Satoshi Nakamoto Email Adds Some Details to the Legend of Bitcoin’s Origins

These emails were shared as evidence by early Bitcoin contributor Martii Malmi as part of his testimony in the Cryptocurrency Open Patent Alliance (COPA) v. Craig Wright trial.

Private email correspondence between anonymous Bitcoin creator Satoshi Nakamoto and Martii Malmi, an early contributor to the project, further reveals the origin story of the flagship cryptocurrency and its creator’s earliest ideas for the future.Bitcoin Miner

The emails were shared as part of Malmi’s testimony in the Cryptocurrency Open Patent Alliance (COPA) v. Craig Wright trial. The trial has been ongoing since early February and will determine if there is any substance to Wright’s claim that he created Bitcoin.

Never Before Seen Emails

One set of emails relates to early conversations between Satoshi Nakamoto and Malmi, who contributed to the Bitcoin website and project code beginning in 2009.

These emails provide insight into Satoshi Nakamoto’s earliest expectations for Bitcoin and its future growth. Based on these emails, he realized the challenges that Bitcoin could face in terms of its legal status.

He wrote in one email:

“There are a lot of things you can say on the sourceforge site, but I can’t say them on my own site …… Even so, I’m uncomfortable with explicitly saying ‘consider it an investment’. That’s a dangerous thing to say and you should remove that bullet point. It’s fine if [Bitcoin users] come to that conclusion on their own, but we can’t say that.”Bitmain Miner

Whether cryptocurrencies and related products are investment contracts has been a key point of debate between the industry and regulators, particularly the SEC.

After years of negativity, Bitcoin has generally become a commodity, with many considering it “digital gold”. This is largely because it was originally issued through mining rather than investment contracts, although Bitcoin exchanges have allowed users to buy crypto assets since as early as 2010.

These emails, by the way, describe the creation of one of the first Bitcoin exchanges. Satoshi Nakamoto was looking for ideas for Bitcoin applications, and Malmi suggested creating an exchange of fiat currency to Bitcoin.

As previously known, Malmi went on to operate and register Bitcoinexchange.com; however, the latest emails show that Satoshi Nakamoto has been a key advisor to the exchange.

Satoshi Nakamoto advised Malmi to initially run the exchange on his own, rather than creating an “eBay-type” or peer-to-peer exchange. He also abandoned plans to incorporate an auction system in favor of Malmi’s idea of setting exchange rates.

In addition, Satoshi Nakamoto received a donation of $3,600, of which $1,000 was used to support the initial operation of the exchange.

Other topics include anonymity, mining profits, and fees

Satoshi Nakamoto also created an early distinction between anonymous and pseudonymous (or partially anonymous) transactions. He anticipated controversy over transaction analysis, which is now a major business for companies like Chainaanalysis and Elliptic.

Satoshi Nakamoto wrote at the time:

“I think we should de-emphasize the anonymity angle …… We can’t give the impression that [Bitcoin] is automatically anonymous. Anonymity is possible, but …… if someone digs into transaction history and starts revealing information that people think is anonymous, the backlash will be much worse if we’re not prepared to expect it ……”

Satoshi Nakamoto and Malmi also discussed other topics, such as mining profits, electricity consumption, and the potential environmental impact of Bitcoin. In response to environmental concerns, Satoshi Nakamoto wrote:

“It would be ironic if we ended up having to choose between economic freedom and conservation.”

He told Malmi that “unfortunately” the proof-of-work consensus method is the only way to ensure that Bitcoin can “work” without a trusted third party. It’s “fundamental” to preventing double-spending, he added.

Satoshi Nakamoto doesn’t seem confused by the idea of putting so much effort into the Bitcoin network. Even if “it does grow to consume a lot of energy,” he writes, it won’t be as “wasteful” as the resources spent on “traditional banking activities.

He further noted:

“The cost will be an order of magnitude lower than the billions in bank fees that pay for all the physical buildings, skyscrapers, and junk mail credit card offers.”

Satoshi Nakamoto was also keenly aware that the price of electricity would affect mining profitability. His analysis at the time did not take into account how fast the mining industry has grown since the introduction of ASIC devices. However, these emails show that he was concerned about how fast the technology would evolve in the coming years.

“The value of bitcoins is related to the power consumed to produce them, and if you run a computing task 7*24 and don’t let it idle, it will consume more power. Also, the extra watts consumed will be directly credited to your electricity bill and the value of the bitcoins you produce will be less than that.”
Another topic discussed by the two developers included the possibility of using Bitcoin timestamped data. Later, Satoshi Nakamoto’s own Genesis block deal included a famous financial headline.

The emails also reveal discussions surrounding Satoshi Nakamoto’s initial decision to “hide the transaction fee settings” because he thought the ability to customize fees would confuse users. He predicted that fees wouldn’t need to be adjusted until “the distant future, if ever”.

The prediction about Satoshi Nakamoto was partially correct. Prior to 2017, the average transaction cost for Bitcoin was just a few cents, but costs have risen dramatically over the years, with recent transactions typically costing a few dollars.

Emails may refute Craig Wright’s claims

Crucially, Malmi’s email contradicts some of the claims that Wright has made over the years in his attempts to prove he is Satoshi Nakamoto.

Wright says that Malmi first contacted Nakamoto in February 2009, but the email records show that Malmi was not the one who contacted Nakamoto. However, the e-mail records show that Malmi contacted Satoshi Nakamoto a few months later, in May 2009.

Another contradiction pointed out by Malmi is that Wright misspelled Malmi’s name in court, which is out of character for Satoshi Nakamoto, who knows him well.

Another contradiction stems from the fact that Wright misidentified Malmi’s nationality, even though the emails contained Finnish email addresses ending in .fi and, in one case, Malmi’s full street address, including his country.

Wright also claimed in a previous case that Malmi had created the darknet marketplace Silk Road. This presumably led Wright (who plays Satoshi Nakamoto) to publicly withdraw from Bitcoin in 2010.

In his witness statement, Malmi called the allegations “absurd and false. He noted that Ross Ulbricht was convicted years ago of creating and operating an illegal dark web business.

Media outlets have previously reported on emails filed between Nakamoto and Adam Back as part of a broader effort by the COPA to refute Wright’s claims in court.