Fully Peer-to-Peer

In 2011, I sent my last email as Satoshi to Gavin…

I wish you wouldn’t keep talking about me as a mysterious shadowy figure, the
press just turns that into a pirate currency angle. Maybe instead make it about the open source project and give more credit to your dev contributors; it helps motivate them.

I don’t need to do what a bunch of cypherpunks told me to do. Evidence has nothing to do with a bunch of idiots who say how keys should be managed because they want anonymity. Evidence is something that is set in law and has been for hundreds of years. I built Bitcoin to be an honest immutable system that wouldn’t suffer from the same problems that ecash, Liberty Reserve US Dollars, and all the rest of the scam systems had.

Personally, I’m tired of it all, and people are going to start understanding what Bitcoin really is.

The level of hypocrisy is disgusting. You have groups of developers saying that they were distributed and thus above the law. In the 1990s, a group of developers created a company called Webgo. The argument about why they were not conducting security fraud was put forward as them being a bunch of distributed developers and that it wasn’t really a company. The SEC didn’t care. The fact that they weren’t registered only removed the protection the limited liability company (LLC) would have provided. In effect, they were issuing trust or partnership shares without authority.

Developer groups who can change the original protocol are in control of their protocol.

The term ‘decentralised’ has become a marketing ploy. The ledger may be distributed, but when you’re talking about a protocol that is not set and can be varied, then you have a software development process that is controlled by an organisation. No cryptocurrency has a distributed development process. The reality is, there is no such thing as a development process that is distributed without authority or power. The only way to ensure a distributed system can grow without interference is for the system to act within the legal framework as it exists and for the developers to be unable to change the protocol.

In 2015, some people wanted to tell my story, but without my knowledge or approval. The thing is, they didn’t know the full story, and left enough gaps for those who did not want me as Satoshi to plant seeds of doubt and to spread total lies. Wired and Gizmodo lapped up the lies, and their gutter journalism was taken up by the bigger news outlets. So in 2016, I was left no choice but to come out yet again, but was manipulated and misled. For example, the agreement with the BBC was that it was going to be a low-key interview with Rory only. No cameras. Rory walked in with a cameraman. You may recall that in the interview, I was angry. 

Do you wonder why?

We Need Government

The issue is whether we have a good government or an oppressive and corrupt one. Anonymity creates corruption, even in government. Especially in government. 

You will find no quotes from me (as Satoshi) opposing government. In fact, the sole quote people use in such regard is the following:

Governments are good at cutting off the heads of a centrally controlled networks like Napster, but pure P2P networks like Gnutella and Tor seem to be holding their own.

As always, they who seek to alter what I said have taken a single quote out of all context and misrepresented the meaning. The part of my communications that everyone ignores is the ellidedresponse:

[Lengthy exposition of vulnerability of a systm to use-of-force
>monopolies ellided.]

The only relevant spelling error in the section is the typo in systm. The word elide is used to mean “to leave out of consideration” or “to strike out.” In saying so, I am leaving out some of James Donald’s notion; I was not agreeing with him where he wrote (see http://www.metzdowd.com/pipermail/cryptography/2008-November/014819.html):

If I understand Simplified Payment Verification

I will categorically say, as with every other person in the anarchist camp: no, you have not even begun to understand. Mr Donald was responding to my claim of scaling. In his post, he replied to my statement that Bitcoin could scale bigger than Visa — it could do so 10 years ago, had the code been tidied up — and that it would scale through an increased block size. Later in the year, we will be doing just that and moving to a scale level that will start to exceed the one of Visa.

Hal Finney and James Donald both wanted the same thing: they wanted something like bit gold. They did not want Bitcoin.

The reality is that there are supporting mechanisms for taxation, and it doesn’t require the status of legal tender. Bitcoin is a funding system. Bitcoin is an immutable ledger. Other systems can be built on top of Bitcoin. Importantly, legal tender can use Bitcoin as a ledger. So where some people said that others wouldn’t hold assets as cash in an inflationary currency if they can help it, they are misunderstanding how Bitcoin works.

In part, I used the mailing list where Bitcoin was first announced because of some of the people from one of my former universities. I enrolled at the University of Newcastle to do a master’s degree in statistics in 2005 for two reasons: Firstly, some of the people there at the university were highly skilled in network graph theory and modelling. I needed such knowledge to develop Bitcoin. Next, some of the people there at the University of Newcastle were deeply versed in the mathematics of monetary systems. Entering the university gave me access to all of their work, so that I could research it. One of the individuals was Graham Wrightson. With Andreas Furche, they formed the Monetary Systems Engineering Research Group. I was with the University of Newcastle as a postgraduate researcher between 2005 and 2009.

I did not put down that I was Satoshi when I talked to them. I was just another postgraduate researcher and student.

Having said so, some of the people at the University of Newcastle had been involved in the original version of DigiCash and worked with David Chaum.

What I came to understand in reviewing the work conducted by the researchers was that Bitcoin needed to act within the existing legal system. The authors in the group wrote extensively about the privacy debate. To quote them, “the need for privacy in payments is emphasised by some and feared by others.” Bitcoin exists upon a knife-edge. It is not anonymous, but it is private enough. I came up with the idea of networks merging because of the group. In a conversation that I had when I started my degree with Prof Graham Wrightson, I saw that the separate networks and communication infrastructure would end up merging. To further quote them,

There are good reasons to come to the conclusion that it is generally impossible to create such a system at all. The security of the current cash system rests with the fact that it is extremely hard to copy, or counterfeit, bank notes and coins stop therefore people can assume the validity of a banknote without consulting a central bank for verification, and exchange of banknote among many subsequent parties without needing to know who held it before.

In doing my research, I came up with the conclusion that anonymous money was not desirable. To come to a full understanding, I needed to complete postgraduate work in law. At one point I was enrolled in four separate master’s degrees simultaneously.

Prof Wrightson knew of Wei Dai, and pointed me towards a paper titled “Knowledge-Based Communication Processes in Building Design” that he knew of because of his work in machine learning. Both Adam Back and Prof Wrightson directed me to Wei Dai. 戴维 turned out to be another cypherpunk, and he was an incredibly helpful one. I used some of his code in the original release of Bitcoin — with his permission. Andreas Furche knew of Hal Finney and Adam Back. So I emailed people. I was researching in 2005, and came to the conclusion that I could build something. By 2007, I was ready to start.

I didn’t contact Adam Back until 2008 when I was well and truly invested in the project I was conducting.

Bitcoin was never a cypherpunk experiment.

I left the Cypherpunks mailing list in the ‘90s because I couldn’t stand people like Julian Assange. I couldn’t stand what some of the people there stood for. I was the opposite of many others on the cryptography mailing list. Even those people I liked, such as Tim May, held concepts that I could not stand.

Prof Wrightson, when I talked to him, told me all about DigiCash. He is the reason that I took up a pseudonym. The Monetary Systems Engineering Research Group had a lot of resources. I read their patents and papers on transfer instruments, but more than anything else, I took away the problems that had occurred with DigiCash. I saw what had happened with ecash. I saw what had happened with e-gold.

CSIRO and the Australian Taxation Office had conducted a joint Internet report in 1997. I got to read about money laundering, and from Prof Wrightson I heard of a number of the problems that all of the previous systems had had. I really didn’t want to go through the same problems that those involved with DigiCash had grappled with.

I didn’t want to be a shadowy figure, such was never the intent of Bitcoin. The protocol was set in stone, so it didn’t need someone like me to come and save it. Well, that was what I taught myself to believe. What I never suspected was that a bunch of want-to-be comic-book criminals would take my invention and try to turn it into a system designed to promote illicit activity. In particular, I didn’t think people would add systems to create anonymity and build automated ransomware systems into Bitcoin. The purpose of confidential transactions is just and solely this. It is not about protecting normal people; it is about enabling criminals.

I wanted a system that allowed legal transactions which others wanted to block. In 2005, I ended up taking a job with BDO in Australia. The job ended up being a key part of the puzzle as I learnt about auditing and general ledgers. I had a basic knowledge but no hands-on experience.

The WTO decision concerning gaming blocked access to some of my clients. It blocked access to my money. I had bank accounts in Panama that were associated with companies in the gaming space from the time. The money had never come into Australia, and I had not spent it in Australia at any time. I was rather furious that gaming projects I’d been working on were closing down. Such were for licensed casinos. They were being closed down because the US was stopping banks from processing money associated with gaming. They involved operations that didn’t allow money laundering and had stringent AML controls. The whole thing was why in 2005, I started studying law, statistics, and about everything else I could think of — to push the project I had been working on forward.

Black net started as a simple project to monetise information and create a private Internet. After the WTO’s decision, my focus changed, and I needed to implement a monetary platform. Not everyone likes gambling, but I was proud of my past and how I’d managed to get Lasseter’s Online over the regulatory requirements and to become the first licensed gaming operation anywhere in the world. 

Watching my clients close was bad. What was worse was that I was watching the licensed and regulated operators close down. The criminals kept going. The worst money-laundering operations and criminal operations kept taking money, and I watched as the US government’s imposed regulations destroyed good businesses that had operated within bounds and opened up a black market for criminals. The crackdown didn’t stop gambling, it created a system that was criminal. Before, the criminals had been regulated and controlled within the industry. For the most part, they were on the fringes. It changed when the honest operators were forced out.

The last thing I wanted to do was get in trouble for creating a system that enabled the payment of what was legal but what some people saw as illicit. I wasn’t trying to make a criminal system, I worked extremely hard to make a system that had an evidence trail. It’s no good tracing down someone who has made a payment legally — which can remain private.

NETeller was a registered and licensed UK business before the US crackdown. They offered payment services to overseas businesses. I worked hard to set up systems of logs and reporting so that the clients I had worked with had sound systems that didn’t launder money and didn’t take funds from terrorists and criminals. I watched them collapse, and I watched the illegal activities take their place. People didn’t stop gambling; criminals started selling gaming services, they didn’t care where the money came from, and they made more money taking terrorist and criminal funds and washing them. 

SportingBet was a client for a time, and then funding was cut. The CEO was arrested in a stunt in America as he got out from a flight.

So, I was not trying to be anonymous for the reasons the cypherpunks tell you. I wanted my privacy. I wanted to create something that would allow people to conduct any business that was legal. I don’t care if you’re taking money from a licensed sports book; if it was licensed, it would be fine. It’s why Bitcoin’s private and not anonymous. But I didn’t want to have to explain the same to governments in 2010. All everyone saw was a new system just like the rest. 

Liberty Reserve, e-gold, ecash… they are nothing new because they allow people to have anonymous money which favours criminals and crime. I invented Bitcoin to be different. I invented Bitcoin to walk the fine razor-edge between surveillance and criminal systems that is privacy.

I argued that Bitcoin would scale, and it does.

Satoshi Nakamoto (aka Craig Wright) wrote:
>> I've been working on a new electronic cash system that's fully
>> peer-to-peer, with no trusted third party.
>> The paper is available at:
>We very, very much need such a system, but the way I understand your
>proposal, it does not seem to scale to the required size.
>For transferable proof of work tokens to have value, they must have
>monetary value. To have monetary value, they must be transferred within
>a very large network - for example a file trading network akin to
>To detect and reject a double spending event in a timely manner, one
>must have most past transactions of the coins in the transaction, which,
> naively implemented, requires each peer to have most past
>transactions, or most past transactions that occurred recently. If
>hundreds of millions of people are doing transactions, that is a lot of
>bandwidth - each must know all, or a substantial part thereof.

Long before the network gets anywhere near as large as that, it would be safe for users to use Simplified Payment Verification (section 8) to check for double spending, which only requires having the chain of block headers, or about 12KB per day. Only people trying to create new coins would need to run network nodes. At first, most users would run network nodes, but as the network grows beyond a certain point, it would be left more and more to specialists with server farms of specialized hardware. A server farm would only need to have one node on the network and the rest of the LAN connects with that one node.

The bandwidth might not be as prohibitive as you think. A typical transaction would be about 400 bytes (ECC is nicely compact). Each transaction has to be broadcast twice, so lets say 1KB per transaction. Visa processed 37 billion transactions in FY2008, or an average of 100 million transactions per day. That many transactions would take 100GB of bandwidth, or the size of 12 DVD or
2 HD quality movies, or about $18 worth of bandwidth at current prices.

If the network were to get that big, it would take several years, and by then, sending 2 HD movies over the Internet would probably not seem like a big deal.

Satoshi Nakamoto - aka Craig Wright


The problem is not that Bitcoin scales but rather that it is not designed to facilitate money laundering. It does not make a good system for automated ransomware. It doesn’t work as a completely scaled criminal system.

For distributed systems, Liberty Reserve and e-gold were far more distributed than Bitcoin has ever been. The systems were more anonymous.

Bitcoin is fully peer-to-peer when parties exchange transactions directly. It’s what SPV was designed to be. There is no need to have complex systems like Lightning. Alice and Bob exchange a transaction; Bob checks Alice’s transaction, and ensures that it is valid and has not yet been spent; Bob sends it to the mining network; the miners compete to include the payment from Alice into a block gaining a payment or transaction fee. Bitcoin is peer-to-peer not because of the network acting to distribute blocks, but because individuals exchange transactions.

E-gold was shut down because it allowed anonymous transactions. Being distributed will not save you. Developers are not distributed. The owners of organisations and exchanges such as Binance are not distributed. People are not distributed. If you can change the protocol, it is not distributed.

e-gold… Internet payments, 100% backed by gold
e-gold is the only tangibly backed, worldwide electronic monetary/payments system. e-gold is 100% backed by physical…web.archive.org

“A systemic flaw in the e-gold design, present from the very beginning, made it vexingly difficult for e-gold to expel a User, in a truly effective way, for criminal abuse of the system. e-gold investigative staff might detect suspicious activity, block or freeze the offending account, and later discover the same perpetrator had created additional accounts,” says the e-Gold founder. “One element was logic that allowed an e-gold account full privileges from the moment of creation and only revoked those privileges in the event of suspicion that the account holder was seeking to mask their identity or actually engage in illicit activity.Compounding this weakness was an unrestricted ability for Users to create multiple accounts without any obligatory indicator that they were all under the control of one person.”

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