Monday, November 24, 2014

Is Bitcoin "Creator" Satoshi Nakamoto an NSA Agent?

 CryptoNews, not an outlet unfriendly to Bitcoin, reports:
The NSA was one of the first organizations to describe a Bitcoin-like system. About twelve years before Satoshi Nakamoto published his legendary white paper to the cryptography mailing list, a group of NSA information security researchers published a paper entitled How to Make a Mint: the Cryptography of Anonymous Electronic Cash in two prominent places, the first being an MIT mailing list and the second being much more prominent, The American Law Review (Vol. 46, Issue 4 ).
The paper outlines a system very much like Bitcoin in which secure financial transactions are possible through the use of a decentralized network the researchers refer informally to as a Bank. They list four things as indispensable in their proposed network: privacy, user identification (protection against impersonation), message integrity (protection against tampering/substitution of transaction information – that is, protection against double-spending), and nonrepudiation (protection against later denial of a transaction – a blockchain!).
CN concludes with a series of questions:

 If it comes out that the NSA has been behind Bitcoin all along, does that change its value? After all, the NSA is the biggest snoop in town these days, keeping massive logs of metadata on phone calls with many speculating that they are doing a little more than that even. That they are keeping the contents of the phone calls as well. And as for secure e-mail: PGP was declared dead almost a year ago.
What do you think? Is Satoshi in fact an NSA agent? What does this imply for the sanctity of Bitcoin? Does this prospect comfort or discomfort you?
I have nothing to add to the debate over the origins of Bitcoin, I do want to emphasize, however. that I have long been a critic of Bitcoin and the idea that it is somehow is a repellent to government monitoring of transactions. Bitcoin is a very trackable instrument, which would be a powerful tool for the NSA in tracking actions of individuals.

I don't know if NSA developed Bitcoin, but if Bitcoin were ever adopted by a large majority of Americans, it would be a spectacular boost to the NSA in its tracking of individuals. The new CN report certainly hints at an NSA role, and it is completely understandable why they would want to introduce such an instrument.

Have the Bitcoin fanboys been duped by the NSA? Possibly. But the real Bitcoin fanboy failure is in not being able to recognize the faulty promotion of Bitcoin as a method of some kind of universal currency that would protect citizens of the world from government control of monetary transactions. It does no such thing.


  1. No, it wouldn't preclude bitcoins becoming money if the NSA was behind it all along.

    What precludes bitcoins from becoming money is that it has no use-value, and therefore is not capable of communicating information about the subjective values people have for those means which they employ in the satisfaction of their preferences.

    In short: It doesn't mean anything to anybody, so any attempt to use it as a money must necessarily be based either on a gamble or on the taking advantage of someone else's always mistaken assumption that bitcoins somehow do, actually, mean something.

    Randomly picking a number of bitcoins to pay for a pizza is NOT economic calculation.

    1. Oh, and a "dollar" or "yen" or "Euro" has a use-value? And a single initial transaction, mainly to show feasibility, determines current exchange value of bitcoins? I'm tempted to call this sort of argument "vulgar Austrian", but at best it is a parroting of Austrian ideas that do not go where Anonymous wants them to take them.

    2. No, the paper "dollar" never had a use value; Which is why, even when it was backed by gold it wasn't money - rather, it was an IOU *for* money. Money being commodities such as gold and silver.

      The fact that paper is being used as if it were money doesn't prove that it is money, either.

      First of all, paper was forced on people:

      A History of Gold Confiscation

      Why the Greenbackers Are Wrong (AERC 2013)

      Second, any value that is being derived from the use of paper is derived precisely because someone *else* in the economy has been tricked into giving up something for nothing. Paper promises aren't wealth, and using them to counterfeit real goods and services - regardless of whether people willingly, yet unknowingly, accept counterfeit promises in trade - is theft. At best, it could be said that it is an economic calculation on one's ability to successfully defraud another.

      But thirdly, depending on how the term is used, neither dollars nor bitcoins can even be called a medium of exchange. Just because you exchange something indirectly, doesn't make the intermediary good a "medium" (in what I consider to be the correct use of the term). Mediums transport something. In the case of money, it transports subjective value until it is redeemed for that which you value more than the good for which you received the money.

      I try to meet people where they're at, so I sometimes choose to use the term "medium of exchange" in the sense that you would probably mean it, because I think I can still make my main case, and keep your attention, by pointing out that "just because something is widely used as a medium of exchange doesn't make it money", because the definition of money entails economic calculation and yet you can be tricked into accepting a medium of exchange that either nobody wants or has no use-value.

      Your mistake is that you think of money as something other than a barter good. But given that all human action is profit-oriented, the moment your medium of exchange has no link to use-value is the moment you lose the ability to determine profit and loss (more money units does not necessarily mean more profit).

      This is why real money is always something with a use-value. Any other widely-used medium of exchange is at least partially fraudulent.

  2. In computer security, there is a concept of a "honeypot." The honeypot lures and viruses onto its machine, so that they can be trapped, quarantined and discovered. Perhaps bitcoin is a kind of honeypot used by the government to catch people they deem lawless. I have no evidence for this. Just a hypothesis.

  3. The computer science breakthrough seems too significant for a honey pot. I don't think the NSA is this subtle or forward thinking. Even if the NSA owns the crypto primitives currently used in Bitcoin, the idea could easily be forked into a system with tools they don't own. The unintended consequences of this 'honeypot' would be massive... governments never do that. Ummmm, wait a minute...