the face behind bitcoin - newsweek

3/6/2014 The Face Behind Bitcoin - Newsweek

http://mag.newsweek.com/2014/03/14/bitcoin-satoshi-nakamoto.html 1/13

The Face Behind Bitcoin

Satoshi Nakamoto stands at the end of his sunbaked driveway looking timorous. Andannoyed.

He's wearing a rumpled Tshirt, old blue jeans and white gym socks, without shoes,like he has left the house in a hurry. His hair is unkempt, and he has the thousandmile stare of someone who has gone weeks without sleep.

He stands not with defiance, but with the slackness of a person who has waged battlefor a long time and now faces a grave loss.

Two police officers from the Temple City, Calif., sheriff's department flank him,looking puzzled. "So, what is it you want to ask this man about?" one of them asks me."He thinks if he talks to you he's going to get into trouble."

"I don't think he's in any trouble," I say. "I would like to ask him about Bitcoin. Thisman is Satoshi Nakamoto."

"What?" The police officer balks. "This is the guy who created Bitcoin? It looks likehe's living a pretty humble life."

I'd come here to try to find out more about Nakamoto and his humble life. It seemedludicrous that the man credited with inventing Bitcoin the world's most wildlysuccessful digital currency, with transactions of nearly $500 million a day at its peak would retreat to Los Angeles's San Bernardino foothills, hole up in the family homeand leave his estimated $400 million of Bitcoin riches untouched. It seemed similarlyimplausible that Nakamoto's first response to my knocking at his door would be tocall the cops. Now face to face, with two police officers as witnesses, Nakamoto'sresponses to my questions about Bitcoin were careful but revealing.

Tacitly acknowledging his role in the Bitcoin project, he looks down, staring at the

By Leah McGrath Goodman / March 6, 2014 6:05 AM EST

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pavement and categorically refuses to answer questions.

"I am no longer involved in that and I cannot discuss it," he says, dismissing all furtherqueries with a swat of his left hand. "It's been turned over to other people. They are incharge of it now. I no longer have any connection."

Nakamoto refused to say any more, and the police made it clear our conversation wasover.

But a twomonth investigation and interviews with those closest to Nakamoto and thedevelopers who worked most frequently with him on the outofnowhere globalphenomenon that is Bitcoin reveal the myths surrounding the world's most famouscryptocurrency are largely just that myths and the facts are much stranger than thewellestablished fiction.

Far from leading to a Tokyobased whiz kid using the name "Satoshi Nakamoto" as acipher or pseudonym (a story repeated by everyone from Bitcoin's rabid fans to TheNew Yorker), the trail followed by Newsweek led to a 64yearold JapaneseAmericanman whose name really is Satoshi Nakamoto. He is someone with a penchant forcollecting model trains and a career shrouded in secrecy, having done classified workfor major corporations and the U.S. military.

Standing before me, eyes downcast, appeared to be the father of Bitcoin.

Not even his family knew.

There are several Satoshi Nakamotos living in North America and beyond both deadand alive including a Ralph Lauren menswear designer in New York and another whodied in Honolulu in 2008, according to the Social Security Index's Death Master File.There's even one on LinkedIn who claims to have started Bitcoin and is based inJapan. But none of these profiles seem to fit other known details and few of the leadsproved credible. Of course, there is also the chance "Satoshi Nakamoto" is apseudonym, but that raises the question why someone who wishes to remainanonymous would choose such a distinctive name. It was only while scouring adatabase that contained the registration cards of naturalized U.S. citizens that aSatoshi Nakamoto turned up whose profile and background offered a potential match.But it was not until after ordering his records from the National Archives andconducting many more interviews that a cohesive picture began to take shape.



Two weeks before our meeting in Temple City, I struck up an email correspondencewith Satoshi Nakamoto, mostly discussing his interest in upgrading and modifyingmodel steam trains with computeraided design technologies. I obtained Nakamoto'semail through a company he buys model trains from.

He has been buying train parts from Japan and England since he was a teenager,saying, "I do machining myself, manual lathe, mill, surface grinders."

The process also requires a good amount of math, something at which Nakamoto andhis entire family excels. The eldest of three brothers who all work in engineering andtechnical fields, Nakamoto graduated from California State Polytechnic University inPomona, Calif., with a degree in physics. But unlike his brothers, his circuitous careerpath is very hard to trace.

Nakamoto ceased responding to emails I'd sent him immediately after I began askingabout Bitcoin. This was in late February. Before that, I'd also asked about hisprofessional background, for which there is very little to be found in the public record.I only received evasive answers. When he asked about my background, I told him I'dbe happy to elaborate over the phone and called him to introduce myself. When therewas no response, I asked his oldest son, Eric Nakamoto, 31, to reach out and seewhether his father would talk about Bitcoin. The message came back he would not.Attempts through other family members also failed.

After that, Nakamoto disregarded my requests to speak by phone and did not returncalls. The day I arrived at his modest, singlefamily home in southern California, hissilver Toyota Corolla CE was parked in the driveway but he didn't answer the door.

At one point he did peer out, cracking open the door screen and making eye contactbriefly. Then he shut it. That was the only time I saw him without police officers inattendance.

"You want to know about my amazing physicist brother?" says Arthur Nakamoto,Satoshi Nakamoto's youngest sibling, who works as director of quality assurance atWavestream Corp., a maker of radio frequency amplifiers in San Dimas, Calif.

"He's a brilliant man. I'm just a humble engineer. He's very focused and eclectic in hisway of thinking. Smart, intelligent, mathematics, engineering, computers. You name it,he can do it."



But he also had a warning.

"My brother is an asshole. What you don't know about him is that he's worked onclassified stuff. His life was a complete blank for a while. You're not going to be able toget to him. He'll deny everything. He'll never admit to starting Bitcoin."

And with that, Nakamoto's brother hung up.

His remarks suggested I was on the right track, but that was not enough. While hisbrother suggested Nakamoto would be capable of starting Bitcoin, I was not at all surewhether he knew for certain one way or the other. He said they didn't get along anddidn't speak often.

I plainly needed to talk to Satoshi Nakamoto face to face.

Bitcoin is a currency that lives in the world of computer code and can be sentanywhere in the world without racking up bank or exchange fees, and is then stored ona cellphone or hard drive until used again. Because the currency resides in code, it canalso be lost when a hard drive crashes, or stolen if someone else accesses the keys tothe code.

"The whole reason geeks get excited about Bitcoin is that it is the most efficient way todo financial transactions," says Bitcoin's chief scientist, Gavin Andresen, 47. Heacknowledges that Bitcoin's ease of use can also lead to easy theft and that it is safestwhen stored in a safedeposit box or on a hard drive that's not connected to theInternet. "For anyone who's tried to wire money overseas, you can see how mucheasier an international Bitcoin transaction is. It's just as easy as sending an email."

Even so, Bitcoin is vulnerable to massive theft, fraud and scandal, which has seen theprice of Bitcoins whipsaw from more than $1,200 each last year to as little as $130 inlate February.

The currency has attracted the attention of the U.S. Senate, the Department ofHomeland Security, the Federal Reserve, the Internal Revenue Service, the TreasuryDepartment's Financial Crimes Enforcement Network, the Securities and ExchangeCommission and the Federal Bureau of Investigation, which in October shuttered theonline black market Silk Road and seized its $3.5 million cache of Bitcoin. "The FBI isnow one of the largest holders of Bitcoin in the world," Andresen says.



In recent weeks, a revived version of Silk Road as well as one of Bitcoin's biggestexchanges, Tokyobased Mt. Gox, shut down and filed for bankruptcy after attacks byhackers drained each of millions of dollars.

Andresen, a Silicon Valley refugee in Amherst, Mass., says he worked closely with theperson "or entity" known as Satoshi Nakamoto on the development of Bitcoin fromJune 2010 to April 2011. This was before the rise of today's multibilliondollar Bitcoineconomy, boosted last year by the unexpected, if cautious, endorsement of outgoingFederal Reserve chair Ben Bernanke, who said virtual currencies "may hold longtermpromise."

Since then, Bitcoin ATMs have been cropping up across North America (with some ofthe first in Vancouver, British Columbia; Boston; and Albuquerque, N.M.) while theacceptance of Bitcoin has spread to businesses as diverse as Tesla, OkCupid, Reddit,Overstock.com and Virgin Galactic, Richard Branson's aviation company, which hassaid it will blast people into space if they cough up enough Bitcoin.

"Working on Bitcoin's core code is really scary, actually, because if you wrecksomething, you can break this huge $8 billion project," says Andresen. "And that'shappened. We have broken it in the past."

For nearly a year, Andresen corresponded with the founder of Bitcoin a few times aweek, often putting in 40hour weeks refining the Bitcoin code. Throughout theircorrespondence, Nakamoto's evasiveness was his hallmark, Andresen says.

In fact, he never even heard Nakamoto's voice, because the founder of Bitcoin wouldnot communicate by phone. Their interactions, he says, always took place by "email orprivate message on the Bitcointalk forum," where enthusiasts meet online.

"He was the kind of person who, if you made an honest mistake, he might call you anidiot and never speak to you again," Andresen says. "Back then, it was not clear thatcreating Bitcoin might be a legal thing to do. He went to great lengths to protect hisanonymity."

Nakamoto also ignored all of Andresen's questions about where he was from, hisprofessional background, what other projects he'd worked on and whether his namewas real or a pseudonym (many of Bitcoin's devotees use pseudonyms). "He was neverchatty," Andresen says. "All we talked about was code."

https://bitcointalk.org/



Andresen, an Australian who graduated from Princeton with a Bachelor's in computerscience, eventually became Nakamoto's point person on a growing team ofinternational coders and programmers who worked on a volunteer basis to perfect theBitcoin code after its inauspicious launch in January 2009.

Andresen originally heard about Bitcoin the following year through a blog he followed.He reached out to Nakamoto through one of the Bitcoin founder's untraceable emailaddresses and offered his assistance. His initial message to Bitcoin's inventor read:"Bitcoin is a brilliant idea, and I want to help. What do you need?"

Andresen says he didn't give much thought to working for an anonymous inventor. "Iam a geek," he says simply. "I don't care if the idea came from a good person or an evilperson. Ideas stand on their own."

Other developers were driven by "enlightened selfinterest," profit or personalpolitics, he says. But nearly all were intrigued by the promise of a digital currencyaccessible to anyone in the world that could bypass central banks at a time when theglobal financial system was on life support. In this respect, the launch of Bitcoin couldnot have been better timed.

In 2008, just before Bitcoin's official kickoff, a somewhat stiffly written, ninepageproposal found its way onto the Internet bearing the name and email address ofSatoshi Nakamoto.

The paper proposed "electronic cash" that "would allow online payments to be sentdirectly from one party to another without going through a financial institution," withtransactions timestamped and viewable to all.

The masterstroke was replacing the role of banks as the trusted middlemen withBitcoin users, who would act as sentinels for the integrity of the system, verifyingtransactions using their computing power in exchange for Bitcoin.

Bitcoin production is designed to move at a carefully calibrated pace to boost valueand scarcity and remain inflation proof, halving its quantity every four years, and isdesigned to stop proliferating when Bitcoins reach a total of 21 million in 2140.(Bitcoins can be divided by up to eight decimal places, with the smallest units called"satoshis.")

https://bitcoin.org/bitcoin.pdf



"I got the impression that Satoshi was really doing it for political reasons," saysAndresen, who gets paid in Bitcoins along with a halfdozen other Bitcoin coredevelopers working everywhere from Silicon Valley to Switzerland by the BitcoinFoundation, a nonprofit working to standardize the currency.

He doesn't like the system we have today and wanted a different one that would bemore equal. He did not like the notion of banks and bankers getting wealthy justbecause they hold the keys," says Andresen.

Holding the keys has also made early comers to Bitcoin wealthy beyond measure. "Imade a small investment in Bitcoin and it is actually enough that I could now retire if Iwanted to," Andresen says. "Overall, I've made about $800 per penny I've invested.It's insane."

One of the first people to start working with Bitcoin's founder in 2009 was MarttiMalmi, 25, a Helsinki programmer who invested in Bitcoins. "I sold them in 2011 andbought a nice apartment," he says. "Today, I could have bought 100 nice apartments."

Communication with Bitcoin's founder was becoming less frequent by early 2011.Nakamoto stopped posting changes to the Bitcoin code and ignored conversations onthe Bitcoin forum.

Andresen was unprepared, however, for Satoshi Nakamoto's reaction to an emailexchange between them on April 26, 2011.

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

Andresen responded: "Yeah, I'm not happy with the 'wacky pirate money' tone, either."

Then he told Nakamoto he'd accepted an invitation to speak at the Central IntelligenceAgency headquarters. "I hope that by talking directly to them and, more importantly,listening to their questions/concerns, they will think of Bitcoin the way I do as a justplainbetter, more efficient, lesssubjecttopoliticalwhims money," he said. "Not asan allpowerful blackmarket tool that will be used by anarchists to overthrow theSystem."

https://bitcoinfoundation.org/



From that moment, Satoshi Nakamoto stopped responding to emails and dropped offthe map.

Nakamoto's family describe him as extremely intelligent, moody and obsessivelyprivate, a man of few words who screens his phone calls, anonymizes his emails and,for most of his life, has been preoccupied with the two things for which Bitcoin hasnow become known: money and secrecy.

For the past 40 years, Satoshi Nakamoto has not used his birth name in his daily life.At the age of 23, after graduating from California State Polytechnic University, hechanged his name to "Dorian Prentice Satoshi Nakamoto," according to records filedwith the U.S. District Court of Los Angeles in 1973. Since then, he has not used thename Satoshi but instead signs his name "Dorian S. Nakamoto."

Descended from Samurai and the son of a Buddhist priest, Nakamoto was born in July1949 in the city of Beppu, Japan, where he was brought up poor in the Buddhisttradition by his mother, Akiko. In 1959, after a divorce and remarriage, sheimmigrated to California, taking her three sons with her. Now age 93, she lives withNakamoto in Temple City.

Nakamoto did not get along with his stepfather, but his aptitude for math and sciencewas evident from an early age, says Arthur, who also notes, "He is fickle and has veryweird hobbies."

Just after graduating college, Nakamoto went to work on defense and electronicscommunications for Hughes Aircraft in southern California. "That was just thebeginning," says Arthur, who also worked at Hughes. "He is the only person I haveever known to show up for a job interview and tell the interviewer he's an idiot andthen prove it."

Nakamoto has six children. The first, a son from his first marriage in the 1980's, isEric Nakamoto, an animation and 3D graphics designer in Philadelphia. His next fivechildren were with his second wife, Grace Mitchell, 56, who lives in Audubon, N.J., andsays she met Nakamoto at a Unitarian church mixer in Cherry Hill, N.J., in the mid1980s. She recalls he came to the East Coast after leaving Hughes Aircraft, now part ofRaytheon, in his 20s and next worked for Radio Corporation of America in Camden,N.J., as a systems engineer.



"We were doing defensive electronics and communications for the military,government aircraft and warships, but it was classified and I can't really talk about it,"confirms David Micha, president of the company now called L3 Communications.

Mitchell says her husband "did not talk much about his work" and sometimes took onmilitary projects independent of RCA. In 1987, the couple moved back to California,where Nakamoto worked as a computer engineer for communications andtechnologies companies in the Los Angeles area, including financial informationservice Quotron Systems Inc., sold in 1994 to Reuters, and Nortel Networks.

Nakamoto, who was laid off twice in the 1990s, according to Mitchell, fell behind onmortgage payments and taxes and their home was foreclosed. That experience, saysNakamoto's oldest daughter, Ilene Mitchell, 26, may have informed her father'sattitude toward banks and the government.

A libertarian, Nakamoto encouraged his daughter to be independent, start her ownbusiness and "not be under the government's thumb," she says. "He was very wary ofthe government, taxes and people in charge."

She also describes her father as a man who worked all hours, from before the familyrose in the morning to late into the night. "He would keep his office locked and wewould get into trouble if we touched his computer," she recalls. "He was alwaysexpounding on politics and current events. He loved new and old technology. He builthis own computers and was very proud of them."

Around 2000, Nakamoto and Grace separated, though they have never divorced. Theymoved back to New Jersey with their five children and Nakamoto worked as asoftware engineer for the Federal Aviation Administration in New Jersey in the wakeof the September 11 attacks, doing security and communications work, says Mitchell.

"It was very secret," she says. "He left that job sometime in 2001 and I don't think he'shad a steady job since."

When the FAA contract ended, Nakamoto moved back to Temple City, where for therest of that decade things get hazy about what kind of work he undertook.

Ever since Bitcoin rose to prominence there has been a hunt for the real SatoshiNakamoto. Did he act alone or was he working for the government? Bitcoin has beenlinked to everything from the National Security Agency to the International Monetary



Fund.

Yet, in a world where almost every big Silicon Valley innovation seems to erupt inlawsuits over who thought of it first, in the case of Bitcoin the founder has remainedconspicuously silent for the past five years.

"I could see my dad doing something brilliant and not accepting the greater effect ofit," says Ilene Mitchell, who works for Partnerships for Student Achievement inBeaverton, Ore. "But I honestly don't see him being straight about it. Any normalperson would be all over it. But he's not totally a normal person."

Nakamoto's middle brother, Tokuo Nakamoto, who lives near his brother and mother,in Duarte, Calif., agrees. "He is very meticulous in what he does, but he is very afraidto take himself out into the media, so you will have to excuse him," he says.

Characteristics of Satoshi Nakamoto, the Bitcoin founder, that dovetail with Dorian S.Nakamoto, the computer engineer, are numerous. Those working most closely withBitcoin's founder noticed several things: he seemed to be older than the other Bitcoindevelopers. And he worked alone.

"He didn't seem like a young person and he seemed to be influenced by a lot of peoplein Silicon Valley," says Nakamoto's Finnish protégé, Martti Malmi. Andresen concurs:"Satoshi's style of writing code was oldschool. He used things like reverse Polishnotation."

In addition, the code was not always terribly neat, another sign that Nakamoto wasnot working with a team that would have cleaned up the code and streamlined it.

"Everyone who looked at his code has pretty much concluded it was a single person,"says Andresen. "We have rewritten roughly 70 percent of the code since inception. Itwasn't written with nice interfaces. It was like one big hairball. It was incredibly tightand wellwritten at the lower level but where functions came together it could bepretty messy."

Satoshi Nakamoto's 2008 online proposal also hints at his age, with the odd referenceto "disk space" something that hasn't been an issue since the last millennium andolder research citations of contemporaries' work going back to 1957.



The Bitcoin code is based on a network protocol that's been established for decades.Its brilliance is not so much in the code itself, says Andresen, but in the design, whichunites functions to reach multiple ends. The punctuation in the proposal is alsoconsistent with how Dorian S. Nakamoto writes, with double spaces after periods andother format quirks.

In the debate between those who claim Nakamoto writes curiously "flawless English"for a Japanese man and those who contend otherwise, writing under both names canswerve wildly between uppercase and lowercase, full spellings and abbreviations,proper English and slang.

In his correspondences and writings, it has widely been noted that Satoshi Nakamotoalternates between British and American spellings and, depending on his audience,veers between highly abbreviated verbiage and a more formal, polished style. GraceMitchell says her husband does the same.

Dorian S. Nakamoto's use of English, she says, was likely influenced by his lifelonginterest in collecting model trains, many of which he imported from England as ateenager while he was still learning English.

Mitchell suspects Nakamoto's initial interest in creating a digital currency that couldbe used anywhere in the world may have stemmed from his frustration with bank feesand high exchange rates when he was sending international wires to England to buymodel trains. "He would always complain about that," she says. "I would not say hewrites flawless English. He will pick up words and mix the spellings."

Eric, Nakamoto's oldest son from his first marriage, says he remains torn overwhether his father is the founder of Bitcoin, noting that messages from the latterappear more "concise" and "refined than that of my father's."

Perhaps the most compelling parallel between the two Nakamotos are theirprofessional skill sets and career timeframes. Andresen says Satoshi Nakamoto toldhim about how long it took him to develop Bitcoin a span that falls squarely intoDorian S. Nakamoto's job lapse starting in 2001. "Satoshi said he'd been working onBitcoin for years before he launched it," Andresen says. "I could see the original codetaking at least two years to write. He had a revelation that he had solved something noone had solved before."



Satoshi Nakamoto's threeyear silence also dovetails with health issues suffered byDorian S. Nakamoto in the past few years, his family says. "It has been hard, becausehe suffered a stroke several months ago and before that he was dealing with prostatecancer," says his wife, who works as a criticalcare nurse in New Jersey. "He hasn'tseen his kids for the past few years."

She has been unable to get Nakamoto to speak with her about whether he was thefounder of Bitcoin. Eric Nakamoto says his father has denied it. Tokuo and ArthurNakamoto believe their brother will leave the truth unconfirmed.

"Dorian can just be paranoid," says Tokuo. "I cannot get through to him. I don't thinkhe will answer any of these questions to his family truthfully."

Of course, none of this puts to rest the biggest question of all the one that onlySatoshi Nakamoto himself can answer: What has kept him from spending hishundreds of millions of dollars of Bitcoin, which he reaped when he launched thecurrency years ago? According to his family both he and they could really use themoney.

Andresen says if Nakamoto is as concerned about maintaining his anonymity as heremembers the answer might be simple: He does not want to participate in the Bitcoinmadness. "If you come out as the leader of Bitcoin, now you have to make appearancesand presentations and comments to the press and that didn't really fit with Satoshi'spersonality," he says. "He didn't really want to lead it anymore. He was prettyintolerant to incompetence. And he also realized the project would go on withouthim."

On the other hand, it is possible Nakamoto simply lost the private security keys tounlock his Bitcoin and cash in on his riches. Andresen, however, says he doubts it. "Hewas too disciplined," he says.

If Nakamoto ever sells his Bitcoin fortune, he would likely have to do so at alegitimate Bitcoin bank or exchange, which would not only give away his identity butalert everyone from the IRS to the FBI of his movements. While Bitcoin lets its usersconduct transactions anonymously, all transactions can be viewed transparently online and everyone is watching Nakamoto's Bitcoin to see if he spends it, says Andresen.



For his part, Andresen says he is inclined to respect Nakamoto's anonymity. "Whenprogrammers get together, we don't talk about who Satoshi Nakamoto is," he says."We talk about how we should have invested in more Bitcoin. I mean, we're curiousabout it, but honestly, we really don't care."

Calling the possibility her father could also be the father of Bitcoin "flabbergasting,"Ilene Mitchell says she isn't surprised her father would choose to stay under cover ifhe was the man behind this venture, especially as he is currently concerned about hishealth.

"He is very wary of government interference in general," she says. "When I was little,there was a game we used to play. He would say, 'Pretend the government agencies arecoming after you.' And I would hide in the closet."

Forensic analysts Sharon Sergeant and Barbara Mathews contributed to research forthis piece.

the face behind bitcoin - newsweek

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