of money did not cause inflation, and keep saying wait, it’s coming, all while the global economic data clearly shows deflation. The role of collapsing Velocity explains it perfectly, M*V = P*Q. Once people fully grasp that, they realize how much worse things would have been if they had simply allowed the deflationary forces to run their course. Reasonable people who say we should have let the banks fail, or should not have printed so much money, simply do not understand money mechanics nor how highly leveraged every facet of the global economy is, and how interdependent absolutely everything is. Nobody should be willing to play financial Jinga, with the world’s financial system hanging in the balance.

    Traditional IS-LM says savings equals investment, but not all investments have the same effect on the economy. If savings has to compete for return, then the capital markets are efficient and should fund growth. However, some uses are problematic and distort the market. People try to be responsible stewards and ‘store’ capital, save it. This is not an problem in and of itself, as they often give it to stewards to manage it, who put it to productive use. However, when they store it by putting it into real estate, the capital becomes unproductive, and it distorts prices, making both rent and purchase prices too expensive relative to people’s ability to earn a living, meaning a higher percentage of their income goes to cover housing. This leaves less free time for contemplation, less money and time for the arts or cultural activities, personal growth, less gift money for donations, and the quality of productive people’s lives is negatively impacted. It’s a hidden transfer of wealth, gained through capital advantage, and is unhealthy socially. In fact, it’s not unreasonable to say this is one of the single biggest problems in the global economy today, excess capital flowing into real estate. I have wanted to ask Piketty and his team if they could separate wealth accumulation derived from real economic investment vs. gains derived through real estate investment. That would be highly fascinating, and could restore faith in capitalism if we could limit non-owner occupied real estate investment wealth accrual. Inflation is good for asset owners, always bad for renters. I understand and agree with your point that cost of living increases/inflation are a tax on fixed-income savers. It’s clear the current global currency system creates booms and busts, and nobody wants artificial inflation or deflation, but that is exactly what you have in the real estate sector every time you drop interest rates so low. We are clearly seeing it again on the west coast of the U.S. , where housing prices have surpassed their previous highs, and the average rent in SF is $4,200/mo!

    As it pertains to bitcoin, limited supply runs the risk of not meeting the actual need for currency, failing to properly capitalize people or businesses, and thus leaving potential real productivity gains on the table, the same gains that raise everyone’s standard of living. Limited supply always empowers the haves vs. the have-nots, and the entire reason we left the Gold Standard was physical constraints are unmanageable and lead to limited growth, and disproportionate control and power.

    I am a firm believer that currencies are evolving, and bitcoin has helped us take the next major step. It has a niche, but is not an end-all, be all. Originally we had gold, and limited supply garnered trust, but we then found gold notes easier to use, so we moved to specie backed notes. But why should the value of a currency be defined by a commodity? Isn’t a more evolved perception that the real value of any currency is the personal productivity of the person who is presenting it, that we all serve each other each day by doing things that meet the needs of others, while they meet our needs? The gas station attendant does not pump gas because he needs it, but because you need it. You give some of your productivity to reciprocate, which meets his needs; money stores that value temporarily so it’s portable, but obscures what actually happens, which is two people meeting each other’s needs out of their own productivity. The value of the currency is defined in the moment of exchange, no matter the supply or velocity, and that each party exchanges when they feel what the other has is more valuable than what they themselves have, a win-win. If not, they don’t exchange. Digital or Crypto currencies are bringing us closer to this reality in some ways; Instead of going backwards from fiat to gold or specie, which is a complete illusion and disaster that ignores history, we are moving forward through hidden trust in fiat to overt trust in a set of cryptographically sealed digits that in and of themselves have no inherent value. This transparency is real progress! The fact that you trust it more because the supply is fixed is an illusion, but self-fulfilling. The same global forces of acceleration and deceleration will impact it, but will have nowhere to go except into price instability. Traditional currencies ideally expand and contract supply to meet the product (multiplication) of supply times velocity, which leads to a more constant price. This is theoretically what the FED tries to do. By fixing supply, you guarantee these forces surface in the only way they can, price increases and decreases, and this will not fundamentally change with increased trading volume. If you think a saver is troubled by 5% inflation now, what until the value of their bitcoin drops 10%…before lunch! No merchant wants to monetize all of their productivity, only to assume the volatility of bitcoin. No saver, no consumer; it’s not purchase money, it’s not savings money. Who then wants to stomach this volatility? Only the speculator, who hopes for future windfalls out of thin air…or rather, out of the limited supply. That is gain transferred from one person to another, albeit freely, but is not productivity realized, is not true economic gains that improve the standard of living. And therein lies the trouble with bitcoin…it is more efficient and less costly to hold and transfer, more secure, but the value is by design inherently unstable. There is a niche for it as a digital asset, always will be, but there will also be more and more digital assets coming online and available that more perfectly meet people’s needs: consumers, merchants, savers. As that happens, and digital assets meet more specific needs, I think Bitcoin will fully serve it’s role but will not be a panacea for any current currency ills. It may act like digital gold, appreciating in times of fear, and when the working class in poor countries start to have savings and want to store assets in the cloud, but my guess is they will store it in their own digitized native currency, the same one they buy bread with. You can fix the supply, but you end up with inherent price instability. You can fix the price, but you end up with inherent supply fluctuations. You cannot do both, limited supply with a stable price. You can argue one is better than the other, but there are arguments for both, and groups that benefit or lose under each design.

    I think this will become clearer when a new global digital currency is launched soon that narrowly fixes value/price by constantly expanding and contracting supply to perfectly meet demand, a type of public utility. This is what many international businesses and investors want, a digital savings instrument in the cloud that is more stable than any single country’ s currency. No upside, no transfer of wealth from other buyers, just stability, where they can leave and store value, insulate it somewhat from global instability, and pull it down in any country they want, whenever they want to. That to me is chapter 2 in digital currency evolution, while blockchain is already on chapter 3 with smart contracts.

    • Reply

      Travis Patron

      08 02 2016

      Thank you for the comment Jon.

      Bitcoin certainly does not claim price stability to be its main feature. I do not think bitcoin will experience significant price stability in the short run. However, I do believe as network effects go, more users exchanging bitcoin as a valid form of money will advance the stabilization effect we are already seeing.

      But does the limited supply actually cause price instability?

      It’s my belief that one of the less discussed parameters of bitcoin is the difficulty index of creating new monetary units, which, serves as a sort of bitcoin consumption index. Such an industrial consumption index, as detailed by John Nash in his many essays, could be “appropriately readjusted depending on how patterns of international trade would actually evolve”. The ability for the bitcoin network to re-target the difficulty of finding the next block in the chain of transactions gives us this consumption index. This very function of the bitcoin network is what administers expansion and contraction of supply to meet demand, which, as you say, leads to a more constant price.

      Furthering the discussion on monetary supply to meet demand, it seems such a public utility is already before us, yet still in a very raw, immature state. As long as the USD is kingpin in terms of liquidity, and we are denominating our goods in it, bitcoin will be relatively volatile. It is not until goods, services, and the mindset of the consumer are thinking bitcoin-first will it be recognized as a vehicle to “pull it down” into national currency jurisdictions.

      Could it be that the mindset of such consumers will be internet of things connected machines rather than biological humans?

      The day where bitcoin is a “bank account in the cloud” is most definitely approaching. It will come not necessarily because of fixed supply or its digitized nature, but because bitcoin is governed by a force magnitudes more intelligent than might or men – a time-bound regulatory algorithm.

  • Reply

    Dushyant Goel

    28 06 2016

    The author argues that Mr. Nakamoto holds 5.5% of the bitcoins that there ever will be. Hence one party controlling five percent of all currency that will ever be created in an economy, poses a huge risk to the integrity of decentralization, if it were to be maliciously used.
    Hence, it is important to know the identity of Mr. Nakamoto.

    But I have the following disagreement :
    We know that Mr. Nakamoto created bitcoin because of his strong belief in decentralisation. So even if we don’t know anything about him we sure, we can at least say that he is strongly in favour of decentralisation.
    Therefore it is very unlikely that he would sabotage his own work and force any decision that would undermine bitcoin or decentralisation.

    Even if god forbid he is lured by greed to take any selfish step, it would not help even if we know his identity.

    So his identity does not really matter as long as we know what his motives are, and all the evidence point to that he/she is motivated by creating an alternate decentralized currency

    In short the reason to not care about identity is not just “bitcoin is opensource” but also that “we know one thing about this person and that is he wants to create a decentralised currency”

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