Nick Szabo, The Real Satoshi Nakamoto: The Definitive Case Study

The birth of Bitcoin

The 2008 financial crisis sparked a revolutionary invention: Bitcoin, the world's first peer-to-peer digital cash system, developed by a visionary computer scientist who utilized cutting-edge asymmetric cryptography. Bitcoin's enigmatic creator shrouded himself in the pseudonym "Satoshi Nakamoto" to maintain anonymity.

Embracing a profound commitment to the principles of decentralization, Satoshi left the project in 2011. My extensive research on Satoshi points to renowned computer scientist Nick Szabo, the inventor of smart contracts and Bitcoin's precursor, Bit gold.

Who is Nick Szabo?

One of the most influential computer scientists of all time, Nick Szabo is an American polymath with expertise in economics, libertarianism, cryptography, programming, law, and science. Szabo's former business partner describes him as a "quiet master of cryptocurrency" and states:

"His work and insights are comparable to Einstein, Heisenberg, Bohr, Born, and Schrödinger..."

After graduating with a bachelor in computer science degree from the University of Washington in 1989, Szabo returned to his birthplace California, where his interest in extropy (futurology) led him to the Cypherpunk movement. Along with Wei Dai and Hal Finney, Szabo became a leading voice in the movement, hosting gatherings and promoting its principles.

Arguably, Szabo is the most ambitious cypherpunk. He was inspired by David Chaum, the inventor of digital cash, and Tim May, a cypherpunk, who in 1988, wrote the "Crypto Anarchist Manifesto," outlining the movement. In 1995, he began working as a consultant for Digicash, the first ecash attempt by none other than David Chaum.

Notably, Szabo worked at the NASA jet propulsion laboratory, demonstrating his strong math skills. In 2006, Szabo graduated from George Washington Law School with a Juris Doctor. For his many academic contributions, Szabo was awarded an honorary social sciences doctorate and professorship from Francisco Marroquín University in 2017.

Szabo's groundbreaking 2001 paper, "Trusted Third Parties are Security Holes," pioneered the case for distributed networks operating without trusted intermediaries, profoundly influencing Bitcoin advocates worldwide.

Bit gold: Bitcoin's predecessor

Nick Szabo invented Bit gold in 1998, a sketch for a decentralized cryptocurrency using bit gold miners to solve complex mathematical puzzles. The design utilized Adam Back's Hashcash for its proof-of-work algorithm, which Bitcoin uses a variation of.

Importantly, Szabo refers to Bit gold as Bitcoin's "predecessor design." The project was introduced on Szabo's 'Libtech' mailing list, which included Hal Finney, Wei Dai, and economists George Selgin and Larry White. Dai, who went to the same university as Szabo, also drafted B-Money on the list.

Mr Szabo has an impressive blog known as Unenumerated, and decided to publish Bit gold there in 2005 after Hal Finney encouraged him to. In a 2005 blog post, "Antiques, Time, Gold and Bit gold," Szabo passionately stated:

"There are some problems involved with implementing unforgeable costliness on a computer. If such problems can be overcome, we can achieve bit gold. This would be the first online currency based on highly distributed trust and unforgeable costliness rather than trust in a single entity and traditional accounting controls. Hal Finney has implemented a variant of bit gold based on a tamper-evident computer plug-in card, for which remote users can verify what code is running on the card."

As shown, Szabo's dream was for Bit gold to be the first P2P, decentralized online currency. This passage also demonstrates that Hal Finney's RPOW was a key inspiration for Szabo. Further, in a famous 2011 blog post titled, "Bitcoin What Took Ye So Long," Szabo equates Bitcoin's early ideas to Bit gold:

"The short answer about why [Bitcoin] took so long is that the bit gold/Bitcoin ideas were nowhere remotely close to being as obvious [as] gwern suggests."

For context, Gwern is a Satoshi researcher, programmer, and writer. The timing of Szabo's blog post is fascinating. May 2011 was the same month Satoshi sent has last emails to core developers — according to Nathaniel Popper, a former New York Times journalist, who described this in a 2015 article about Szabo being the likeliest candidate:

"May 2011 was also the last time Satoshi communicated privately with other Bitcoin contributors. In an email that month to Martti Malmi, one of the earliest participants, Satoshi wrote, “I’ve moved on to other things and probably won’t be around in the future.”

Szabo wrote a seminal blog post in April 2008 titled "Bit gold Markets" and later altered the URL to postdate the Bitcoin whitepaper. Interestingly, he commented:

"[Bit gold] would greatly benefit from a demonstration, an experimental market (with e.g. a trusted third party substituted for the complex security that would be needed for a real system). Anybody want to help me code one up?"

The Bitcoin whitepaper was released 6 months later, raising intriguing questions about whether Szabo received any messages. This revelation is outweighed by a far more important comment that Szabo made in the same comment section (discussed next).

Bitcoin's early draft appears to be Bit gold

Satoshi likely had an early draft and it appears to be Bit gold, given the immense similarities in design and vocabulary. While Bit gold had a built-in L2 for private retail payments, Bitcoin uses external L2s (e.g., Lightning) and prioritizes other aspects over privacy. However, Szabo crucially acknowledged in 2007 that cryptographer Daniel Nagy's model of lessened privacy could be successful:

Szabo's description is very similar to Bitcoin's privacy model, and when a user asked Satoshi in 2010 about Bitcoin's history, Satoshi admitted he started in 2007:

"Since 2007.  At some point I became convinced there was a way to do this without any trust required at all and couldn't resist to keep thinking about it.  Much more of the work was designing than coding. Fortunately, so far all the issues raised have been things I previously considered and planned for."

Six months before the whitepaper, in April 2008, Szabo indicated a similar notion regarding trust when discussing possible Bit gold improvements:

Byrne (commenter): "Why do the puzzling at all, rather than issuing a fixed amount of currency inflated at a predictable rate, with unique identifiers for each unit of currency?"

Szabo: "This is an interesting idea, something like the idea that the Fed should follow a simple algorithm rather than trying to outguess markets. But the real question for beating bit gold is how do we do this without having to put full trust in third parties? If we can figure that out, we've come up with something better than bit gold. ("We" as usual on this blog being just whoever wants to explore the possibility, not the government :-)"

Szabo's idea of a non-government entity creating a better, predictably-inflated currency parallels Bitcoin, and also, Bitcoin's inflation rate is algorithmically predictable through halvings. Subsequently, Szabo explains Bit gold's security flaw:

"Byzantine security is far from perfect. In layman terms it just means that when everybody sends everybody else the same message, far more people have to be corrupted in order to fake the message than if the message is sent through one or a few people. Thus any given party is trusted only to a very small degree, but there is still that small degree of trust."

As shown, Szabo's security concern about Bit gold is its vulnerability to Sybil attacks. Puzzlingly, he sought contributors despite this issue, while foreseeing a superior alternative. Sensationally, Szabo explained in his May 2011 blog post how Satoshi improved upon the same security flaw from April 2008:

"Nakamoto improved a significant security shortcoming that my design had, namely by requiring a proof-of-work to be a node in the Byzantine-resilient peer-to-peer system to lessen the threat of an untrustworthy party controlling the majority of nodes..."

Szabo further described Bit gold in another April 2008 comment; stressing its open source nature much like Satoshi:

"The entire value chain from puzzle to solution, and all transfers of title, are available for all bit gold and can be audited by anybody at any time."

Amazingly, a user named "Eddie" used the term "bit coin" multiple times in a remarkable comment also on "Bit gold Markets."

Eddie's comment appears to have predated Bitcoin's release, as Szabo responded to other comments in a pre-Bitcoin context, while ignoring Eddie's. If it were after the whitepaper, Eddie would have simply mentioned Bitcoin's design, meaning that Szabo likely saw the term "bit coin" before Satoshi used any variation.

In fact, Szabo even responded with curious timing to the first Wall Sreet critique of a cryptocurrency, Bit gold, also 6 months before Satoshi's whitepaper.

Importantly, Szabo invented a blockchain predecessor in 1998 called the title registry, which was Bit gold's decentralized database that used public key cryptography based on hashchains. A title registry can be used for other things, as Szabo explained in a May 2009 blog post, "Liar-resistant government," where he oddly spelled Bitcoin incorrectly, while elucidating its similarities with Bit gold:

"Bit gold, my sketch of an electronic currency that minimally relies on trust in any one person or organization, achieves this minimal vulnerability by using secure property titles. Satoshi Nakamoto has implemented BitCoin which very similarly uses a dense Byzantine fault tolerant peer-to-peer network and cryptographic hash chains to ensure the integrity of a currency."

The unique information in Szabo's work during Bitcoin's early days seems to fit like a puzzle. Aaron van Wirdum brilliantly summarized Bit gold in a Bitcoin Magazine piece titled "The Genesis Files: With Bit Gold, Szabo Was Inches Away From Inventing Bitcoin:"

"Indeed, it's not difficult to see Bit Gold as an early draft of Bitcoin. Apart from the shared database of ownership records based on public-key cryptography, the chain of proof-of-work hashes has an eerie resemblance to Bitcoin's blockchain."

Satoshi avoided Bit gold until 2010

Interestingly, Satoshi decided not to cite Bit gold in the whitepaper, despite its glaring resemblance to Bitcoin. This, along with other details, suggests that Satoshi intentionally avoided discussing the project until necessary. In particular, Bitcoin is a modified implementation of Bit gold (as per Szabo's assessment), which raises the likelihood of Szabo being the whitepaper's primary author.

In a conversation with Satoshi one week after the whitepaper, Hal Finney stated:

"Nick Szabo wrote many years ago about what he called "bit gold" and this could be an implementation of that concept."

In Satoshi's response, he strangely ignored Bit gold. However, Satoshi backtracked in 2010, admitting that Bitcoin was an implementation of B-Money and Bit gold.

A Satoshi Easter egg motivated Szabo

Satoshi listed his birthday as April 5, 1975, and importantly, April 5, 1933, was the day US President Franklin D. Roosevelt signed Executive Order 6102, making it illegal for Americans to store gold. In a change of heart, the US Government reversed the policy in 1975. Amazingly, Szabo mentioned FDR's gold ban on his blog 10 days before Satoshi registered Bitcoin.org on August 18, 2008:

"Due to personal cash flow needs, I am selling some of my collection. Nobody is printing any more of this kind of money and it is a great hedge against inflation. As a collectible it is subject to less political risk than gold (recall FDR's confiscation of gold in the U.S., for example)..."

Szabo has also mentioned FDR's gold ban in speeches. The timing of Szabo selling his private notes is very noteworthy, given its close proximity to Bitcoin.org's registration.

Remarkable timing

Evidently, Szabo displayed unique timing between 2007-2011, and the most impressive part of his timeline is undoubtedly the week of Bitcoin.org's registration.

Curiously, Szabo interacted with a perplexing folder on his web server called "anotherszabo" two days before Satoshi registered Bitcoin.org.

The timing, name, and other circumstantial evidence raise interesting questions about the contents of the folder and why it was referred to as "anotherszabo."

Next, Szabo mysteriously put his blog into "reruns" two days after Bitcoin.org's registration on August 20. "Reruns" signified Szabo only reposting for part of 2008 and 2009. Strikingly, two reposted papers were Bit gold and "Bit gold Markets," making them appear like they were published after the whitepaper (as previously noted).

Stunningly, I discovered that Satoshi sent his first email on that same day, 3-4 hours before Szabo's important "Reruns" post.

Szabo's ideas match Satoshi's early code

While examining the motivations behind Bitcoin's pre-release code, I noticed several key points. Notably, Satoshi decided to remove a virtual poker game from the public release, which Szabo curiously has an interest in:

"My own vision of cypherpunk evolution runs along the following lines... online markets: Internet video poker... etc."

Further, Satoshi programmed an unfinished digital marketplace, which he later described as an "eBay style marketplace:"

"I was trying to implement an eBay style marketplace built in to the client."

Strikingly, Szabo displayed a high respect for eBay in his revolutionary paper, "Shelling Out: The Origins of Money":

"It is no coincidence that markets in rare objects and unique artwork... have enjoyed a renaissance during the last century. One of our most advanced high-tech marketplaces, eBay, is centered around these objects of primordial economic qualities."

Satoshi borrowed from Szabo's economics

Evidently, Satoshi was motivated to ensure scarcity and a lack of government involvement in Bitcoin. For example, he embedded a British newspaper headline into the Genesis block stating, "Chancellor on Brink of Second Bailout for Banks."

Szabo also desired to curb inflation and remove the need for middlemen in Bit gold:

"The problem, in a nutshell, is that our money currently depends on trust in a third party for its value. As many inflationary and hyperinflationary episodes during the 20th century demonstrated, this is not an ideal state of affairs."

Satoshi echoes Szabo in his first forum post:

"The root problem with conventional currency is all the trust that's required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust."

Crucially, in Szabo's famous 2011 blog post, he suggested that his paper about money's origins should be required reading for people debating Bitcoin's economics:

"Gold couldn't work as money until it was already shiny... or something else besides money, they told me... Even though I had rebutted these arguments in my study of the origins of money, which I humbly suggest should be required reading for anybody debating the economics of Bitcoin."

Szabo proves in his economic theory that 'unforgeable costliness' and scarcity make objects like gold reliable as money. The effort required to mine gold, which is a finite material, cannot be faked, making it a strong medium of exchange due to scarcity and trust minimization rather than aesthetic appeal.

Satoshi implemented Szabo's economics through digital mining and the 21 million limit (establishing unforgeable cost and scarcity), proving that Bitcoin does not need intrinsic qualities like gold's luster to be the best. With fiat money, you must trust a government, leaving citizens exposed to possible hyperinflation, while Bitcoin cannot be hyperinflated since a trusted third party isn't used.

These factors explain why Szabo views his work as being required reading, and he even stated in a 2018 interview at Francisco Marroquín University:

"Well, the term mining came about with the analogy to gold mining... so, my economic theory that I applied to Bit gold, and that I... or some people at least applied to Bitcoin."

You can see Satoshi using this economic philosophy in his third email to Martti Malmi. In Szabo's work, shells are a frequent example of a trust minimized, scarce form of money in the ancient world. Further, a researcher showed in a 2017 article how Satoshi again utilized Szabo's economic arguments through his description of a non-aesthetic metal.

Immense similarities in personality and skills

As previously stated, Satoshi was motivated by scarcity when designing Bitcoin, much like how Szabo was with Bit gold. However, that is far from the only similarity. Satoshi had experience with smart contracts, which Nick Szabo invented:

"The design supports a tremendous variety of possible transaction types that I designed years ago. Escrow transactions, bonded contracts, third party arbitration, multi-party signature, etc."

Daniel Nagy, the cryptographer whose 2007 ecash design interested Szabo, even noted that Bitcoin's formal language, Script, utilizes smart contracts on Szabo's 2011 blog post:

"Strokes of genius include:
- The formal language used to describe transaction details. Smart contracts right there!"

What's more, Satoshi supported the existence of altcoins in writings such as below.

Szabo likes certain altcoins in addition to Bitcoin (such as Monero), which is explained by him being the inventor of smart contracts, while also having researched monetary history. Crucially, he understands that many types of scarce money existed historically, utilized by diverse groups — a scenario that he supports in the digital world.

Intriguingly, Szabo knows Japanese, paralleling Satoshi's choice of a pseudonymous Japanese name. Also, two researchers showed in a detailed analysis of Satoshi's newly released emails that Satoshi was likely an American on the West Coast.

In fact, Nick Szabo has similar writing mannerisms to Satoshi. A group of 40 final-year Aston University stylometry students, led by Professor Jack Grieve, stated in a 2014 study of the whitepaper:

"The number of linguistic similarities between Szabo’s writing and the Bitcoin paper is uncanny... We are pretty confident that out of the list of people regularly referred to as possibilities, Nick Szabo is the main author of the paper, though we can’t rule out the possibility that others contributed."

Interestingly, the study concluded that Szabo was the main author of the whitepaper, while mentioning the possibility of contributors being involved. A 2017 analysis about also resulted in Szabo's style being most similar.

Regarding programming, a 2016 analysis revealed that Nick Szabo's commenting style bears a strong resemblance to Satoshi's. Subsequent research found this similarity in James Donald's work. However, Donald publicly interacted with Satoshi, whereas no known correspondence exists between Szabo and Satoshi.

Szabo's OPSEC is extraordinarily strong

By examining the principles of Occam's Razor, it's easy to understand why Nick Szabo was the first credible Satoshi candidate. Szabo's strong OPSEC caused many people in 2011 to theorize he didn't exist, along with his name being an alias for mathematician John Nash. Unsurprisingly, Szabo is an experienced user of pseudonyms:

"In my limited experience creating Internet pseudonyms, I've been quite distracted by the continual need to avoid leaving pointers to my True Name lying around -- excess mail to/from my True Name, shared files, common peculiarities (eg misspellings in written text), traceable logins, etc.... The hazards are everywhere."

Additionally, there is evidence potentially indicating that Satoshi faked his British linguistics. A 2020 analysis showed that Satoshi's linguistics were erratic, with both British and American English used often, contrary to popular belief. In fact, Satoshi used American alongside British English in the same posts and emails at times, raising the chances that his linguistics were another red herring.

Satoshi respected Hal Finney, Szabo's friend

Satoshi Nakamoto sent the first Bitcoin transaction to Hal Finney, showing Finney's high interest, despite not being part of its creation. Interestingly, Finney stated in 2010:

"I'd like to hear some specific criticisms of the code. To me it looks like an impressive job, although I'd wish for more comments. Now I've mostly studied the init, main, script and a bit of net modules. This is some powerful machinery."

Satoshi replied:

"That means a lot coming from you, Hal.  Thanks."

The deep respect expressed by Satoshi implies that he knew of Finney before the creation of Bitcoin, lining up with Szabo's friendship with Finney. It was confirmed in Satoshi's newly released emails with Martti Malmi that he knew about Finney's RPOW and its influence like Szabo:

"[Hal] helped me a lot defending the design on the Cryptography list, and with initial testing when it was first released.  He carried this torch years ago with his Reusable Proof Of Work (RPOW)."

Some crypto leaders share the same conclusion

Many knowledgeable people in the crypto space understand a great deal about Nick Szabo since he invented smart contracts and Bit gold, but some take it a step further. Litecoin's creator, Charlie Lee, stated in 2017:

"In my opinion, Nick Szabo is the closest we have to Satoshi, if not Satoshi himself."

As Litecoin's creator, Lee is highly familiar with Bitcoin's technology. Unsurprisingly, he isn't the only one to think this way. Elon Musk famously stated in December 2021:

"[Nick Szabo] seems to be the one more responsible for the ideas behind Bitcoin than anyone else."

Musk's statement is strongly supported by Szabo having published over 20 research papers on Bitcoin-related ideas, while others haven't come close. This lines up with reporting by respected journalist, Jeff Roberts, who mentioned in a 2018 Fortune piece how industry veterans were convinced of Szabo being involved in Bitcoin's creation.

Common opposing arguments

When you look at internet discussions speculating on who Satoshi is, Nick Szabo consistently ranks at the top. However, there are arguments against this theory. Some critics argue that Szabo lacks programming experience, citing no public C++ code. While this is the most plausible argument against Szabo being the main participant, there are opposing factors, such as his expert-level open source web code.

Additionally, in a 2017 Tim Ferriss podcast interview with entrepreneur Naval Ravikant, Szabo denied the notion that he was inexperienced at programming after Ravikant questioned his ability to program Bit gold:

Ravikant: "Nick, you only had the theory of Bit gold, but you're not a serious enough programmer to create Bit gold."

Szabo: "Well, I am a serious programmer, but.... I.... didn't get around to programming Bit gold."

Like other times, Szabo gave no concrete reason as to why he didn't program Bit gold. These details, including Szabo's strong computer science education, show that him not being able to program Bitcoin doesn't appear to match the evidence. Additionally, when a Twitter user asked Szabo why Bit gold failed, Szabo curiously replied:

"It's much easier to run actual software than a design for software."

Author Dominic Frisby famously revealed in his popular 2014 book, Bitcoin: The Future of Money?, that Szabo said to him privately:

"C++ is a great language for implementing cryptographic primitives because of its efficiency."

Szabo's statement implies that he has C++ experience. Based on his full analysis, Frisby concluded that Szabo was Satoshi. Additionally, the real Satoshi would hide his C++ code from the public due to obvious reasons. Still, someone else could have written the code.

Finally, some argue that Szabo stopped using double spaces at the start of sentences after the 1990s, but this is false. Szabo has never used double spaces on his blog, which many incorrectly think is the only work he published after the 1990s. The above 2005 email shows Szabo using double spaces while discussing how RPOW is a working version of Bit gold.

Ancestral connection to Satoshi's first statue

Hungary was peculiarly chosen as the location for Satoshi's first statue. Interestingly, Szabo's father was a Hungarian who opposed the communist regime in the 1950s and immigrated to America for freedom. This has inspired Szabo throughout his life, especially for his work to create a secure financial system untethered from government.

Conclusion

Bitcoin has revolutionized the global financial landscape, providing trust minimized financial services to millions of previously unbanked people. Satoshi Nakamoto is a visionary who did a phenomenal job hiding his identity while changing the world.

The evidence demonstrates that Bitcoin's creator possibly had collaborators and was a driven person with strong skills in economics, cryptography, and programming. Based on the above research, Nick Szabo appears to be the only candidate to closely resemble the unique profile of Bitcoin's inventor.

* This article is based on extensive research using public resources. The conclusions reached by the author are opinions, not established facts. Readers should evaluate the material independently. Note: Mr Szabo has denied being Satoshi Nakamoto.

* Please respect Mr Szabo. Additionally, beware of malicious individuals promoting scam tokens in the name of Szabo and other Satoshi candidates like Len Sassaman.