
Ask HN: Why would a government have created bitcoin? - pg
I've long suspected bitcoin was created by a government.  Bulletproof protocols usually require peer review, yet there have been zero leaks from the reviewers.  Pools of crypto guys who don't leak stuff are usually employed by governments.<p>The part that puzzles me is why a government would do this.  I can imagine several possibilities:<p>1. To finance their own black operations.<p>2. Because they thought digital currencies were inevitable, and they preferred bitcoin to some potentially more malevolent form.  (Could bitcoin have been worse from a government's point of view?)<p>3. A friend suggested this: because they felt their currency would never become the standard reserve currency, and they felt it was better that no one's be if theirs couldn't be.<p>4. A variant of the above: the US did it because it seemed inevitable that the dollar would eventually lose its place as the standard reserve currency, and better to have it replaced by bitcoin that the yuan.<p>I realize some of these explanations are pretty far fetched, but so is an individual cooking up bitcoin as an intellectual exercise.  Whatever the explanation of bitcoin's origin turns out to be, it will probably be pretty weird.<p>Anyone have opinions about these possible explanations, or other ones?
======
jacquesm
Bitcoin was not created by a government. There are two groups that are on the
suspects list for having engendered bitcoin, one group centers around Trinity
College, another is a bunch of loosely affiliated international collaborators.
Both groups are on the record with precursors to bitcoin (papers, software),
neither has admitted openly that they were the ones.

If you read their papers in the run-up to bitcoin then there is no doubt that
either group had the technical ability and the means to execute on the idea.

To posit that a government did this would need to come with some proof that is
stronger than the proof pointing at these two non governmental groups.

~~~
nostromo
Care to speculate on their motivation for remaining anonymous?

~~~
achompas
As an alternative currency, Bitcoin is very, very illegal in various
countries. For example, I believe the Federal Reserve Act in the US outlaws
all non-Reserve currency.

~~~
linhares
you are two or three years out of the loop, buddy

------
frendiversity
I've long suspected bitcoin was created by Paul Graham. Bulletproof protocols
usually require peer review, yet there have been zero leaks from the
reviewers. Pools of crypto guys who don't leak stuff are usually employed by
startup funds.

The part that puzzles me is why Paul Graham would do this. I can imagine
several possibilities:

1\. To finance his own black operations.

2\. Because he thought digital currencies were inevitable, and he preferred
bitcoin to some potentially more malevolent form. (Could bitcoin have been
worse from Paul Graham's point of view?)

3\. A friend suggested this: because he felt his currency would never become
the standard reserve currency, and he felt it was better that no one's be if
his couldn't be.

4\. A variant of the above: Peter Thiel did it because it seemed inevitable
that the PayPal account would eventually lose its place as the standard
Internet currency, and better to have it replaced by bitcoin than Liberty
Reserve.

I realize some of these explanations are pretty far fetched, but so is a
government cooking up bitcoin as an political exercise. Whatever the
explanation of bitcoin's origin turns out to be, it will probably be pretty
weird.

~~~
raldi
> Pools of crypto guys who don't leak stuff are usually employed by startup
> funds.

That's not true, and it's the crucial difference between your version and the
original.

------
mooneater
Here's my conspiracy theory:

BitCoin was created by a group who found a way to reverse SHA 256. They
considered how to monetize this invention. The idea of building a currency
around that secret was originally a joke, but a proof of concept got taken
seriously by one member.

These people can compute bitcoins directly instead of mining, and will
therefore control the future money supply. And by enforcing a limit on the
supply of Bitcoin, they also figured out how to avoid the inflationary problem
inherent in owning an actual currency mint.

~~~
skore
I knew those people researching quantum computation were up to no good.

------
neilk
Are we overestimating how much crypto is involved?

I'm not a crypto guy, but as I understand it, the crypto in Bitcoin is
relatively simple and well-understood. The genius idea was how to verify
transactions using proof-of-work in a peer system. At least this is what an
acquaintance of mine, Paul Bohm, says ([http://www.quora.com/Bitcoin/Is-the-
cryptocurrency-Bitcoin-a...](http://www.quora.com/Bitcoin/Is-the-
cryptocurrency-Bitcoin-a-good-idea/answer/Paul-Bohm)). Bitcoin lets other
people worry about performance and implementation; the protocol just poses a
problem. And apparently the first miners, produced by the entity known as
Satoshi Nakamoto, were really slow.

So maybe one person, or a small group of people, could have made that
conceptual breakthrough?

~~~
chjj
Came here to say this. I really think it may have been one person. It was a
brilliant idea, and as you all know, it only takes one person to have an idea,
but would it really take _that_ much work to implement? Would it really
require an elite highly-funded team of programming geniuses?

When the Linux kernel was first posted, a lot of people, including RMS,
couldn't believe that one man got a kernel up and running so quickly.
Normally, up until that point, only large well-funded companies were thought
to be capable of producing robust kernels. Linux happened despite this
preconception. Imagine if Linux had been released anonymously. I wonder what
rumors would have started.

~~~
neilk
Hang on a minute. Writing toy kernels for an OS is an exercise that grad
students do. The other Unix OS for PCs at the time, Minix, was the work of a
single individual, Andrew Tanenbaum. There are plenty of other examples.

I don't really know what I'm talking about when I talk about crypto or
Bitcoin. I was just musing out loud. In fact, don't even read this comment
that I'm writing. :)

BTW, I think the best comment in this thread so far is by myprasanna, who
seems to be saying that the premise of the entire question is wrong. Those of
us who came late to Bitcoin marvel at how this brand new idea and an
implementation came out of nowhere. But it seems to have had a history on
crypto mailing lists, and implementation ideas were even discussed in public.
Maybe the idea has a longer gestation than it appears.

<https://news.ycombinator.com/item?id=5548682>

~~~
chjj
I specifically said "robust" kernels for this reason. While I wouldn't call
Minix a toy kernel, it definitely was not as robust as Linux after a while
into Linux's infancy. I'm guessing it was considered something a single person
could probably manage due to its size.

I think this actually furthers my point as well. Minix was created by a world-
renowned computer scientist. Linux was created by a college student. Did it
really require an elite genius computer scientist to make Linux? No, it just
required a kid who was interested in programming (as it happens, he was also
very smart). Couldn't the same be true of bitcoin?

------
tptacek
So many weird assumptions baked into this question.

* Why do you think Bitcoin is bulletproof?

* What kind of peer review do you think Bitcoin has had?

* Who are the crypto review firms that routinely leak things?

* Why would a non-leaky crypto review imply that Bitcoin was bulletproof?

* What about the pools of crypto guys at IBM, at Google, or at Microsoft?

* What would make one think Bitcoin is a comparably hard problem to other cryptosystems?

* Why is a cryptocurrency, which is a problem that has been tackled repeatedly by both hobbyists and researchers, more far-fetched as an intellectual exercise than, say, Tor?

SSL/TLS is the best-reviewed cryptosystem in the world. The USG relies on it
in a myriad of different ways. What's the longest stretch we've gone without
discovering some horrible flaw in it?

~~~
Kapura
I disagree with the governement conspiracy thing, but the bitcoin protocol has
been incredibly secure. This is pretty common knowledge. People can't "hack"
into the bitcoin network and make themselves millionaires.

~~~
patio11
Howdy Kapura. (A bit of background knowledge: It might not be obvious if you
haven't been here for a while, but the guy you're talking to is something of
an expert in making systems dependent on cryptography do horrible, horrible
things.)

It may be "common knowledge" that the bitcoin protocol is secure, but this is
largely because a) most bitcoin users and advocates are not competent to make
any determination of security, b) you should probably include an asterix to
the claim like "Well, secure if you don't count the _successful double-spend
attack_ which necessitated a holy-shit-drop-everything-and-downgrade response
by several mining pool operators", and c) acknowledge that one of the main
reasons people don't attack the protocol is because Bitcoin exchanges have
been coughing up everything one could possibly want, and more, with far less
work.

I should probably write a blog post digging into what people mean when they
talk about "the Bitcoin protocol", by the way. Bitcoin isn't a protocol like
HTTP is a protocol. Bitcoin's entire protocol specification is the Satoshi
bitcoin client, which you have to warts-and-all emulate to be accepted by the
network, because if you ever disagree with the Satoshi client about the
validity of _any single transaction in history_ then you're suddenly building
off a blockchain which is incompatible with the one used by all the businesses
that one would theoretically want to spend Bitcoins at. It is entirely
possible for "the Bitcoin protocol" -- the series of steps by which clients
agree on the status of the blockchain -- to be bulletproof while the Satoshi
client (i.e. the only instantiation of the protocol that matters) to get
busted like a pinata via e.g. a buffer overflow attack. One would hope that
_when_ that happens, it does not happen on every computer using bitcoin
simultaneously, which strikes me as a very plausible scenario given that the
designed intent of bitcoin is to fan attacker-chosen executable instructions
to every node on the network.

~~~
brian_cloutier
Just a few points here, although most of your comment is valid.

> Well, secure if you don't count the successful double-spend attack which
> necessitated a holy-shit-drop-everything-and-downgrade response by several
> mining pool operators

You're getting your history wrong. There was a problem with older satoshi
clients that caused a fork in the block chain. The fork was serious enough
that all miners with newer clients were asked to temporarily downgrade. There
was also somebody who took advantage of that fork to create a double-spend.

So, 1) The double spend was caused by the holy-shit moment, not the other way
around. 2) There is no proof anybody lost money. Most big merchants stopped
processing transactions during the fork, who knows if the transactions on the
losing chain were accepted.

> designed intent of bitcoin is to fan attacker-chosen executable instructions
> to every node on the network

This is just fear-mongering.

The intent is to create a medium of exchange between untrusted parties. There
is a scripting system that used to be run by clients when checking whether a
transaction output could be spent. That system has a) never been able to do
much of anything except manipulate numbers and b) been disabled for quite some
time now.

------
gojomo
Bitcoin isn't nearly as anonymous as many believe. The ever-shifting addresses
make it look anonymous to average folks... just like a Three-Card-Monte game
might look fair. But, with TLA levels of traffic analysis, plus the
cooperation or compromise of a few major entry/exit/exchange points, it's
probably quite transparent. So I can buy the theory that it was thought to be
a 'manageable' variant drawn from the possibility space of all
cryptocurrencies.

But also, it may have just been an experiment that grew far beyond
expectations. Some deep-secret think-tank group was playing with digital cash
scenarios, perhaps as part of scenario-planning about possible futures where a
cryptocurrency arises from far-left-field. Bitcoin was one of the ideas that
got a lot of review and generated some vibrant internal debate: could this
work? A proponent got approval to release it, under a pseudonym, to see how
unaffiliated people reacted. So indirectly from a government... but not part
of any master plan.

(See also my prior comment at <https://news.ycombinator.com/item?id=5501803>
for why I think tax collectors may be very comfortable with Bitcoin in the
long run.)

~~~
nawitus
Copying my other comment here:

There's already zerocoin, a proposed extension of bitcoin, which guarantees
completely anonymous bitcoins.

[http://blog.cryptographyengineering.com/2013/04/zerocoin-
mak...](http://blog.cryptographyengineering.com/2013/04/zerocoin-making-
bitcoin-anonymous.html)

~~~
nunb
bitcoin is designed so that miners have an incentive to work on it and not
alternatives. The result being much the same as that predicted by Austrian
theory: a single money winning in the market, and the rest being demonetized.
(A caveat however, when it is easy to convert between the moneys, this need
not occur to the same degree.)

One would therefore predict low-to-zero chance of monetizing
zerocoin/litecoin/namecoin if they compete for the same resources that bitcoin
would compete for, namely miner processing power.

(edit: zerocoin is not subject to this criticism, I stand corrected; thanks
nawitus)

~~~
gojomo
Some alterna-coins may not rely on the same sort of processing power as
Bitcoin. For example, Bitcoin mining has migrated to specialized GPUs and
ASICs. Litecoin specifically chose 'scrypt' memory-hard hashing, for which the
same GPUs/ASICs provide no benefit. Other 'proof-of-stake' proposals for
maintaining the ledger emphasize staying actively connected to the network –
pulling your own weight in verification and distribution – rather than raw
hashing power.

Bitcoin's proof-of-work-during-verification trick is neat, but may not be the
only way, and thus viable alternatives may emerge that don't face the barrier
of an early miner decision to redeploy computational power elsewhere.

~~~
nunb
true, agreed.

though processing power would seem to be the best proof of stake, as say
compared to network connectivity.

~~~
gojomo
In the proof-of-stake proposals, actually holding old balances, and actively
helping to certify transactions when challenged to do so, is what earns you
the right to 'mint' new ledger-extensions. (And if you don't, your future
transaction fees go up.)

Not sure all the kinks are worked out, but competing based on who best enables
the fastest, most consistent, most-fraud-resistant global log seems to more
directly benefit the community, than proving who's burned the most resources
on electricity and specialized hardware.

------
_red
The truth is that the groundwork for bitcoin was laid down long before it
appeared as a specific project. Bitcoin is a classic case of all the threads
hanging there, but needing someone to come and tie them together.

Wei Dai published his work originally on crypto-currency in 1998 (in fact some
suspected that Wei Dai _is_ Satoshi). Moreover Szabo was mirroring lots of the
same thoughts with his bitgold proposals.

From an economic perspective, the Austrian school has been gaining more and
more creditability as it becomes increasingly clear that monopolistic control
of currency is unworkable in the long-term.

Therefore, there was nothing specifically revolutionary about it. It was
really just one of those things that it was just waiting for someone to come
tie these things together into a coherent project (I'm not at all minimizing
the work satoshi did).

This all does beg the larger question; Who is Satoshi and why would he
disappear. Personally, I think it was a nom-de-plume of several people who
intelligently made the decision to 'disappear' (even though they may still be
active on the project using different names). Leaderless projects are very
difficult for the various state monopolies to fight.

~~~
rdl
The people I suspect the most are Wei Dai, Adam Back, Nick Szabo, Ian
Goldberg, or a few people of that era. Look at people who did interesting
stuff then stopped for a few years... (Zooko, Jim McCoy, some Dutch people,
Ian Grigg, etc are all candidates too)

~~~
gwern
I think we can rule out Zooko. I've been reading his stuff and interacting
with him for a while, and between his personal life and Tahoe-LAFS, I simply
don't think he had the time; and his delayed reactions to Bitcoin are not at
all what I would expect from the creator. He and Satoshi simply _sound_
different.

~~~
kragen
For some reason Hal Finney is missing from the list.

~~~
gwern
If Zooko has had challenges in his personal life over the past half-decade,
Hal's had even huger challenges! IIRC, Nakamoto was active well after Finney
announced his ALS diagnosis (October 2009). Also worth noting is that Finney
was an active participant in the first email thread started by Nakamoto
announcing Bitcoin, and seemed relatively hostile (I suppose Finney could have
been arguing with himself, but you'll agree that it makes the hypothesis a
little less likely).

~~~
kragen
Hal's still active, and his version of his early involvement in Ⓑ is a little
different:[https://bitcointalk.org/index.php?topic=155054.msg1643833#ms...](https://bitcointalk.org/index.php?topic=155054.msg1643833#msg1643833)

~~~
gwern
He says he was more positive? Well, he was more positive than the other
reactions, that is true... You can read the emails for yourself.

------
rdl
The funny thing is I am pretty sure your hypothesis is very false, but most of
the points are true!

1\. You haven't worked in government. Their code is worse than Yahoo! or
virtually any startup. Bitcoin isn't.

2\. Bitcoin is far from the most malevolent possible form for governments.
Chaumian blinded money, what I want to build next, with open, non monopolistic
exchanges, and protocols designed to be hidden, instant, etc., is the most
powerful possible form of anonymous cash.

3\. No clue, but probably not, since the concept of a reserve currency is
irrelevant. With electronic exchanges, you can separate out the different
roles of money.

4\. A subset of 3.

~~~
abstractbill
_1\. You haven't worked in government. Their code is worse than Yahoo! or
virtually any startup. Bitcoin isn't._

I bet the NSA and NASA both write code that's orders of magnitude better than
anything Yahoo does, just to pick two counterexamples.

~~~
rdl
Sadly not particularly true of the NSA of 2013.

And this wouldn't have been their A team.

~~~
mooneater
Can we please hear a little more about this, rdl?

~~~
rdl
Talk to Binney. They contract out everything, and don't even oversee shit well
anymore. They have regressed to the USG mean.

~~~
socmoth
Rdl is correct. Smart people often get hired by small firms which do contract
work for government organizations. It allows the smart people to live outside
of the hierarchy imposed by a large institution.

The motivations are very similar to startups working outside of larger
companies. You get more freedom in work choices and pay scale.

~~~
rdl
I mean I am overstating the case for effect here, and I am sure there are
small cliques of competent people hidden within big organizations everywhere,
but if this were a government official project, it wouldn't have been done by
those people. I knew brilliant people in the military in Iraq, but they
weren't brilliant due to their jobs. If we did awesome stuff on the side it
wouldn't have been a product of the US government.

Government also discourages small side projects, especially in the classified
world, and particularly discourages them from becoming production. They would
far prefer to run a program of record, or pay for (well defined) innovation by
third parties.

------
GHFigs
I've just assumed that Neal Stephenson's next novel is so large that we're
actually living inside it.

~~~
nunb
I can't wait for all of Snow Crash to come true (even though it's just an
intermediate step).

------
HarryHirsch
Alternative hypothesis: Bitcoin was created by a group of quants at some
investment bank for a laugh and/or money.

Bitcoin has well-known built-in weaknesses, e.g. the limited supply; it was
designed to be exploitable, _and we see this being done in the real work as we
speak_. You find the knowledge how to work markets at investment banks.

~~~
jacquesm
> it was designed to be exploitable

That's a pretty bold statement for which I'm not aware of any proof
whatsoever. Bitcoin is pretty rough and ready when you first look at it but on
closer inspection it is actually remarkably solid.

~~~
chipotle_coyote
I suspect -- putting words in the OP's mouth, admittedly -- that the argument
isn't that Bitcoin is exploitable in terms of software engineering, but rather
in terms of BTC market manipulation, given that he mentioned the arbitrary cap
on the total number of Bitcoins possible as a limitation. (I recognize that
whether this is a flaw or virtue, or perhaps some of both simultaneously,
depends on who you ask.)

~~~
snowwrestler
I assumed that's what he meant too. The total market cap of the entire bitcoin
economy today is a bit over $1 billion USD. That is a small enough number that
a large financial institution, or maybe even a few rich people, could
manipulate the price with large transactions.

------
jackgavigan
Why would a government create Bitcoin? Simple! To help them track money
launderers and penetrate black marketplaces like Silk Road.

Many assume that Bitcoin is anonymous. It's not. At best, it is pseudonymous
because every transaction is published in the blockchain for all the world to
see. That means that users can be identified by conducting network analysis on
the blockchain - see [http://anonymity-in-
bitcoin.blogspot.co.uk/2011/07/bitcoin-i...](http://anonymity-in-
bitcoin.blogspot.co.uk/2011/07/bitcoin-is-not-anonymous.html) \- and matching
the results up with data from other sources (e.g. credit card payments
records, emails, intel from spyware, etc.).

It doesn't actually matter whether Bitcoin was created by an agency like the
NSA or not - there is no doubt that they (and probably at least two there
intelligence and security agencies) are doing this.

~~~
gwern
> To help them track money launderers and penetrate black marketplaces like
> Silk Road.

Which explains why the Silk Road is still around...? Creating Bitcoin would be
incredibly short-sighted if that was the goal: if you read indictments of
other drug markets or illegal markets like the Farmer's Market or the
carder.su busts, it's clear that the government gets all the financial info it
wants.

~~~
mikecane
Let me add to the complexity. What if Silk Road is also gov't? We have had
proof of CIA drug-running. And the so-called Drug War is a failure. You don't
get failure on that magnitude without gov't complicity, even if it's simple
bribery. See: Alcohol Prohibition.

~~~
eurleif
I think the Armory (Silk Road's sister site for weapons) is evidence against
that. It was shut down because it wasn't profitable for the owner(s). Funding
obviously wouldn't be an issue if it were the government, so if the Armory
were good for their strategic objectives, why would they have shut it down?
And if it were bad for their objectives, why would they have created it to
begin with?

------
wooster

      Could bitcoin have been worse from a government's 
      point of view?
    

Yes, it could have been designed to be a viable currency, rather than a lesson
in basic economics for crypto-anarcho-libertarian-nerds.

~~~
wyager
Please, tell us Bitcoin's economic flaws. I do hope you're not going to parrot
the same worn-out, fallacious complaints about deflationaryism, volatility,
etc. that we've all heard and dismissed.

~~~
nhaehnle
Outside of a fringe group of Austrians, economists essentially agree that
having a flexible money supply is a _good_ thing.

One of the first pieces of evidence is typically that those countries that
left the gold standard earlier also recovered from the Great Depression
earlier.

~~~
mikecane
>>>One of the first pieces of evidence is typically that those countries that
left the gold standard earlier also recovered from the Great Depression
earlier.

By ramping up production for WWII.

Now I'm going to go orthogonal and mention something I've never seen
addressed. Germany was economically a shambles. How did Hitler manage its
economic comeback? Have any books been written on that subject?

EDIT for a typo. As usual.

~~~
yk
Disclaimer: Germany in the period of '33 to '45 was not a capitalist society
and aggregate measures of markets can be grossly misleading.

In the Great Depression the German chancellor Bruenning did try to keep a
balanced budget, kept essentially a gold standard [1] and cut unemployment
insurance. This resulted in 30% unemployment and a very high multiplier.
Additionally Weimar Germany was on brink of civil war in the end.

Hitler then did introduce the Reichsarbeitsdienst, essentially forced but
payed labor for the unemployed. And he did ramp up spending, first mostly for
infrastructure later shifting to the military. [2] And he was rather reckless
in consolidating his power, which probably lead to increased 'investor
confidence.' With these policies he managed to get more than 5% real GDP
growth each year, [3] together with steeply falling unemployment. [4] (
Wikipedia has an article with more details. [5])

And this is probably the reason why this is rarely addressed, economic policy
was an area where Hitler did have some success, at least by modern metrics
which are not easily applicable. ( And therefore it is actually quite hard to
discuss without getting awkwardly close to not damning Hitler. In fact I am
wondering at the moment, if this posting needs a stronger disclaimer.)

[1] The Rentenmark introduced after the hyperinflation of '23 was backed by
land.

[2] The details are actually quite interesting, the regime was trying to hide
a substantial part of the dept as 'Mefo bills.'

[3] <https://en.wikipedia.org/wiki/File:BSPDRWeltkriseEngl.PNG>

the datasource is

[https://www.destatis.de/DE/Publikationen/WirtschaftStatistik...](https://www.destatis.de/DE/Publikationen/WirtschaftStatistik/VGR/RezessionBetrachtung.pdf?__blob=publicationFile)
[German]

[4] <http://archive.is/JXNR>

[5] <https://en.wikipedia.org/wiki/Economy_of_Nazi_Germany>

~~~
mikecane
>>>In fact I am wondering at the moment, if this posting needs a stronger
disclaimer

Don't worry about that. We are discussing strictly economic policies and
ideas, not politicians/dictators. Thanks for the reading.

EDIT to add: Having now read, I see there is nothing there for sane people to
duplicate. Thanks.

------
somid3
So I'm a hacker currently at MIT Sloan and have been analyzing bitcoins for
sometime, so take my views with a grain of salt (I.e.: I not a Phd. I the
field)

Basically, no government would like to have a electronic curency like the
Bitcoin because it impedes them from controlling the money supply and
therefore be able to apply monetary policies. A central bank with no monetary
policy is limited in its function, consequently, the notion of a Bitcoin is
like you having to program in an OS where you do not have root access or can't
change versions of certain libraries etc.

China and other countries have suggested having a global currency that is
backed by a "basket of currencies" -- other governments have suggested
different solutions, but I can't imagine a Bitcoin to have been plotted by a
government.

------
mseebach
So, the only piece of evidence pointing to a government is the lack of
reviewers, which IMO is a pretty weak indicator. Why would Bitcoin need a ton
of reviewers? It's not like it was designed to replace critical parts of the
economy overnight. Tons of non-academic "research" is released into the wild
(such as nearly all commercial software) with zero peer review. I mean,
there's no peer review of AirBNB, that doesn't make it a NSA operation (or
does it? Hmm..).

My impression is that BTC is a relatively simple application of existing (peer
reviewed) crypto-tech, and could therefore have been invented by a single, or
small group of, dedicated crypto scientists.

------
jey
> so is an individual cooking up bitcoin as an intellectual exercise

Is that really far fetched? Seems it's no more far-fetched than an individual
coming up with the initial version of Linux. As I understand it, Bitcoin is
just one implementation of the "crypto-currency" line of thought. E.g.
<http://www.weidai.com/bmoney.txt>

------
martindale
It's 2007. The economy is in increasing turmoil, with the housing bubble ripe
for bursting and concerning news coming from overseas regarding the stability
of the Eurozone. The CIA relays some troubling discoveries in the distribution
of risk in the largest banks, and the Bush administration makes a request for
proposals for contingency plans in the event of a global economic collapse.

Enter the NSA's contribution, a distributed proof-of-work currency that
provides early adopters with a majority share of the wealth and has the
potential to revolutionize currency in general. The CIA is authorized to
develop and deploy a series of operations, including the fabrication of a
social structure that results in a viably large computing network to sustain
the technology long-term with a mind-numbing pace.

Enter Bitcoin, wherein the U.S. maintains a majority share of wealth in the
event of a global economic collapse.

------
sheefrex
An interesting question, and option 2 seems to be the likeliest option.
However, I would qualify it and say that it was created with the intention of
having it fail. This would ease the introduction and attractiveness of any
regulation, or prohibition, of virtual currencies.

If a government were to create it with the intention of it lasting, then I
would imagine they would have designed it such that the supply of the currency
increased with the number of transactions; I'd like to hazard the guess that
this is both possible, and would prevent both inflation and deflation. Why is
preventing both of these necessary? Had they included inflation, it is
unlikely bitcoin would have attracted its initial users - that is, the
libertarians et al. Similarly, had it been deflationary, then this would
possibly constrain government; no seignorage, and the real value of debt
rising over time.

~~~
linhares
to presume that in 2008 someone would be doing this "with the intention of
having it fail" is a little far-fetched, isn't it?

------
vijayboyapati
From Hal Finney's "Bitcoin and Me":
<https://bitcointalk.org/index.php?topic=155054.0>

When Satoshi announced the first release of the software, I grabbed it right
away. I think I was the first person besides Satoshi to run bitcoin. I mined
block 70-something, and I was the recipient of the first bitcoin transaction,
when Satoshi sent ten coins to me as a test. I carried on an email
conversation with Satoshi over the next few days, mostly me reporting bugs and
him fixing them.

Today, Satoshi's true identity has become a mystery. But at the time, I
thought I was dealing with a young man of Japanese ancestry who was very smart
and sincere. I've had the good fortune to know many brilliant people over the
course of my life, so I recognize the signs.

------
overgard
I do agree that the inception of bitcoin is probably more interesting than we
realize, but there are a few premises here I'm questioning:

1\. That the sophistication of bitcoin implies a government effort. I'd
actually argue it's just as likely to be a corporate effort. This is more of a
gut feeling, but modern government seems much more reactive than proactive,
and so if they were to have created this, my suspicion would be that it was in
response to something. But since I don't see an obvious "something", I'd
imagine some sort of corporate entity is more likely to be proactive about an
effort like this.

Or, maybe even more likely than that, some sort of organized crime effort. I
mean the classic stereotype of the "mafia" makes that seem funny, but I
imagine modern organized crime entities would be very interested in something
like bitcoin. Especially since, outside of idealistic libertarians, I imagine
the only reason right now to spend bitcoins is if you want to buy something
that can't be tracked back to you.

2\. I don't quite buy the premise that bitcoin is a bulletproof protocol. For
instance: <https://en.bitcoin.it/wiki/Weaknesses> .

Some of these are sophisticated problems, but a lot of these things are
exactly the kind of problems that could have been caught if there had been a
proper peer review.

~~~
DanBC
> I imagine the only reason right now to spend bitcoins is if you want to buy
> something that can't be tracked back to you.

Why wouldn't they have baked in anonymity if the reason for Bitcoin was
anonymous purchasing?

~~~
jacquesm
Bitcoin solves one problem and solves it well.

One way to make it anonymous:

<https://en.bitcoin.it/wiki/Tor>

Side note: if you buy something and it is physical at some point the package
will have to be handed to you. That's a pretty tough nut to crack if you want
to stay anonymous. At a minimum you're going to have to be proximate to the
drop-point which makes playing 33 bits on you a lot easier.

~~~
pbhjpbhj
You have to route the cash-out through an anonymising network. Surely that's
possible, eg the fabled "Swiss bank account" in the world today?

Would a bank offer such an anonymising service; there's surely some level of
transaction fee that would make the risk exposure worthwhile?

------
hollerith
>Bulletproof protocols usually require peer review, yet there have been zero
leaks from the reviewers.

Aside from leaking their identities (for reputational reasons) I am having a
hard time thinking of anything these hypothetical reviewers would be motivated
to leak. The best I can come up with is, "The main architect of Bitcoin hates
the U.S. government, and his main motivation was to weaken it by depriving it
of tax revenue."

As to why they are not leaking their identities: they run the risk of being
kidnapped and tortured for their BTC if everyone knew who they were -- since
(from the point of view of the average Bitcoin-literate thug) it is highly
likely that those who got in on the ground floor of Bitcoin hold a lot of BTC.

~~~
jiggy2011
_they run the risk of being kidnapped and tortured for their BTC if everyone
knew who they were_

Doesn't any rich person have the same risk?

~~~
hollerith
Maybe I am wrong, but I get the impression that the average wealthy person
keeps their most liquid assets in an institution where the employees know him
or her and there are institutional safeguards against that kind of thing.
(ADDED. ATMs for example, have cameras.)

Also, the rich _do_ tend to make a point not to let it be publicly known that
they are rich if they can. (ADDED. Officers of public corporations for example
cannot hide their incomes from the public because of the financial-reporting
requirements imposed on the corporations.)

~~~
jiggy2011
There's plenty of movie plots about "leave a large suitcase full of cash at
location X or bad thing Y happens" but I guess large quantities of cash are
more difficult to hide and large withdrawls from a bank account would raise
red flags.

------
tlb
5\. It was a small project at a federal agency, unappreciated by top
management. They had access to experts who could keep it quiet, but there was
no particular political agenda behind it.

------
DesaiAshu
Seems more likely bitcoin was created by a big bank:

\- Immediate use for it to launder money (HSBC already does this but recently
got flagged by the US gov)

\- Long term (if it became successful) it would enable them to reduce
dependency on governments / regulation. Big banks are already more powerful
than most governments and are rumored to cause political turmoil in countries
to increase dependency on the bank. Why just control transactions when you can
control the money itself?

\- Have the financial knowledge / data to design a currency + have the
technical expertise to implement it (due to the masses of quants joining banks
in the past 10 years)

~~~
linhares
Very very unlikely (if you ask me), generally a contender is unable to even
see radically new technologies after they're up-and-coming. That they would
design it, design it properly, and launch without fanfarre is extremely
unlikely to me.

~~~
DesaiAshu
You're right, we see this a lot in tech, because start-ups are easy to start.
But in other places / industries people who want to innovate have no choice
but to work in R&D at a big company. For example, in India, it's really hard
to start new companies, so big companies (like TATA) continue to out innovate
everyone and disrupt themselves. It's really hard to start a new bank, so if
you're smart and interested in innovating in finance, you don't really have
much choice but to work for a bank. Plus governments are really the incumbents
here, so it's less likely for them to start a currency to rival their own than
it is for a bank

------
neilxdsouza
Here is my theory. The US did behind the backs of the Federal Reserve, which
is currently it's biggest enemy and threat and it's an internal enemy,
controlled by the Private Banking economy. The Federal Reserve remains an
economic black hole, sucking out money from the US system (at 6% of Profit on
Interest in Bonds Raised).

Consider the system where the 6% dividend paid out to the share holders of the
Federal Reserve is untaxed. Further as US debt spirals, the bonds raised
increases and the 6% dividend increases further. It's like a sequence 1.0001
Raised to the power of n will finally start diverging very fast beyond a
certain point.

Bitcoin takes you back to the days of the US around the Boston Tea party. When
the British asked how do you deal with currency, the colonists replied - We
print our own notes (not backed by debt paid to the UK). The Federal Reserve
represents a similar debt trap. Bitcoin breaks free from this. That's my 2 bit
coins.

~~~
neilxdsouza
Consider the following hypothetical conversation between President Barack
Obama and the Intelligence team.

President: Hey guys - what's going on. In my presidential campaign I promised
to clean up this financial mess, so todays team meeting is about how we clean
this up. Can someone please enlighten me on this.

Agent 1: Well sir the main problem is US debt, it's a monster gone out of
control. When the act was created in 1913, they forgot at 1.00000001 raise to
n for sufficiently large n will diverge to infinity. We have unfortunately
crossed the point of no return.

President: Well, is there a way out, like an alternative currency?

NSA Agent 2: Well sir, there is something, but it's kind of weird and requires
a system reboot.

President: Explain, anything is better than this shit.

NSA Agent 2: Well the last president who tried to mess with it got asssinated.

President: I have no plans on going up this way, can we sneak it in.

NSA Agent 2: Well we need a new currency, but if we say that aloud, the whole
world will blow up. And we need it to not be backed by debt. Let the old
currency work for a while, then we will kick the new one in when it spreads
really well.

President: What about currency control.

NSA Agent 2: Well it works on 256 bits crypto.

President: That doesnt translate, english dude.

NSA Agent 2: Well we can control the currency, we can do 2048 bits with our
computers for a while now, which means that we can generate new currency
whenever we need it.

President: Well, in that case, you have my permission, go for it. God speed,
you have my presidential blessings.

------
snowwrestler
One reason a government might do it is to shine a light into the dark corners
of the online black market. As I understand it (not a crypto expert by a long
shot), bitcoin transactions are traceable but not personally identifiable. So
even if they cannot see who is transacting, they could build models of the
networks that are transacting. Perhaps this could be married up with other
sparse data to improve their understanding.

Another reason would be pure research--not a specific goal in mind, but simply
to see what happens when this sort of tool is released into the Internet.

One thing a government would have going for it is a complete lack of interest
in the actual monetary value of bitcoins--it's a tiny drop in the bucket of
most large governments, and top-secret-level crypto teams are not likely to
spill their guts for a few millions dollars...particularly if they know that
their transactions would be easily traced.

------
myprasanna
My best guess would be a bunch of friends in a crypto lab cooked it up. It's
not that there were no leaks. There were reviews done in the cryptography
mailing list and changes were made. Just that they happened publicly online.
The first idea was proposed in 2008, while the client was first launched in
2009.

------
arthurrr
1\. why not just finance the way they normally do, by borrowing (selling
bonds), or taking money from the taxpayer?

2\. currencies today are already essentially digital. the vast majority of
transactions are handled electronically. the value of a bank account are just
bits on a disk.

3\. bitcoin can't become a reserve currency, there is no such thing as bitcoin
bonds. the growth of the bitcoin money supply has been predetermined.
government wants to be able to control the money supply, because it gives them
power.

4\. the usd as a reserve currency will probably be replaced by a global
currency, SDR's, to the detriment of humanity.

i don't think it is farfetched to cook up bitcoin as an intellectual exercise.
i think it is more likely to be 2, or 3 people in collaboration, because
design by committee never works.

government is too short-sighted to have created something like bitcoin.

------
guylhem
The possibilities you list are interesting, yet I suggest you read another
essay posted here about "legal/illegal" bitcoins, where governments could
force one to "declare" what its bitcoin accounts are, and treat all incoming
payments and outgoing payment to "undeclared" accounts as illegal, and tax
accordingly.

This would the the perfect scheme to ensure orwellian control of the economy,
with a complete history of the transactions. It is a possibility - that
bitcoin is touted as a "libertarian dream" while it can be in fact used for
complete control by the governement.

Today's currencies are too many and transferts not properly traceable. Make
that one currency and add in the design that all transferts are to be logged,
and it does not matter whether one uses a bitcoin address or its full
identity.

With enough social network analysing and recouping information, especially
with the governement weigth and files, it should not be hard to "uncover" the
true id.

I find this possiblity interesting, even if far fetched.

EDIT: see the actual thread on <https://news.ycombinator.com/item?id=5501803>

Another possibility would be to reduce the "weight" of the financial sector.
Having IIRC 10% of the GDP used for allocating resources is wasteful when
there is technology available to do this very thing. I commented on Krugman
article on <https://news.ycombinator.com/item?id=5541189> along with
additional details on <https://news.ycombinator.com/item?id=5543308>

Basically, using bitcoin instead of the current financial sector would remove
frictions and transaction costs, improving efficiency. It is compatible with
the standard economic approach, especially on grow theory, where growth is
explained by technical change and human capital in many models - from the
augmented Solow growth model to Romer and Lucas.

Bitcoin could then be seen as a way to "reallocate" the human capital "spent"
in the financial sector to new productive endeavours - the lack of inflation
being added to make sure that there would not remain any incentive to waste
human capital on looking for ways to speculate.

That is the explanation I prefer at the moment - Bitcoin as an experiment
created to improve efficiency of our economical system as a planetary level,
by someone well versed in economy and computer science.

Yet out of your list of possible explanation, I would say (2) is the most
likely. But if indeed it was government made, I would not say the US is the
most likely author.

Look at how the european currencies tried and failed to replace the dollar as
the world currency - sum up the Euro currencies place in world commerce before
and after the Euro, and you'll see they failed. A bit like HP-Compaq merger,
with total share of the market less than their initial shares.

This could support (3) and (4). It is also quite interesting to see how EU-
wide directives about virtual currencies were implented and voted were created
_before_ BTC became very popular- see
<http://ec.europa.eu/internal_market/payments/emoney/>

The second EU electronic money directive, 2009/110 dates from 2009.
Considering how long the political process usually takes, I find having a
directive voted and ready in its _SECOND_ version in 2009, then implemented
with only a year and a half delay in say France, "unusual".
[http://www.bryancave.com/files/Publication/515cae04-f1c0-46c...](http://www.bryancave.com/files/Publication/515cae04-f1c0-46cf-
bd5b-15f26e31a147/Presentation/PublicationAttachment/ee3b82d5-0c37-4ed6-bde0-181ed6d0c556/2013%2002%2022%20Briefing%20Paris%20Second%20Electronic%20Money%20Directive%20_DEM%202_%20Transposed%20in%20.pdf)

The only thing that would not match this is how the ECB follows a Friedman
like monetarist approach, with a 4.5% M3 monetary aggregate growth target,
while bitcoin is not inflationary.

But when you consider the FED bad habits of "quantitative easing" (printing
money), it make the US even _less_ likely to be the originator.

TLDR : ranked from most likely IMHO:

1- it was created by someone familiar with economics and computer science to
improve efficiency (compatible with the current analysis and the initial
comment about central banks)

2- it was created by a public organisation, considering virtual currency
inevitable, to make the most of them, but in that case, it is more likely from
the EU than from the US

3- it was created by a public organisation, either aiming for, or having a
side objective of, orwellian control.

EDIT2: about this 3rd option, I know the records list Trinity College as one
of the potential "epicenters" based on published papers and software, but it
does not excludes the possibility the effort was funded with this very goal in
sight - give students money, incentive, ideals, and watch while they develop
what you wanted.

Just like how BTC can be touted as a libertarian dream while it could also be
very dangerous, initial creators could have been fooled by only knowing a part
of the plan.

So I share pg opinion there. Some possibilites should not be discarded too
quickly ; if it was possible to create STUXNET to harm Iran nuclear program,
with all the complexity involved, and then keep the official involvement
hidden for like 10 years, this gives a priory evidence that such a feat could
be done as a government project.

I am quite concerned by this last "orwellian" option, as unlikely as it may
be.

One of my side projects at the moment is examining this possibility - not
shouting that too loud, because I don't want to be taken as a conspiracy
theory nutcase :-)

Also, I only have an interest in economics - I'm not a professional economist,
so there must be some flaws in my analysis.

~~~
nawitus
>With enough social network analysing and recouping information, especially
with the governement weigth and files, it should not be hard to "uncover" the
true id.

There's already zerocoin, a proposed extension of bitcoin, which guarantees
completely anonymous bitcoins.

[http://blog.cryptographyengineering.com/2013/04/zerocoin-
mak...](http://blog.cryptographyengineering.com/2013/04/zerocoin-making-
bitcoin-anonymous.html)

~~~
dmix
There's also bitcoin tumbling services that further obfuscate transaction to
the point where it's incredibly computation/time intensive to track
transactions...if at all possible.

They breakup transactions between hundreds of wallets before sending back to
one address, similar to money laundering.

~~~
zenocon
How would this work? Having the whole blockchain available, one could write a
program fairly quickly to take all of those transaction splinters and narrow
it down to the real source and destination addresses.

~~~
pudquick
Since you can make new wallets at any time to spend from, the key is paying
your btc into a wallet that others are paying into, and then extracting
multiple different amounts to new, different wallets (and then using those for
spending).

If I have two accounts, one with 0.5 btc (newly created, never tracked by
authorities, purchased with a relatively disposable account from somewhere
like virwox) and one with 1.5 btc (potentially tracked, need to launder it),
I'd pay both into a tumbler and then extract into 3-5 different accounts (like
0.2, 0.45, 0.9, 0.18, and 0.27).

How do you prove, as a tracker, that those 5 accounts paid out to, involve btc
from the original 1.5 tracked account? Especially when you consider the
hundreds of other accounts being paid out to at the same time.

Still paranoid? Rinse and repeat.

~~~
guylhem
Zenocoin argument stands. If you have access to the full bitcoin chain, can
you write a mathematical proof that allows one account to transfer anonymously
to another account, without using a "tumbler" mixed account?

IMHO, you can't.

That's the flow in anonymity, because, how do you ensure the tumbler properly
operates? There is an incentive to try and "steal" from the tumbler pool.

Even if it works, the tumbler could be marked as "tainted" - or any undeclared
BTC account by default could be declared tainted, and taxation imposed on any
incoming bitcoin, unless then come from an untainted account to another
untainted account.

The same logic currently applies in the real world - ie if you receive say
500k wired to your account from an account in the cayman islands, the taxman
will want to have a word with you.

Do you see the logic there? It was previously discussed in the thread
reference in the original message.

~~~
jfim
There's also the fact that there is zero incentive to use a tumbler unless
you're doing something that you don't want being tracked, since using the
tumbler has a non-zero cost.

~~~
chii
wanting anonymity does not imply guilt.

it s not the case that if you have not done anything wrong, then you have
nothing to hide.

~~~
endgame
But guilt does imply wanting anonymity, and because actually setting up secure
anything is hard, J. Random User isn't going to really do it.

Look at how hard it is to get many people to set up a password manager, or
encrypted email. You can't hide in the crowd if the crowd isn't there.

------
brownbat
Reserve currencies have come and go, but sometimes over spans of hundreds of
years.

Bitcoin has been around fewer than five.

Maybe we should wait a minute or two before discussing its role as a global
reserve.

No smart government would make the currency dependent upon predictions about
its impact on global monetary policy, because that would involve a heady
series of presumptions.

Also challenging these presumptions: Bitcoin is essentially a proof of
concept, which could be copied or forked or reimplemented from scratch at any
time. Some alternate coins have been developed already, maybe not enough to
exceed the network effects, but these improvements pile up. Something
destabilizing could easily unseat Bitcoin over the span of time required to
scale to cover a plurality of human transactions.

------
binarymax
It's way more traceable than cash.

~~~
Andrew_Quentin
but no less anonymous, maybe more so.

~~~
marshray
If it's traceable, how is it anonymous? I.e., you could have a wallet full of
BTC that no one knows is yours, but the moment you buy anything with it that's
linkable to you then all of your BTC becomes non-anonymous.

~~~
kragen
If you put every incoming transaction into a separate wallet, and create a new
intermediary wallet for every outgoing transaction, then only a minimal amount
of Ⓑ becomes non-anonymous with each outgoing transaction. But statistical
methods can still probably bear fruit.

------
fnordfnordfnord
Well,

* if you were a gov't who was consistently on the losing end of problems caused by the current regime,

* you'd failed to get relief by diplomacy,

* couldn't or wouldn't seek relief by open warfare,

* and didn't mind the remote prospect of making your situation worse,

Why not?

Personally, I don't think a gov't did it. I've always liked Kaminsky's "it's a
group of quants" hypothesis. Or maybe Michael Clear. Or maybe some other
Physics/CS type. But I really have no idea, and haven't really looked into it
more than reading random internet news.

------
fizx
You have a currency that requires a history of every transaction ever. Perhaps
the hypothetical government is confident in its ability to unmask pseudonyms,
and it will soon have access to everyone's financial history.

</tinfoil>

------
rattray
My understanding is that whoever built bitcoin was pretty darn good at what
they were doing. I question whether the best of the best in cryptography would
choose to work for a government over earn enough money to spend time building
something awesome, like bitcoin. This is coming off watching the video Gary
Tan posted recently [1].

To me, the only question left is about leaking. What's a greater incentive
against leaking: coercion by a bureaucratic, nontechnical employer (ie; a
government), or the bonds of secrecy between close friends in a common cause?
Call me an idealist, but I think the latter has a pretty good shot. The number
of leaks coming from Apple vs the number of leaks from Google (higher from
Apple, IIRC) seems to support this viewpoint.

[1] [http://sub.garrytan.com/hackers-can-be-business-guys-and-
oth...](http://sub.garrytan.com/hackers-can-be-business-guys-and-other-
lessons-from-an-interview-with-paul-graham-during-the-first-yc-batch-in-2005),
around 12:30 iirc.

EDIT: sentence structure.

~~~
sliverstorm
_I question whether the best of the best in cryptography would choose to work
for a government over earn enough money to spend time building something
awesome, like bitcoin._

I question whether the best of the best in cryptography couldn't just work for
the government TO earn enough money to spend time building something awesome.
I mean, at least in the field of cryptography, it has always seemed like the
government would be high on the list of places to work anyway. Crypto is a big
deal to government, so they are going to be on the cutting edge, and plenty of
other top crypto guys work there.

~~~
rattray
Fair point. I rescind the first paragraph of my post. Thanks

------
saalweachter
I think you're way over-thinking this.

 _Governments do a lot of things._

While some things governments do are a top down strategic plan, every person
at every level of every part of every government is an intelligent actor
capable of doing things for bizarre or obscure reasons. Sometimes these things
serve large nefarious purposes. Sometimes these things serve small nefarious
purposes.

If BitCoin was created by a pool of secret government cryptos, it's possible
their mandate was very different from anything related to BitCoin: The Digital
Currency. Maybe their mandate was to start an open sourced project which would
optimize a cryptographic algorithm. And then one of the guys handed this
assignment said to another, "Hey, we should totally do that BitCoin thing
you're always talking about at lunch." And they did it, because they thought
it was cool, and it technically satisfied the requirements of their
assignment, and their manager signed off on it so they thought they might not
get fired.

------
runjake
_> Pools of crypto guys who don't leak stuff are usually employed by
governments._

You're pretty on with this.

I do believe it was created by a crypto guy employed within the UKUSA
intelligence community, but as a side project -- perhaps even a side project
based off of his/her work.

I think the theories about the US and the American dollar don't pan out
because there are more efficient ways of dealing with this than creating a
new, solid (thus far) cryptocurrency and gaining acceptance and real-world
value out of it. All this while maintaining absolute secrecy within the IC
(where I have friends and acquaintances studying BitCoin, looking for
theoretical attack vectors and de-anonymization techniques). SOMETHING should
have leaked somewhere (most likely a politician, as they can't seem to keep
their mouths shut.)

------
clamprecht
As to #4, the United States is usually in denial about things like the dollar
losing its status as the standard reserve currency. If a government is behind
bitcoin, you have to give them credit for it.

Some people think the US government invented crack cocaine to fund CIA
operations. Who knows...

~~~
readme
There's plenty of strong allegations of CIA drug involvement that you can just
look up:
[http://en.wikipedia.org/wiki/Allegations_of_CIA_drug_traffic...](http://en.wikipedia.org/wiki/Allegations_of_CIA_drug_trafficking)

There would be one really good reason to invent a crack epidemic. Before that,
there was a pretty strong anti-capitalist black nationalist movement. The men
behind the curtain would _not_ want that growing.

~~~
ryanmolden
It would also increase the value of raw cocaine as a pre-cursor to highly
valuable (from a cost vs. resale perspective) crack. The CIA being involved
in, or simply turning a blind eye to, cocaine smuggling when the funds were to
be used to fund things they viewed as necessary but those "idiots" in
Washington wouldn't fund is not entirely looney. The angle of increasing the
value of a fairly easily smuggleable drug is more compelling to me than a
conspiracy targeting African-American communities in particular, like the CIA
is run by some crude caricature of a southern grand dragon.

~~~
marshray
Agree. It was the FBI that was concerned with domestic black militants. The
CIA just wanted a way to get cash anonymously to fund weapons-for-Iran and the
Contras in Nicaragua.

If the CIA was behind Bitcoin, they would have done a better job with the
unlinkability.

------
lakesta
I like the food for thought but as a lot of people have stated I don't know
that it totally all adds up. The idea that a gov't would create a currency
that is currently not being taxed doesn't seem like its at the moment that
beneficial of a government project (looking at you, USA). However, I suppose
it could be a different government (any of the PIGGS countries, Israel, Iran,
or any other country that is having a money crisis and wanted a black market
way out. That said, couldn't the author also be a big bank? I know big banks
here in the US have thousands of coders on staff and while most do meaningless
chores more than cool projects perhaps banks in other countries aren't so bad
(looking at you Switzerland).

~~~
nwzpaperman
Don't you think a corporate entity or government would patent the code?

~~~
mikecane
The most lucrative formulas are never patented. Coca-Cola, for example.

------
dragonwriter
> I've long suspected bitcoin was created by a government.

Why?

> Bulletproof protocols usually require peer review, yet there have been zero
> leaks from the reviewers.

Bitcoin isn't bulletproof, it has (and, as I understand, originally had more)
well-known vulnerabilities. These are deemed acceptable by people who decide
to use bitcoin (almost by definition, as those who don't deem them acceptable
are unlikely to also choose to use bitcoin.)

> The part that puzzles me is why a government would do this.

There's a whole lot of reasons a government might do something like bitcoin,
but its far from clear that a government did it, much less what the motivation
was if a government did. Really, this seems to be looking for supposition to
pile on supposition to create a conspiracy theory.

------
nunb
I was in a bank yesterday and there were all these animals in cages shuffling
paper around, worried that their customers would yell at them if they were off
by a single digit, (because doing so would be tantamount to robbing the
customer of their hard work) and it struck me that all that the shuffling
accomplishes is moving tokens of value around, mere accounting entries.

And it doesn't even do that well! It's breathtakingly inefficient.

For instance, one can't tell how many shoes are sold in a country.. that would
require a totally different, feet-on-the-ground statistical survey, or an
industry association (voluntary reporting). We can't tell who's doing what at
all. We're like the suckers in The Wire Season 1 (which seems so quaint by
today's standards) trying to reverse-engineer IRL networks.

The hacker solution would be so much more elegant, so much less messy (no
meatspace!). It's like your example of hackers in dorms doing voip way before
Skype. No self-respecting hacker could (even on the wildest bender) have come
up with pushing pieces of paper around as value-tokens. What a hacker cooks up
today is what the world will use in the next decade.

With bitcoin, unravelling a network is trivial. Bust one node (a snitch or an
undercover sting op) and the rest unravel.

The combination of government and hackers sits somewhat oddly in my mind. So I
shall refrain from pursuing that line of thought.

However, in this spirit of prognostication, I like possibility #4. But you
understate the case. It's not about USD vs RMB, it's about fractional-banking
vs fixed-quantity money.

If #4 is the case, some might argue that USG must have pre-mined a bunch of
coins (and conversely, that if they didn't, #4 is not the right answer). This
need not hold, of course. One can make some predictions if #4 is indeed the
case: with bitcoin, taxation is easy and automatic. Smaller governments would
result (State, Local & Federal), deficit spending would end, the free-market
would still work, but command-and-control would be much easier.

edit: I see I'm largely of the same opinion as user guylhem.

------
gbog
Already so many comment mine will be buried deep. Anyway: I am happy to see
that in fact pg has no China-blindspot.

I feared pg and others (eg Fred Wilson) were never talking about China because
they droped half of the world out of their sight, as so many people sadly do.
In fact it seem to not be the case. It was more of a strong reticence against
saying stupid things, and a righteous understanding that not saying stupid
things about China is very hard.

But still, the nearby horizon is inevitably a confrontation between US and
China, and we need clever and trusted people to state their best bets about
how to handle this issue, which, left alone, can rot in the wrong hands and
have a bad ending for everyone.

------
DigitalSea
This reminds me of a theory I heard of that Bitcoin was created to secretly
try and crowd-source the breaking of seemingly impossible encryption protocols
(encrypted files not meant for anyone other than the intended recipient). I
wonder if such a theory is actually plausible though considering the client is
open source, what if the block chains people are mining are actually encrypted
files and the government are using people as bot-nets for breaking encryption?
This is one reason I would suspect the government of creating Bitcoin.

------
nleyten
I very much doubt that Bitcoin was created by any government. Having said
that, one reason why government could be interested in fomenting Bitcoin is
because it makes some forms of tax evasion nearly impossible. I've written to
some length on this often neglected side of Bitcoin; see the section "On the
upside: Bitcoin is transparency friendly" in the following blog post:
[http://nleyten.com/post/2012/10/24/Announcing-OCaml-
bitcoin-...](http://nleyten.com/post/2012/10/24/Announcing-OCaml-bitcoin-1.0)

------
stcredzero
If I were in control of a sovereign entity, I might be motivated to create a
cryptocurrency at this point. This could be a way to increase a small
country's currency reserves. The US government and other major powers would be
against this, however, for the same reason why they squashed bearer bonds.

Also, given how bad Bitcoin is in some ways, I could believe it wasn't created
by crypto experts working for a government. There is no good theoretical basis
for secure hashing algorithms.

------
antr
my 2 cents:

along the "far fetched" lines, it is definitely a possibility that this was a
govt initiative, and possibilities 1 and 2 (not 1 or 2) seem to fit my
reasoning.

countries that fit my argument are those with large trade deficits; have
little or no natural resources; are known to run smuggling networks of drugs,
counterfeit money, etc.

countries with little or no economic resources are constantly under economic
pressure to trade in "trusted" currencies. they need to purchase commodities
and resources where counter-parties only accept strong currencies (usd, eur,
gbp, chf, nok, etc.). it's impossible doing business with a large/influential
commodities trader unless you trade in any of the currencies above.

given that these countries are unable to generate enough foreign reserves via
exports, large undercover networks that smuggle all kinds of illegal
goods/services are unofficially permitted. e.g. class a drugs, counterfeit
money (sold at a discount. think for a second why some top notch usd
counterfeiters are located in africa and asia), free/subsidised drugs sold
back to developing countries by 3rd world countries, etc.

consequently the creation of a virtual currency, that does not require an
export, and that it can be _easily printed_ with ubiquitous
technology/computing power is a great way to make up for the real economic
shortfalls.

final remark: still, i think the chance of this being the case is very slim.
right now the trade deficits/currency needs by many countries that fit this
profile are orders of magnitude larger than the overall value of the bitcoin
market. unless the size of the btc market grows at a very high rate i
seriously doubt this can be an effective tool to run the above operations.

------
gyardley
Most if not all governments believe a fixed money supply leads to deflation.
They also believe that deflation is a bad thing that should be avoided.
(Whether _you_ believe this is completely irrelevant. What matters for this
argument is what the _government_ believes.)

Since Bitcoin's supply is fixed, Bitcoin is inherently deflationary. A
government that creates and releases Bitcoin is a government that creates and
releases something it believes is seriously flawed.

Why would a government release something it believes is seriously flawed? (The
most likely answer is 'it doesn't', but let's play along.)

Perhaps that government believes the adoption of Bitcoin would damage its
rivals more than itself.

Perhaps that government fears the adoption of truly-effective digital
currency, and therefore chose to release and publicize one with inherent
problems that will prevent its widespread adoption - delaying the onset of a
truly-effective currency. (Again, dear reader, _you_ might think Bitcoin is
fine - but I suspect most government economists are more in line with Paul
Krugman.)

Finally, perhaps the government truly thinks Bitcoin is a bad idea - but not
everyone who works for the government agrees with the government. It only
takes one person to leak something. Perhaps the group who created and reviewed
Bitcoin were hired during one administration, and then, being unhappy with a
future administration, someone decided to leak their what they were working
on.

Note, for those of you who enjoy tinfoil hats, that the first paper on Bitcoin
came out just days before the 2008 presidential election, when the polling was
almost uniformly predicting a Barack Obama victory. Is Bitcoin a release from
someone who believed both in the project they were working on and that they
were about to be unemployed?

------
argumentum
Ultimately, keeping a conspiracy under wraps is an n^2 problem, where n is the
number of people behind it.

If it's a government, it is not a constitutional one with democratic
elections. Checks and balances make it much more difficult to carry out a
conspiracy with elegance and grace. I'm not saying it's impossible, but if the
US did it, it will come out very soon. There are too many conflicting
interests in government to keep this under wraps for long.

Essentially, crypto-guys who don't leak stuff would have to have been acting
at the bottom of a chain of command that does leak stuff clumsily, and is
opposed by political forces with the incentive to find stuff out. Plus, no
major agency of the government has yet commented, which suggests that they are
trying to get their heads around the phenomenon before choosing how to act.

All the same, I doubt it's an individual, as you suggested. It's certainly a
group or entity with it's own agenda, external to, but perhaps sponsored in
some way by a government (perhaps even the US, for the reasons you mentioned).

~~~
hyperbovine
> Ultimately, keeping a conspiracy under wraps is an n^2 problem, where n is
> the number of people behind it.

I'm puzzled by this statement. You need n people to keep the secret...

~~~
archgoon
I believe his argument is that if you have n people in on a conspiracy, than
you have possibility of any of the n^2 communication channels becoming
compromised, and n^2 more chatter going on. You can mitigate this by having
only one person keep track of things, and ensure that no one else knows anyone
else is in on it (yay! Star topologies!)

~~~
marshray
Also, each of the n individuals knows that there are (n - 1) others who could
also leak. Attribution for the source of the leak becomes harder and everyone
involved knows it. So the motivation to keep the secret is reduced along with
the sense of accountability.

------
wfn
For what it's worth, the protocol is/was not 'bulletproof' [1].

As far as I understand the basic architecture of the protocol, none of the
crypto parts used are to be considered 'novel' (public/private keys+signature
schemes & hashes) - it was the overall combination of various parts, esp. the
combination of proof-of-work + p2p to (also) verify transactions, and the
hash-chained blockchain to avoid double-spending etc. that proved to be truly
powerful.

[1]: "On 6 August, a major vulnerability in the bitcoin protocol was found.
Transactions weren't properly verified before they were included in the
transaction log or "blockchain" which allowed for users to bypass bitcoin's
economic restrictions and create an indefinite number of bitcoins."
(<http://en.wikipedia.org/wiki/Bitcoin#2010>; direct link to CVE:
[https://web.nvd.nist.gov/view/vuln/detail?vulnId=CVE-2010-51...](https://web.nvd.nist.gov/view/vuln/detail?vulnId=CVE-2010-5139))

------
api
A left field speculation of mine: are we sure Bitcoin isn't Japanese? I know
there's circumstantial evidence against Satoshi being Japanese, or even being
a single person, but considering Japan's economic malaise it seems possible
that they would consider bizarre experiments. MtGox, the largest exchange, is
also Japanese (or started there).

------
kcnickerson
Number 4 with additional variant…

it's possible that Bitcoin is simply a relatively cheap Straw-man to initiate
a real world trial of a global, all digital currency. experiment with the
security, anonymity, market, boom/bust, acceptance.

under this scenario, there will be others until the system is "perfected" for
a unified single global currency.

------
seferphier
The paypal mafia could be the creators of bitcoin. They certainly have in
depth knowledge about the financial markets and technological expertise.
Furthermore, the idea of bitcoin is not only original but also frightingly
ambitious that fits well with their personalities.

i am curious as to peter's opinion on bitcoin.

------
DanielBMarkham
Sounds far-fetched to me, but I'll play along.

Assuming some third-party actor in the game, we make a mistake if we assume
there was only one reason. Even if we concentrate on one reason, we may be
drifting off-course.

The primary value of BitCoin is its anonymity and difficulty to trace. That
means that the people that made it appreciated those values.

The world economic system is closing up -- slowly the noose tightens, and
there's less and less place to hide transactions. That creates a need both at
the state and individual level.

What I'm interested in is if there is a BitCoin 2.0, or 3.0. I sure hope so.
I'd hate to think the very first thing that became popular ends up being the
de facto anonymized currency. When I'm thinking about who would build this and
how it would be reviewed, everybody jumping on the 1.0 bandwagon doesn't give
me the warm and fuzzies.

~~~
feral
>The primary value of BitCoin is its anonymity and difficulty to trace. That
means that the people that made it appreciated those values.

There are many simple things that could have been done to make it more
anonymous.

The blockchain contains huge amounts of information that could have been made
much harder to analyze, if anonymity was a main design goal.

The rest of the system is almost surprisingly well designed and robust, it
seems surprising to me that if they set out to design for anonymity, this is
the best they came up with.

Hell, if we put our tinfoil hats on, and go with the line of thinking in PGs
post, I'd almost say that from an anonymity point of view, in default usage,
its closer to the 'clipper chip', where its just obscure enough to make people
think they are anonymous, but really reveals a lot if you look at it properly.
Not putting that forward as a theory, though!

------
benologist
There are organizations that would benefit immensely by not having physical
cash changing hands, requiring storage, laundering and processing by banks and
tax departments.

Makes more sense I think for whatever multi-billion dollar cartel to be
planning 20 years into the future with bitcoin as a 'version 1' mvp.

------
sneakin
I'd search the social graph around Julian Assange and Wikileaks. Bitcoin came
out shortly after they were blockaded. Wikileaks then waited a year or so
after Bitcoin was released to start using it. There's also a nexus of
cypherpunks around them with the skills and knowledge.

~~~
marshray
Bitcoin was out almost two years _before_ the Wikileaks blockade:
[https://en.bitcoin.it/wiki/Bitcoind#History_of_official_bitc...](https://en.bitcoin.it/wiki/Bitcoind#History_of_official_bitcoind_.28and_predecessor.29_releases)
[https://en.wikipedia.org/wiki/Wikileaks#U.S._diplomatic_cabl...](https://en.wikipedia.org/wiki/Wikileaks#U.S._diplomatic_cables_leak_responses)

Sure, it was probably someone who exchanged messages with some cypherpunks at
some point. Since that includes most of the skilled crypto implementers I
know, it doesn't narrow it down much.

------
friedland
Bitcoin is a money trading game in the guise of a new type of currency. Most
of Bitcoin is being hoarded by traders and speculators who think they actually
own something. Bitcoins could never effectively serve as an currency as there
will never be stable liquid.

------
leot
I was speaking with a friend just yesterday about how useful and easy it would
be (if you're the CIA/NSA) to run, say, the VPN "Private Internet Access".

In that conversation I came to similar speculations as pg's about Bitcoin (I
mean, the first client was written for Windows, which straight away seems
decidedly not-hacker-y).

As for motivation: it's not as though this would be the first time that a spy
agency found sources of funds extra-congressionally (see, e.g.,
<http://en.wikipedia.org/wiki/Iran%E2%80%93Contra_affair>). Perhaps,
alternatively, they thought it was worth experimenting with, say:
<http://en.wikipedia.org/wiki/Assassination_market> .

Another explanation would be that someone at a gov't agency figured out that a
crypto-currency was likely to come into existence at one point or another, and
if/when one did, it would be very useful/necessary to buy a lot of it/get
involved. If the currency was designed by someone else/a large open source
community, it might (or might not) have flaws in it that could render the
currency fundamentally unstable and make questionable any involvement of the
agency in the currency (e.g., they'd have to choose which cryto-currencies to
invest in, they might find it difficult to work with the authors to correct
any systemic flaws, they'd probably have to buy a lot of the currency rather
late in the game). Another reason is that, if the agency in question designed
the currency itself, it would have a large head-start on putting together the
hardware that could be used to disrupt it/eliminate it, if need be (c.f. US
military control of GPS). Who knows, perhaps the RAND Corporation put out a
report forecasting the introduction of crypto-currencies and showing that the
organization/state that first introduced it would gain a significant strategic
win.

If I were an administrator of the NSA/CIA/whatever, I can imagine being won
over by arguments that a crypto-currency was inevitable, and that my
agency/country would have a major advantage (financially and strategically) if
it designed said currency itself rather than letting someone else do it.

------
chris_dcosta
I would have thought that if this was a government backed project it would
include the ability "to know" - whether that be the persone, the amount or the
"where" af transactions.

It would be pretty dumb not to include that aspect, but as far as I know,
these are exactly the things bitcoin prevents.

There would be very few people with peer-to-peer networking skils the
programming knowledge to put that together and thhe mathematical knowledge to
create the algorithm and the economics knowledge to understand how to control
inflation. But there are still weaknesses in the process.

------
chatmasta
It's entirely possible that the NSA possesses quantum computing capabilities,
in which case they also possess the extreme power over bitcoin cryptography.
If this is the case, then they are able to track black market transactions
including ones among terrorist cells. If I were the NSA, I would say it's a
safe bet that when you release am "anonymous" currency, you promote an illicit
economy. Andie you secretly have the ability to omnisciently track its
activity, why not promote the currency?

------
dsrguru
I think a much more likely explanation is that the creators wanted to develop
a cryptographic currency that was sound enough to become wildly popular and,
in doing so, to let early adopters (i.e. themselves) make a ridiculous amount
of money. I say adopter _s_ in the plural because Wikipedia suggests that
Satoshi Nakamoto is three people:
<http://en.wikipedia.org/wiki/Bitcoin#Identity>

------
incision
I like bitcoin as a robust, validated communication network with the currency
function incentivizing its operation and creating noise to mask the murmur of
its true purpose.

------
asciilifeform
Aside from the traditional "NSACoin" hypothesis (massive transaction graph
waiting to be de-anonymized), here's another one: the private keys for the
massive hoard of coins mined in the earliest days of Bitcoin are on a
bureaucrat's computer, and will be used to crash the exchange rate -
discrediting cryptocurrencies for all time. (Discussion here:
<http://www.loper-os.org/?p=1009>)

------
prawn
IMO, this question is part-test, part-research by PG who would not be opposed
to being involved with a future, digital currency. Equally for reasons of
curiosity as for anything to do with profit or changing the world?

Which was the sole-founder startup working on something a bit like this? Got
rejected but with promising feedback on their first foray. Was it a currency
or something else they were working on?

An addition for the next Frighteningly Ambitious Startup Ideas list?

------
damian2000
The fact that something like Stuxnet could be leaked, and yet something
altogether less malevolent like Bitcoin could be tighter, and not leak? Highly
improbable in my view. I think its more probable that a genius-level
individual came up with it, and subsequently got lucky in that his creation
became wildly successful. Would we be discussing this if noone had used it,
and it remained a lone individual's spare time project?

------
dasht
I think PG is asking the wrong questions. None of merely plausible hypotheses
as to the motive of an imagined government actor creating bitcoin is
_testable_.

Perhaps more importantly, we've skipped entirely past the question -- a
question we might actually be able to begin to answer with evidence -- what
_what bitcoin is actually doing_ in the real world beyond the obvious and
superficial details that make headlines.

------
mikecane
I was giving this some more thought. Anyone else here familiar with the cast
of characters from the book _The Predictors_ ?
[http://www.amazon.com/Predictors-Maverick-Physicists-
Theory-...](http://www.amazon.com/Predictors-Maverick-Physicists-Theory-
Fortune/dp/0805057579)

Is there any possibility of their involvement?

------
pasbesoin
Assuming your premise, I would proffer some version of 4), although not
necessarily done by the U.S.

The U.S. and its currency are toast -- in a decline, if not crash.

Those who are relatively apolitical (not overly vested in any particular
political system) with U.S.-based assets are going to want them denominated in
some "neutral" form of tender.

------
shmerl
Why creating conspiracy theories? You can suggest it's martians who created it
with the same level of credibility.

------
theGimp
I'm surprised nobody mentioned MintChip [1]. It does not use the exact same
concept that bitcoin uses, but it's another crypto currency, and it's being
developed by the Canadian government.

[1] <http://en.wikipedia.org/wiki/MintChip>

~~~
neilk
Please. MintChip is not even remotely similar. It's a stored value card with
some crypto for signing transactions.

------
pbreit
I don't see the motivation for a government whatsoever. It's easy to envision
a person or group of anonymous people creating it. There have been a countless
number of individuals coming up with digital cash schemes.

------
jfoster
Why does "crypto guys who don't leak" equal government? That doesn't sound
like it would be all that hard to reproduce outside of government. Most
corporates don't leak either.

------
dropkickbox
to ferret out, and get forensic evidence against those engaged in illegal
activities. see the wired egold story. As someone mentions below, "its way
more traceable than cash"

------
Zigurd
Sadly the word "econoterrorism" has already been coined (no pub intended). I
would have protected that intellectual property and licensed it to DHS for a
reasonable fee.

------
chris_dcosta
Isn't it amazing how many commentors actually know nothing about the
mechanisms of the currency, preferring to comment from a position of ignorance
in tabloid headline statements.

I find it very strange coming from a community of so-called "hackers" that
this should happen, considering a) the interesting and complex technical
mechanisms involved, and b) the "mysterious" circumstances of it's coming
about. Who wouldn't want to get their hands dirty with it - at least out of
curiosity?

In fact, it's what I find more and more irritating about this community,

Apologies @pg - just had to let off steam.

------
justincormack
Er, if a government had created it you would have to pay taxes in it. That is
where the value of money comes from, future taxes you have to pay.

------
lightblade
Pools of crypto guys who don't leak stuff can also be employed by..the mobs!

This make more sense because bitcoin is already being used for acquiring
drugs.

------
frendiversity
If this is true, which countries have the computing/network resources to
theoretically take over/control the network?

------
oracuk
Possibly because someone wanted a market demand to drive down the cost of
ASICs for cracking AES256?

------
coldtea
5) As a honeypot for crypto fans, anti-government types, money laundering, and
such?

------
rooshdi
Bitcoin is a means of control, just like any currency. The incentive is
intrinsic.

------
altoz
if, say a government created a time machine and figured out that this is the
major form of currency in the future, to bring prosperity to the past much
quicker.

------
Datsundere
Created by a bored japanese man

------
guard-of-terra
What if Satoshi is an alien? Extraterrestrial being.

Maybe he replicated The Currency that is known to work using local technology.

This will explain how Satoshi looks like one person and still does too much
stuff for one person and gets it all right in a first try.

Even funnier if he's a space traveller, altough I suspect laws of physics
disallow "naive" time travel.

------
reaclmbs
You got it right, buddy, but it's an emerging government - not an entrenched
one.

------
yarou
It is clear that Bitcoin was engineered deliberately by some entity. Whether
that entity is a government, economic bloc, or group of individuals is an
interesting question. My two cents are that this group of individuals are
related in some way to the IMF-World Bank. An alternative "currency" was
established during the height of the financial crisis, in the form of SDRs.
Bitcoin could likely be the logical next step from SDRs. The beauty of the
currency is that it can be used to solve policy issues, without necessarily
revealing the political actor(s).

------
frozenport
Every Bitcoin transaction an be tracked, and once you associate a wallet with
a name you have the entire purchase history of the person.

------
n0mad01
i had similar thoughts and the possibility that bitcoin was written by the us
government seems conclusive to me.

two more possibilities :

* maybe it can be a way to liquidate the overwhelming national debt.

* what are these numbers all miners are crunching -> maybe decoding military stuff.

~~~
nhaehnle
What the miners are crunching is well documented as part of the protocol
specification and a clear case of "nothing up my sleeve".

