Blog > Bitcoin & Blockchain Tech

Two steps forward, one step back

By Craig Wright | 06 Apr 2019 | Alternative Coins & Systems

All progress comes through a path of resistance. To understand this, we need to understand that a status quo will push back when you start to understand something. With all technology, there is a rush forward and we take two steps, and then as those who profit from the past start to see their world eroded, they push back and create a revolution. Whether violent or nonviolent, all change moves through a series of revolts and revolutions.

A revolution has those who seek change take action against an established order.

Such are always aggressive in nature, but the aggression can be focused away from violence, as it has been in Bitcoin. It leads to a movement, groups of people that work together to advance a shared political, social, or ideological concept or goal.

The revolt in step 1 gives way to a revolution in step two.

The status quo and established order see it as in the revolt making its way to revolution, they act to protect their interests. As they push back, the change is forced onto a back foot; a step is taken backwards. Here, the status quo and those that seek a new order merge and mingle. And we take a step forward in a shared evolution.

I’m not proud of everything I have done. But I would do it again. I’m not always proud of the aggression and brashness and lack of polish I had in my past, but without them I would not be the man I am now. A part of me sought to resist change. The apotheosis into what I must become is not easy. And some of it involves owning my past and those things I’ve done to get to where I am now.

Few people understand what was required in the beginning of Bitcoin. When Bitcoin was launched in January 2009, it required a series of machines to send and transmit information without fail. This is far more difficult than you can imagine.

In my ranch that I used to own in Bagnoo, Australia, I converted part of my shed and home to run computers. In my house outside of Sydney, I took my garage and ran racks of machines.

I had racks of computers in my converted shed. With the mezzanine I had plenty of space. Earlier, I spent money to have fibre laid and opened up a rural town to fast Internet. Few people seem to understand that the first version of Bitcoin following the genesis block fell over. The genesis block is dated to 3rd January, 2009. The first mined block occurred on 9th January.

They are both days where I travelled to my farm. I had to travel 3 1/2 hours to get there.

I ran 67 machines in a cluster. They were Windows servers. I managed things and coded on Windows XP, and loaded software on machines running on Windows Server 2003. The first version of Bitcoin was launched and started to run, but stopped. There were program errors in the Bitcoin code, but they weren’t the biggest problem. I needed to reconfigure the systems.

I’d started with a major miscalculation.

Microsoft patch Tuesday.

The original machines were a group of workstations and not a domain. When I initially installed them, I used a series of Windows Server 2003 licences. And then MS09–001.

It wasn’t actually the first problem, but it was the biggest. All of the machines weren’t running at block one. There were what I hoped to be enough. Bitcoin didn’t run on Linux at the time. I had Centos, Redhat, and Solaris machines on my network to handle DNS and sendmail, but Bitcoin ran on Windows.

The week between genesis and block one was busy. I moved away from Windows Server 2003, and set up a Windows 2008 domain. I set up a forest hierarchy with machines just outside of Sydney, in Bagnoo, and live links to a Melbourne server. I had connections to a Methodist Church just outside of California where I donated some time running their IT. I figured that since I paid for the systems sold, it wouldn’t matter if I ran Bitcoin on the server. I did the same in Tumbi Umbi in the church there. Both of them had a number of machines that I’d set up. I paid for the Internet connections personally, and donated the servers and the licenses, so I figured using them to run Bitcoin nodes wasn’t outside the scope of what I could do as it wasn’t costing them anyway.

The first reboot was an eye opener. I had configured all of the machines with the same time zones, even those in different countries. They all shut down to patch at the same time. The entire Bitcoin network stopped following the genesis block, and needed to be started again. When they came up, network services and connections were flaky, and the network forked and split, and it was a big mess to say the least. The funny thing is, the code had fewer flaws running on Windows Server than it did on XP.

Those machines are gone now. I replaced them every 12 to 18 months. Servers were donated to a number of churches and ran email means for such organisations. A couple ran web servers. During the year I started installing machines that ran Windows XP and nodes. There weren’t a lot of machines running Bitcoin in 2009. To my knowledge, Dave ran one machine, that’s full-time, and he ran three or four on or off. Hal Finney ran a machine. Bear ran one or two.

Around 10 machines, maybe 12, mined Bitcoin between 2009 and 2011. They included churches and charitable organisations that I did work for freely. Any Bitcoin they had remained with them, and if they have them, they have them, and if not, it’s lost until someone later in history recovers them when the keys become exploitable.

I had between 60 and 100 machines running at the time, of which an average of 55 or 56 would be mine personally. In the beginning, 75 were mine personally.

There was a lot of supporting infrastructure. The Cisco routers, the switches, the firewalls. I used a combination of IP tables and checkpoint, and had snort running as my IDS.

You might guess, it took up a bit of my time.

The speculation around which bitcoin belonged to whom always made me laugh. Some of the most clueless pseudoscience ever spouted came out about which bitcoin Satoshi owned or not.

My old blog, gse-compliance.blogspot.com, was not updated much in this period. You could say, January was a very quiet week. A newly constructed and chucked-together Windows domain is not a fun thing to manage. At the same time, I was still finalising the handover from leaving BDO. I was out completely by the third week of January, and it gave me a lot more time than at the start of the month which was hellish.

Eternal vigilance is the cost of liberty. Even blockchain is not enough, we need to actually monitor the logs. But immutability is a start. Bitcoin isn’t just money. It is far more, but to be more it needs to be first and foremost money, cash. The security of Bitcoin is based on a stable protocol and an economically incentivised system.

There was a secondary part of the name, Satoshi, that is Satoshi Sugiyama who was adopted by an American and given the name David Phillips. It comes from a book, The House of Morgan. David was adopted in both cases. David Kleiman was adopted, and so was Satoshi.

I admired the “characters” in the book, The House of Morgan. It reminded me of a more glorious and honourable period in banking. Not something that we could go back to, but something we could remember when formulating Bitcoin. Pierpoint Morgan was an interesting character and one that proved himself through work.

Dave ran machines as did a few other people. I don’t know how many of his earliest bitcoin Dave kept, I never discussed it. In 2009, bitcoin had no real cost. So, outside of my personal addresses, I don’t know what was actually kept. I doubt that the machines running at the charities or churches I was involved with at the time even exist anymore. My estimate would be that they managed to collect amongst them between 80,000 and 100,000 bitcoin. If they exist, I hope they do the same people well. You never know, things turn up.

Then, people don’t understand the cost associated with it. The cost of the Internet connections, the servers, the Microsoft licenses, and the electricity alone came to more than people would care to remember. All up, I spent around AU$1.1 million. As such, between the period of 2007 and mid-2009, I had costs that would be directly attributed to Bitcoin of about 70% of the same value. I think my mortgage at one stage between the three properties I owned had blown up to around AU$1.4 million.

It’s why I needed to sell my ranch.

I said I was owning my past, and in time I’m going to detail all of it.

Again, I’m not proud of it all. I’ve been asked in the past how I managed to get data about a number of criminal networks that I modelled. One of them was because of AnonymousSpeech.com. I used it for email and domain registration, but I also used it.

Vistomail was used in what some people would call Canadian pharma spam. Spam didn’t originate from the servers, rather the systems that would run globally allowed other people to register domains and fast flux systems that allowed for the control of botnets and compromise of systems around the world. I both helped and hindered some of it.

I helped in that I discussed Bitcoin with a number of people that were associated with a company called High Secured and people who had been using money through Liberty Reserve. Neither of such people were particularly interested in Bitcoin as money. Liberty Reserve allowed people to take US dollars and transfer to and from banks without conducting AML, so to them Bitcoin wasn’t money.

What they did do was use it as a signalling system. A number of bots were created by people who were associated with something that came from the Russian business network. After the same group of Russian cyber criminals fell apart, some of the parties started their own systems.

Bitcoin enabled them to get past some of the controls that the Microsoft teams had been putting in place. Not because of money, but because a transaction could be used as a signal. If one key signed the transaction, command-and-control servers in a hierarchy would act. If another key was signed, different servers would act. In effect, the systems watched the Bitcoin blockchain and gained instructions without leaving any trace. It helped as a form of covert communication.

Most importantly, for such individuals, Bitcoin started to be a way of controlling the spam servers. I wanted Bitcoin to be used in many ways, and one of them included controlling agents and software instances, but I didn’t want where it went. Consequently, I started tracking communications on such networks. Both Liberty Reserve and High Secured and a few other networks ran my code. I placed back doors in them. At the same time, I ran a number of TCPdump instances and collected traffic. With the machines I had ended up running on such networks, I fairly much had a backplane.

So the irony is that I both held money on the servers and helped get rid of them.

Between 2009 and particularly after the end of 2010, the Australian tax office made my life difficult. The two companies I had founded ended up in liquidation as result. I spent over $1 million in legal fees, and with accounting and other losses I think the totals came to around 3 million lost. The Australian tax office started bankruptcy proceedings during the process. They began in association with the dispute over tax.

The dispute that started here ended in January 2013. The biggest problem started around mid 2011. At that point, I structured my assets. I did so to protect them. The amount of bitcoin I had at the time was not even something I really cared too much about. It was the intellectual property that actually mattered, it is what I have fought to protect the last 20+ years.

Back when all this started, it was not the amount of bitcoin itself that was valuable but rather the intellectual property I’d been developing.

In time, I even got to the point where I had the ATO need to “accept that Dr. Wright did take reasonable care in preparing and lodging his income tax.”

Ironically, the tax office then used the liquidation of my companies that they had caused to try and have me disbarred as a director. They took action with ASIC seeking to have me banned from being a director of any company for a period of 20 years. They lost it, but the action also cost me a lot of money.

The end of it was that all of my claims bared a small $77 amount that was allowed. To offset the $77, I was given an extra 10,000 that I didn’t claim but should have. An individual from the Australian tax office actually maintained that I should be charged for recklessly under-claiming — a claim which was quickly thrown out.

All of my interest expenses, the travel to and from the farm to manage systems in the claimed amounts of Internet communications for my personal use, were me personally, and not my companies or businesses were allowed, as you can see in the document.

At this stage, my interest bill alone had come to over $100,000 a year personally. The loans I had taken out in the previous years all grew. It was eventually allowed and so with the corporate deductions — not that it mattered, because too much had been done to the companies, and they had to go into liquidation.

I get pulled up a lot by people saying that I use people who die as a means to cover up things that have happened. The problem is, I don’t know who will die in advance of their death. My grandfather knew Prof David Rees. I attached details of work I had been doing that was based on mathematics and a system called Cocao that Prof. Rees had pointed me to many many years before. I told the Australian tax office about David Rees in 2009. I was discussing some of his role as I moved assets into other companies again in 2013.

Prof Rees died in August 2013.

At this point, the Australian tax office claimed that I had used Prof. Rees knowing that he would die before they would contact him. Prof. Rees gave me notes on the Asymptotic Theory of Ideals. I use them today. They have been incredibly helpful in some of the work I’ve been doing. I don’t know the future. We are all mortal, and if you need something verified, do it when the person is alive. Then, the Australian government never really sought to prove anything. They just wanted me gone.

I was angry at this. I was angry with Dave Kleiman when he didn’t tell me how badly off he was. I was angry with people taking a system I created and changing it to something else.

Everybody looks at Bitcoin now, and thinks it’s worth so much, so I must have always known I’d be rich.

I didn’t.

I saw myself as a failure in 2011. I used the pseudonym as I thought I could just go on, and if Bitcoin failed as all of the other digital-cash schemes had failed, then I could go off and just become a lecturer and potentially a barrister, and nobody would know about my past failures. It was risky, but everything I did was.

Bitcoin was a long way from being finished.

I don’t think people understand what it’s like to sacrifice nearly everything you have for decades to try and create something. Worse, to be left in a position where you think it has failed. Some of what drove me was the anger from all of the events, but at the same time the mere act of creation is a reward and a drug in itself.

Like it or not, I’m not going away. In all of it, through all the pain I managed to prove and solve and find the way forward. If I had been able to, I would’ve patented Bitcoin. The thing you don’t understand is that, unlike copyright, a patent requires that the real name is used. A copyright can be maintained under a pseudonym, a patent cannot be. I was too afraid of the consequences of what might happen, and at the same time even when not successful by being painted with the brush of Bitcoin in those early days, it would’ve been worse than anything that came from some of the other papers that I did.

Some of the things that are taken for granted now resulted in a series of attacks against my character at the time when I released them.

Bitcoin would’ve been far more than any of those in controversy.

Truth is not derived from a code-is-law perspective

You cannot sign truth with the digital key. Some want to do so, but it’s because they hate law. I don’t. I did when I was young, some of my outlooks were similar to those we see in SegWit Coin (BTC) now, but over time, I have changed and learned that law is important, and so is process. So, like it or not, I’m gonna do it my way. I’m going to make it long and drawn out, and I’m going to detail all of the steps and little by little include verifiable evidence. Again, evidence isn’t a mere signing of a key.

If you don’t get it, you don’t get Bitcoin and you don’t get reality.

I get to tell my story my way. Others wanted to take it from me. When people outed me in 2015 and some tried to paint me as something else, it was because I’m a threat to their agenda. Then, I will always be THE threat to their agenda. But more importantly, exposing them and their lies is more important long term than simply prancing around in a definitive manner in the way some wish; that which I can do now may not always be something that I should do now. You see, I have a long-term outcome and a long-term outlook. And sometimes you will discover that it is better to allow people to go on and have them think that you’re less of a threat because of what you do. When you think it through, if you think it through, you may start to understand.

I still miss Dave. He wasn’t ever a partner, I’m a ruthless corporate asshole. I don’t have partners. I do have friends, and I do work with others who are shareholders. I do contract.

None of us thought about the value of bitcoin. Not back in the beginning. It wasn’t about the value of bitcoin. I find speculators and “HODLers” to be perverse to tell you the truth. But then, all to their own. There is a difference between speculating and investing; I won’t cover or detail it here.

Nor do I seek to save people. If you’re a speculator, if you’re invested in that fake copy of Bitcoin, BTC, then I don’t care, it’s your problem. I have something to build, and I figure it’s a 20- to 30-year journey to get it created properly. Oh, in the next four or five years, you’ll start to see just how big it is, but it’s nothing compared to where it’s going in the decades to come. I didn’t go to what was at one stage millions in debt to own bitcoin. I went into debt, I worked hard and long and smart, and studied, and gave up most of what people need and seek and want and love and enjoy for the chance to create something.

If you think Bitcoin was ever just about owning a lot of bitcoin, you’re more of a fool than you imagine.