Progress pill
The Slow Emergence of Bitcoin

Presentation to the World

The History of Bitcoin's Creation

Presentation to the World

  • The Genesis Block
  • The 21 Million Limit
  • Regulation, Zombie Networks, and Ecology
  • Peer-to-Peer and the Distrust of Central Banks
  • Mike Hearn and the 21 million
  • Martti Malmi and the Presentation of Bitcoin
  • The Two Forums Dedicated to Bitcoin
  • Communication in Stages
After examining how Bitcoin was designed and launched by Satoshi Nakamoto, let's focus on how it was publicly presented. Following its launch at the beginning of 2009, the network was operational. Still, there were few generating nodes (Satoshi mined most of the blocks), and activity was virtually non-existent (32 actual transactions took place during January). The project only had a basic website and a SourceForge page for downloading the software. Moreover, communication about Bitcoin was limited to the Metzdowd Cryptography mailing list, followed at best by a few hundred people passionate about cryptography.
Therefore, the challenge of this period was to promote Bitcoin to attract a critical mass of users who could contribute to the cause in one way or another. That's why Satoshi prioritised improving the site and interacting with various people. He wanted to make his discovery known to the world.
In this chapter, we will examine the cultural codes that emerged from Satoshi's communication efforts, such as his distrust of the banking system and the 21 million limit. We will also comment on Satoshi's conversations with his detractors to defend his invention. Finally, we will talk about the help he got from others, especially the essential assistance of Martti Malmi, his first right-hand man.

The Genesis Block

The launch in January 2009 allowed Satoshi Nakamoto to establish his system's fixed parameters. As he would write later, the nature of Bitcoin is such that, "once version 0.1 was released," its basic operation was "set in stone for the rest of its existence," making it necessary to get things right before the system expanded. (original: "once version 0.1 was released, the core design was set in stone for the rest of its lifetime") In particular, two foundational elements have significant cultural importance: the content of the genesis block and the limit of 21 million units.
The genesis block is the base block of the Bitcoin blockchain, from which it must be extended. It is, therefore, hardcoded into the software. Before launching the network, Satoshi constructed the first link by producing the required proof of work and timestamping it on January 3, 2009, at 18:15:05 UTC. In this block (and specifically in the reward transaction), he inscribed the following message:
The Times 03/Jan/2009 Chancellor on brink of second bailout for banks
This is the headline from the British newspaper The Times on that day, indicating that the Chancellor of the Exchequer (i.e., the British finance minister) was on the verge of bailing out the banks for the second time. The presence of this headline in the block serves a dual role:
  • On one hand, it prevents backdating the launch of the network by proving that the system could not have been started before January 3, since Satoshi could not have known about the headline before the newspaper was published;
  • On the other hand, it symbolically indicates what Bitcoin stands against by referring to the monetary and financial context of the time.
At the time, the world felt the full impact of the financial crisis that began in 2007 with the bursting of the subprime bubble in the United States. Governments bailed out financial institutions to prevent further bankruptcies after the fall of the investment bank Lehman Brothers on September 15, 2008, and central banks engaged in quantitative easing by injecting liquidity into the financial markets. This use of public money created for the occasion unsettled a number of citizens who realized that the banking system is actually one of private profits and socialized losses.
On the other hand, Bitcoin does not rely on a trusted third party and is, therefore, not subject to the whims of a central bank. It thus contrasts with state currencies, such as the dollar or the euro, whose quantity can be arbitrarily changed by those who control money creation; Bitcoin's monetary policy is indeed programmed in advance, written into the protocol, to theoretically never be altered.

The 21 Million Limit

This brings us to the second element presented by Satoshi on the day of the network's launch: the 21 million limit. On January 8, in his introduction email, he described this monetary policy as follows:
"The total circulation will be 21,000,000 units. They will be distributed to network nodes as they create blocks, halving the amount issued every 4 years. the first 4 years: 10,500,000 units the next 4 years: 5,250,000 units the next 4 years: 2,625,000 units the next 4 years: 1,312,500 units etc. the system can support transaction fees if necessary, when that is exhausted. It's based on open market competition, and nodes will probably always be willing to process transactions for free."
A few days later, Hal Finney reacted positively to this monetary policy on the mailing list, excited by the fact that "the system can be configured only to allow a certain maximum number of units to be generated." In his email, he estimated that if Bitcoin became "the dominant payment system used worldwide," each unit would have "a value of about $10 million." He wrote that "the possibility of generating units today with a few cents of compute time" could be "a very good bet." Even if the estimate is debatable (as it is based on a valuation of bitcoin that would be equivalent to the total global wealth), the reasoning is sound.
On January 16, Satoshi reiterates this idea of an “long-term investment” in an email sent to the mailing list, where he describes Bitcoin's potential use cases. He states then that it “might be prudent to get some in case it catches on” and that “if enough people think the same way, that becomes a self-fulfilling prophecy”. He reiterated this assertion a month later by explaining that the limited amount of units is likely to create a “positive feedback loop” in the sense that “the more users there are, the more the value increases, which could attract more users eager to benefit from the increasing value”. Due to this fact, the speculative element is present from the start, with the aim of kickstarting the system.

Regulation, Zombie Networks, and Ecology

In the wake of this, another discussion on the mailing list has developed. Satoshi mentioned spam limitation as a use case, which sparked reactions from various contributors. The creator of Bitcoin preferred to respond to these criticisms in private, but Hal Finney took it upon himself to object in public. He had time to reflect on these issues when he tried developing his own digital currency with RPOW. First, the question of regulation and governments' potential banning of Bitcoin arises. This issue is raised by Jonathan Thornburg, a researcher for the astronomy department at Indiana University in Bloomington and a regular on the mailing list. In his email responding to the use cases proposed by Satoshi, he outlines the situation of global financial surveillance. He indicates that Bitcoin could allow for the transfer of amounts above the threshold that authorities tolerate. The logical consequence of his reasoning is that "no major government is likely to allow Bitcoin in its present form to operate on a large scale."
This question interests Hal Finney, who writes a tweet on January 21st stating that he is "Looking at ways to add more anonymity to bitcoin." Then, on the 24th, he responds to Jonathan Thornburg by writing that "Certainly a valid point, and one which has been widely discussed in the debates over the years about electronic cash. Bitcoin has a couple of things going for it: one is that it is distributed, with no single point of failure, no 'mint', no company with officers that can be subpoenaed, arrested and shut down."
Next, in the same email, Jonathan Thornburg discusses the topic of zombie computer networks, which could trivially "bypass paid email filters," referring to the use case that Satoshi had highlighted. Satoshi replied to him privately, explaining that in this case, one could "earn a nice profit by setting up pay-per-send email addresses and collecting all the spam money," an opinion he transcribed on the list on the 25th. On the other hand, Hal Finney reminds us that the proof of work "is primarily aimed at ensuring the reliability of the transaction history database." He adds that if the proof-of-work tokens are useful, machines will no longer remain idle, and parasitism will decrease.
Finally, the last comment comes from John Gilmore, a founding member of the cypherpunks and the keeper of the movement's first mailing list from 1992 to 1997. In an email sent on January 25, he highlights the supposed ecological consequences of Bitcoin and writes that "the last thing we need is to deploy a system designed to burn all available cycles, consuming electricity and generating carbon dioxide, all over the Internet, to produce small amounts of bitbux to get emails or spams through." Satoshi replies to him privately that "it would be ironic to have to choose between economic freedom and environmental preservation." He adds that "proof of work is the only solution [he has] found to make a peer-to-peer electronic cash system work" and that, even if it were to consume a lot of energy, "it would still waste less than the labor and resource-intensive conventional banking activity it would replace."
John Gilmore in 2007 (source: Flickr)
On the 27th, Hal Finney mentions ways to reduce the energy dissipation associated with calculating proof of work. An hour later, he writes on Twitter, "thinking about how to reduce CO2 emissions from a widespread Bitcoin implementation." Another supporter comes from cypherpunk Zooko Wilcox-O'Hearn, who was then working on Tahoe-LAFS. This file-sharing system is a successor to Mojo Nation, a project popular in the early 2000s. On January 26, within the discussion on the mailing list, he shared a link to a post he published that same day on his blog titled "Decentralized Money," where he mentions various digital currency projects (DigiCash, bit gold, b-money) and praises Bitcoin. He notably writes:
"What I want is a currency which everyone can cheaply and conveniently use but which no-one has the power to manipulate. No-one has the power to inflate or deflate the currency supply, no one has the power to monitor, tax, or prevent transactions. Truly the digital equivalent of gold, during the times and places when gold was the universal currency."
A link to this text would eventually be added to Bitcoin.org a few weeks later. And Satoshi thanked Zooko personally a year and a half later for this little help.

Peer-to-Peer and the Distrust of Central Banks

As we have said, while Satoshi's communication initially was limited to the Cryptography mailing list, it later expanded to other horizons. In February 2009, he participated in the forum and mailing list of the P2P Foundation, an organization founded in 2007 that studies the impact of peer-to-peer infrastructures on society. He interacted with several of its members, always intending to promote his model. On February 11th, Satoshi published an introduction message presenting Bitcoin on the forum (p2pfoundation.ning.com), and sent a copy via email to the list (p2p-research). In this text, he wrote:
"The fundamental problem with conventional currency is all the trust that's needed to make it work. We must trust the central bank not to debase the currency, but the history of fiat currencies is full of breaches of that trust. We must trust banks to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. We have to trust them to protect our privacy, to not let identity thieves drain our accounts. Their significant overhead costs make micropayments impossible."
He claims to be a Japanese man on his profile, but that's not all. An interface update in 2011 revealed his age: 35 years old, which means he was 32 or 33 years old in 2009. Then, in 2014, it was discovered that he had indicated a specific date of birth: April 5, 1975. This seemingly innocuous date is likely a composite reference to the prohibition for American citizens to own gold between 1933 and 1975 in the United States. The day of April 5th relates to the day this prohibition was established by the Executive Order 6102 signed by President Franklin Delano Roosevelt on April 5, 1933, and the year 1975 corresponds to its repeal with the enactment of the Public Law 93-373. This detail is very important since this prohibition ended the classical gold standard (where one could obtain gold in exchange for a representative bill), allowed the devaluation of the dollar (through the Gold Reserve Act in 1934), and facilitated the establishment of the floating exchange rate monetary regime that we know following the Nixon Shock of 1971.
Satoshi Nakamoto's profile on the P2P Foundation forum on March 17, 2011 (source: forum capture)
This is not the only reference to precious metals found in Satoshi's communications. The creator of Bitcoin writes in the comments on February 18:
"To Sepp's question, indeed there is nobody to act as a central bank or federal reserve to adjust the money supply as the population of users grows. That would have required a trusted party to determine the value, because I don't know a way for software to know the real-world value of things. If there was some clever way, or if we wanted to trust someone to actively manage the money supply to peg it to something, the rules could have been programmed for that. In this sense, it's more typical of a precious metal."
Satoshi Nakamoto is also active on the mailing list where he exchanges ideas with Martien van Steenbergen, a Dutch project management consultant. On February 13, he addresses the topic of Bitcoin's programmability and writes to him:
"I see Bitcoin as a cornerstone, as a first step if you want to implement programmable P2P social currencies as described by Marc [Fawzi]'s ideas and others discussed here. First, a basic and normal P2P currency needs to work. Once it is established and proven, moving to the next step, that of dynamic automatic currency, is easy.
I really like the idea of virtual communities, without geographical belonging, experimenting with new economic paradigms."
This all shows that the creator of Bitcoin seeks to adapt to his audience and is doing what he can to get people interested in his discovery.

Mike Hearn and the 21 million

Satoshi's communication strategy is gradually bearing fruit. In April 2009, other people start taking an interest in his invention. This is the case of Mike Hearn, a 24-year-old British developer working for Google from Switzerland, who dedicates his free time to free software. The latter was then interested in digital payment systems, and in particular Ripple, Ryan Fugger's project. And it was precisely on the Ripple Google Group that he heard about Bitcoin through a discussion thread created in March by Charles N. Wyble, a young American computer scientist and entrepreneur.
On April 12, Mike Hearn sent an email to Satoshi, asking a series of questions about Bitcoin. He noted that "it is rare to encounter truly revolutionary ideas" and did not fail to mention Ripple.
Mike Hearn and Satoshi Nakamoto discussed various aspects of Bitcoin, such as scaling, micropayments, how the software works, and the absence of chargebacks. In particular, Mike Hearn asked Satoshi why he chose the quantity of "24 million" (sic) for the total amount of bitcoins and whether they could be subdivided. Satoshi then gave the following explanation:
"My choice for the number of coins and distribution schedule was an educated guess. It was a difficult choice because once the network is going, it's locked in and we're stuck with it. I wanted to pick something that would make prices similar to existing currencies, but without knowing the future, that's very hard. I ended up picking something in the middle. If Bitcoin remains a small niche, it'll be worth less per unit than existing currencies. If you imagine it being used for some fraction of world commerce, then there's only going to be 21 million coins for the whole world, so it would be worth much more per unit. Values are 64-bit integers with 8 decimal places, so 1 coin is represented internally as 100000000. There's plenty of granularity if typical prices become small. For example, if 0.001 is worth 1 Euro, then it might be easier to change where the decimal point is displayed, so if you had 1 Bitcoin it's now displayed as 1000, and 0.001 is displayed as 1."
He would later explain to Mike Hearn that he had "thought about 100 BTC [per block] and 42 million," but 42 million seemed high to him. ("I thought about 100 BTC and 42 million, but 42 million seemed high.")
After contacting Satoshi, Mike Hearn began using the software on his computer. He mined a few blocks, including block 11,157. Parallel to their discussion, the two men made some monetary exchanges. On April 18, Mike Hearn sent 32.51 bitcoins to Satoshi, and he returned the same day. They also sent each other 50 bitcoins from their mining efforts.

Martti Malmi and the Presentation of Bitcoin

Satoshi's communication also caught the attention of a young Finnish computer science student named Martti Malmi. He discovered Bitcoin in early April through a text on the P2P Foundation forum. On the 9th, he started using the software and mined his first block (block 10,351). In the evening, he wrote a short presentation on Bitcoin, in which he supported the anarchist hypothesis that "P2P Currency could make the government extinct?" He published his text under the pseudonym Trickster(n) on two libertarian forums of different sensitivities: anti-state.com (ASC) and the forum of Freedomain Radio (the media of anarcho-capitalist Stefan Molyneux). Martti wrote:
"The system is anonymous, and no government could possibly tax or prevent the transactions. There's no central bank that can debase the currency with the unlimited creation of new money. The widespread adoption of such a system seems like something that could have a devastating effect on the state's ability to feed off its citizens."
Martti Malmi in 2013 (source: Business Insider)
Martti then sends an email to Satoshi stating that he is the author of this text, where he writes that he "would like to help with Bitcoin" even though he "doesn't have much experience in development yet." Satoshi Nakamoto replies on May 2, telling him that his "understanding of Bitcoin" is "right on the money."
The creator of Bitcoin enlisted him to contribute to the web page on SourceForge, the platform where the project is hosted, notably by writing a Frequently Asked Questions (FAQ) section. On the homepage (bitcoin.sourceforge.net), he presents Bitcoin as an "anonymous digital currency based on a peer-to-peer network" that does not rely on "any central authority to issue new money or to monitor transactions." He highlights the following advantages:
  • "Transfer money easily through the internet, without having to trust third parties."
  • "No third party can prevent or control your transactions."
  • "Protect yourself from the instability caused by fractional reserve banking and the poor policies of central banks. The limited inflation of the Bitcoin system's money supply is evenly distributed (by computing power) across the entire network, rather than being monopolized by the banks."
  • "The value of Bitcoin is likely to increase as the growth of the Bitcoin economy outpaces the inflation rate - consider Bitcoin as an investment and start running a node today!"
Satoshi approves of this presentation overall, though he has some reservations. He is particularly "uncomfortable" with declaring Bitcoin as an "investment," likely fearing the legal implications of such a statement. The page was published on May 6, and two days later, Martti Malmi promoted it by sharing a link on platforms Hackernews and Reddit. A slightly modified version of this description was found on the main website by the end of 2009.
Spring 2009 also saw the emergence of the word "cryptocurrency", which was initially used to refer to Bitcoin. On May 11, Satoshi wrote to Martti Malmi:
"Someone came up with the word 'cryptocurrency'... maybe it's a word we should use to describe Bitcoin, do you like it?"
The young Finn agrees and suggests that "The P2P Cryptocurrency" could be Bitcoin's slogan. This suggestion will be implemented: the title of the introduction page will become "Bitcoin P2P Cryptocurrency," and the announcement of version 0.3 in July 2010 will describe the project as "Bitcoin, the P2P cryptocurrency."

The Two Forums Dedicated to Bitcoin

Martti Malmi also set up a forum and a wiki, which are still on the SourceForge page. These elements are opened on June 9. On the 13th, Malmi announces the existence of the SourceForge page, the forum, and the wiki on the Bitcoin mailing list:
"The new Bitcoin website/portal is up at bitcoin.sourceforge.net. Forums and a wiki are included, so you're welcome to join discussion and wiki documentation."
This forum finds its audience. It seems that it even leads to the creation of a dedicated IRC channel for development (#bitcoin-dev) in August. However, we do not have an archive as it was only accessible to its members.
Over the months, more and more people sign up and participate in this first forum, making Satoshi realize that the software infrastructure set up by Malmi is insufficient. On November 5, he writes to the young Finn to suggest the creation of a new forum that could handle higher traffic:
"Now that the forum on bitcoin.sourceforge.net is catching on, we really should look for somewhere that freehosts full blown forum software."
After some discussions on the technical solution to adopt, Martti Malmi installs the forum on his server on November 17, and Satoshi starts to configure it on November 19. Starting from the 22nd, the creator of Bitcoin transfers some Q&As from the old forum that cover topics like privacy, mining, and Linux. He also publishes a welcome message. On the 25th, the forum is launched at bitcoin.org/smf.
The first users begin to register at the beginning of the following month. On December 9, the first message posted by someone other than Satoshi appears, which truly kicks off the discussions. As an illustration, here is a screenshot of the forum on May 29, 2010:
The launch of the new forum was an opportunity to release version 0.2 of the software, which Satoshi Nakamoto and Martti Malmi had been working on for months, which was done on December 16. This version includes improvements such as minimization to the taskbar, automatic startup at launch, and multithreading for mining production. The software was also adapted for Linux, thanks to Malmi's contribution and tests carried out by the newly arrived NewLibertyStandard (whose case will be addressed in the next chapter).
On this forum, which became BitcoinTalk in August 2011, Satoshi wrote 539 messages. These messages formed the bulk of the corpus he left behind, allowing him to provide technical clarifications, explain various economic mechanisms, and share his viewpoint on Bitcoin.

Communication in Stages

Thus, the first part of 2009 was dedicated to communication. Satoshi made sure to draw attention to his discovery through various means and in different places. Other people, including Martti Malmi, helped him spread the message.
The promotion of Bitcoin also went through several stages: first, Satoshi focused on online payments; then he emphasized the fixed monetary policy and the limit of 21 million units; and finally, he mentioned the programmability of his model. In the fall of 2009, Bitcoin seemed ready to grow. It was precisely then that the economic bootstrapping of the system took place. The next chapter will discuss this topic.
Quiz
Quiz1/5
Which British newspaper's headline was included in the Bitcoin genesis block in January 2009?