March 7, 2014

Newsweek wanted a scoop for its relaunch cover story, and boy did it deliver: it uncovered the identity of Satoshi Nakamoto, the inventor of bitcoin. Who then promptly came out and denied everything. Which means that one of the two is wrong: either Nakamoto is lying through his teeth, or Newsweek has made what is probably the biggest and most embarrassing blunder in its 81-year history.

But before we try to work out what the answer is, it’s important to separate out the various different questions:

1. Is Dorian Nakamoto the inventor of bitcoin, Satoshi Nakamoto?
2. Do we, and/or Newsweek, have enough evidence to conclude, with certainty, that Dorian Nakamoto is the inventor of bitcoin?
3. Is it reasonable to believe that Dorian Nakamoto is the inventor of bitcoin?

My tentative answers to the three questions are “we don’t know”; no; and yes.

One way to look at this problem is to try to calculate probabilities, and do some kind of Bayesian analysis of the question, given that either Dorian is Satoshi, or he isn’t. (To make matters even more complicated, Dorian’s given name is, actually, Satoshi. But you know what I mean.) But here’s the problem: if you believe either of the two possibilities, you have to believe in a reasonably long series of improbable propositions. Call it the Satoshi Paradox: the probability that Dorian is Satoshi would seem to be very small, and the the probability that Dorian is not Satoshi would seem to be just as small — and yet, somehow, when you add the two probabilities together, the total needs to come to something close to 100%.

The place to start is the Newsweek article, which brooks no doubt about the matter, and which is told using all the power of narrative journalism. The author, Leah McGrath Goodman, has constructed her 4,700-word article as a case for the prosecution, taking us with her on her quest for evidence and ultimately trying to persuade us that there can be no doubt: Dorian is Satoshi.

Goodman adduces lots of evidence, starting with the crazy coincidence of Satoshi’s name. Dorian’s name is Satoshi Nakamoto. He is an accomplished engineer and mathematician: “brilliant”, according to his brother. He was happy to correspond with Goodman until she asked him about bitcoin — at which point he stopped replying to emails and even called the cops on her. Dorian’s brother even predicted his response to Goodman’s article: “He’ll deny everything. He’ll never admit to starting Bitcoin.”

Goodman says that Dorian, “for most of his life, has been preoccupied with the two things for which Bitcoin has now become known: money and secrecy”. He’s a libertarian, whose daughter says that he is “very wary of the government, taxes and people in charge”. He’s 64, which would help explain slightly old-fashioned aspects of Satoshi, like his use of reverse Polish notation and his worrying about saving disk space. And then there’s the smoking gun — the quote that he gave to Goodman when she arrived at his doorstep.

“I am no longer involved in that and I cannot discuss it,” he says, dismissing all further queries with a swat of his left hand. “It’s been turned over to other people. They are in charge of it now. I no longer have any connection.”

This fits exactly with what we know about Satoshi: that he was deeply involved in bitcoin at the beginning, but has had basically nothing to do with it in recent years. It’s well short of an outright confession, of course — but if you add up all of the circumstantial evidence, it’s pretty hard to believe that everything is some bizarre coincidence. Goodman has presented a lot of pieces of the puzzle — and they fit elegantly together, at least at first glance.

On the other hand, even within the article there are signs that it’s not as clear cut as all that. There’s Goodman’s admission, in the article, that she “plainly needed to talk to Satoshi Nakamoto face to face” — something she never really did, except for a few quick words spoken in front of police officers while he was trying to make her go away. Goodman also quotes Gavin Andresen, the person most publicly associated with the development of bitcoin, as saying that even in the early days, Satoshi “went to great lengths to protect his anonymity”. Which hardly squares with the thesis that he was using his real name.

Then there are the duff notes in the piece. “This is the guy who created Bitcoin? It looks like he’s living a pretty humble life.” That, supposedly, is a verbatim quote from a Temple City cop: it’s possible that a cop uttered those words, but that doesn’t stop them from sounding like very bad expository dialogue. And Goodman can certainly overstretch, as for instance here:

There is also the chance “Satoshi Nakamoto” is a pseudonym, but that raises the question why someone who wishes to remain anonymous would choose such a distinctive name.

Remember that the pseudonym theory was not a mere theory, up until yesterday — it was almost universally accepted as the truth. In terms of Bayesian priors, you need very strong evidence to be persuaded that “Satoshi Nakamoto” is not a pseudonym. And this argument doesn’t even come close.

There’s also the whole question of Satoshi’s English, where Goodman can be seen placing a very hard thumb on the scales. Dorian’s English is not good: you can see that in his Amazon reviews, or in the letter he sent about a proposed Los Angeles rail project: “good secruity system against usage of rail as a get away means from the low income generated theives/criminals from area of east LA et. al must be also put in place regardless of the rail passage chosen.”

That kind of language can be seen too in Dorian’s email correspondence with Goodman: “I do machining myself, manual lathe, mill, surface grinders.” Goodman uses this as evidence for her case: she characterizes Satoshi’s original bitcoin proposal as being “somewhat stiffly written”. She also says, reading the original bitcoin paper, that “the punctuation in the proposal is also consistent with how Dorian S. Nakamoto writes, with double spaces after periods and other format quirks.”

But in fact the proposal is written in deeply fluent English:

Merchants must be wary of their customers, hassling them for more information than they would otherwise need. A certain percentage of fraud is accepted as unavoidable. These costs and payment uncertainties can be avoided in person by using physical currency, but no mechanism exists to make payments over a communications channel without a trusted party.

What is needed is an electronic payment system based on cryptographic proof instead of trust.

How is it possible that Goodman would notice double spaces after the periods, here, but would not notice that the sheer fluency of the language is quite incompatible with everything we know about how Dorian writes and speaks? She even quotes an email from Satoshi to Andresen: “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.” This is breezy, colloquial English — and it’s entirely incompatible with Dorian’s language. The discrepancy is hard to square — and is all the more glaring for the fact that Goodman doesn’t even attempt to address it directly.

Then there’s the whole question of finances. Dorian “fell behind on mortgage payments and taxes” in the 1990s, reports Goodman, and lost his home to foreclosure; what’s more, he doesn’t seem to have had a steady job in well over a decade. And yet, famously and notoriously, he has never sold a single one of the million bitcoins he’s credibly assumed to own, despite the fact that, according to Goodman, he and his family “could really use the money”.

Because all bitcoin transactions are public, and because the specific coins Satoshi owns have been identified, selling or spending those coins would give the world a huge clue as to Satoshi’s identity. But with hundreds of millions of dollars at stake, it begs credibility to believe that Dorian couldn’t have found a way to sell at least some of his coins.

Even within Goodman’s piece, then, there are reasons to doubt her thesis. And in the wake of Dorian’s interview with the AP, there are more. His lack of fluency in English is clearly real; he has a credible explanation for the words he said in front of Goodman; and he has a guilelessness to him which would be very hard to fake, especially over the course of many hours with a skeptical reporter.

Put all that together, along with various other problems surrounding things like the time zone of Satoshi’s postings, and there would seem to be a lot of doubt that Dorian is, in fact, Satoshi.

At this point, it’s easy to fall down a rabbit hole of second-order second-guessing. It’s not particularly credible, for instance, that a libertarian engineer named Satoshi Nakamoto would never have heard of bitcoin until three weeks ago, and would, even after today’s news, “mistakenly” call it “bitcom”. What’s more, Dorian’s deny-everything reaction (and the official denial from Satoshi) is entirely consistent with Goodman’s article.

But the fact is that if you believe that Dorian is Satoshi, you have to accept that there are still a lot of things which don’t really add up. And conversely, if you believe that Dorian is not Satoshi, then you at the very least have to wonder at the astonishing number of coincidences that Goodman has uncovered.

Which means that the responsible thing to do, from Newsweek’s perspective, would have been to present a thesis, rather than a fact. For instance, when Ted Nelson attempted to reveal Satoshi’s identity last May, he put together a video where he put forward a theory which he said was “consistent, plausible, and, I believe, compelling”. He then took a step back, and let the bitcoin community more generally come to their own conclusions about whether or not to believe him; in the end, they (generally) didn’t.

Newsweek could have done that. It could have said “here’s a theory”, and then let the world decide. Many people would have believed the theory; others wouldn’t. And lots of us would probably have changed our minds a few times as we weighed the evidence and as Dorian’s own words came out.

But Newsweek didn’t want a theory, it wanted a scoop. And so, faced with what was ultimately only circumstantial evidence, it went ahead and claimed that it had uncovered Satoshi — that, basically, it was 100% certain.

That decision was ill-advised. Newsweek certainly got lots of buzz for its return to print — but it’s now getting just as much buzz for going to press with what is looking increasingly like a half-baked theory. Personally, I don’t know whether Dorian is Satoshi — but I think I can be pretty safe in saying that the probability is somewhere in the range of, say, 10% to 90%. In other words, it’s possible; it might even be probable; but it’s not certain. And anybody who says that it is certain is wrong.

I believe that Goodman believes that Dorian is Satoshi. I believe that Jim Impoco, my ex-boss, who’s now the editor of Newsweek, also believes that Dorian is Satoshi. But belief is not enough. Dan Rather believed that the Killian documents were genuine; Hugh Trevor-Roper believed that the Hitler diaries were genuine; Lara Logan believed that Dylan Davies was telling the truth about Benghazi. Big scoops are dangerous things.

It would have been less satisfying, for Newsweek, to leave a bit of wiggle room — to present the Dorian-is-Satoshi theory as just a theory, rather than as fact. But it is only a theory. And ultimately, it’s always better to be Ariel Dorfman than it is to be Paulina Salas.