The New Satoshi Emails: Early Developer Sirius Releases 120 Pages Detailing Work on Bitcoin

Satoshi Nakamoto’s earliest collaborator Martii ‘Sirius’ Malmi has released his entire email correspondence with Bitcoin’s creator.

Spurred by an ongoing lawsuit in the U.K., the new emails are the most significant addition to the canon of what we know about Bitcoin’s still anonymous creator. 

Here are the most important new findings.

EMAIL #1: SATOSHI’S BITCOIN SCALING ASSUMPTIONS

When asked how Bitcoin might scale in the future, Satoshi theorized the network might have a maximum of 100,000 nodes. 

Here he goes into the calculations assessing the economics of bandwidth costs to nodes (read: miners) in propagating transactions across the network, the economic costs that would incur, and how that could be cost effectively passed on to users. 

He also discusses the implementation of users paying fees, and hints at the potential for the fee necessary for confirmation of your transaction being market driven due to the processing capacity of the network.

All in all, it’s interesting napkin math, though nothing out of the ordinary for those who have read Satoshi’s full Bitcoin forum posts. 

There Satoshi talked frequently about his vision for how the network might grow larger, and it’s notable much of his ideas were not proven to be viable based on subsequent development work.

EMAIL #2: Bitcoin Doesn’t Waste Energy

Though he wouldn’t stick around to see the tremendous uptick in Bitcoin mining using stranded resources, it turns out, Satoshi knew the network was greent.

One of the first criticisms to be lobbied at his new creation, Satoshi spent time addressing the idea that Bitcoin mining was wasteful on the forums, most notably saying that not having a currency like Bitcoin would be the bigger waste. 

Here, however, he expands on the idea in more detail, and in a more vivid and descriptive way than we’ve seen before. 

EMAIL #3: Satoshi on Time-stamping 

A headed debated today remains whether Bitcoin is money, or whether it can or does have other ancillary uses. 

In this email exchange, Satoshi seems to offer some insight on the debate, noting his belief the blockchain can be used as a distributed time-stamping server. This is akin to what has happened in Guatemala, where the blockchain has been used to certify contentious elections in recent years. 

EMAIL #4: Satoshi Talks DigiCash

Satoshi describing the differences between #Bitcoin and DigiCash, David Chaum’s failed e-money.

This is notable as Chaum’s work had a profound impact on the cypherpunks, including Hal Finney. He specifically discusses the differences in privacy properties of the two models, and notes that unlike Chaum’s scheme did not support an offline model, requiring all participants to be online to make use of the system. 

He also explains the finite supply cap of bitcoin. 

EMAIL #5: Satoshi Was Concerned About Promoting Bitcoin

Satoshi was concerned about his legal risk in launching #Bitcoin, noting he was “uncomfortable” with explicitly labeling it an investment. 

Note: Here also we see he didn’t come up with the term “cryptocurrency” himself.

EMAIL #6: Satoshi Got Burned Out on Bitcoin

By July 2009, Satoshi was tired, saying he “needed a break” from Bitcoin. Here, he also explains Hal’s absence from the work. He also mentions spending a period of 18 months at that point developing Bitcoin. 

A curious note as well, he asks Malmi if he had any ideas for applications people can actually use Bitcoin for. 

EMAIL #7: Bitcoin, A Way to Get Free Money

Satoshi discussing how #Bitcoin might gain adoption. Of note is his emphasis that Bitcoin was easy to obtain given that you could mine it on a computer. He also goes to postulate how the nature of a market trading for Bitcoin would evolve, discussing how skeptical people might be of its value, stating he was confident the increasing mining difficulty would prove its scarcity to people. 

Very different from how we think about BTC today in terms of acquiring it, but demonstrating a prescience of how people would mentally value it in the future. 

EMAIL #8: A Mysterious Bitcoin Donor Emerges

In June 2010, someone offered to donate $2,000 to Satoshi for his #Bitcoin work. Notably, he had the donor send it to Martti’s address. He also communicated care that the donor’s privacy was respected.

EMAIL #9: Satoshi Was a Fan of Free Transactions 

Already known, but Satoshi was pretty adamant that early users consider #Bitcoin “free.” Here he is discussing removing transaction fees from the UX of an early software. 

It’s interesting that his reasoning was to obscure this feature from users, but simultaneously acknowledged its necessity in the far future. 

EMAIL #10: Satoshi Was Dedicated to His Bitcoin Work

Satoshi worked on #Bitcoin on Christmas day. There are some interesting implications here to consider regarding his personal life. 

EMAIL #11: Bitcoin, A Web Currency for Currency Trading?

Satoshi saw #Bitcoin taking hold as a way to trade other internet currencies like Liberty Reserve. He also goes on to discuss the potential for markets selling gift cards for bitcoin, which wound up becoming and is to this day a significant market for bitcoin. 

Note: Liberty Reserve was later shut down by the US.

EMAIL #12: Satoshi’s First Disappearance 

Satoshi had a mysterious leave of absence from #Bitcoin in 2010. Here he is talking about it with Martti, though it’s notably also short on details.

EMAIL #13: Satoshi Realized Bitcoin Wasn’t Anonymous

It was Satoshi who removed the language that Bitcoin was “anonymous” from http://Bitcoin.org. He worried it made Bitcoin sound “shady.” This echoes his later sentiments around Wikileaks announcing their acceptance of bitcoin for donations. 

EMAIL #14: Satoshi Gives Praise to His Protege

Worth noting given the historical revisionism around this, Satoshi thought very highly of Gavin Andresen. Here he is praising Gavin and referring to someone else as a “goofball.”

EMAIL #15: Satoshi Says Sayonara 

We finally have a copy of the email Satoshi sent other developers before taking his name off the project website. As they’ve said, Satoshi doesn’t mention his intention to step back from the project at all.

Overall no substantial new information is brought to light, but the emails do give a new angle to Satoshi’s interactions with others involved in the project before his departure. 

First Female UFC Fighter To Get Bitcoin Paycheck Through Bitwage

• Luana Pinheiro will become the first female UFC fighter to get her paycheck in bitcoin through a partnership with Bitwage.

• Pinheiro joins her boyfriend Matheus Nicolau who previously adopted a Bitcoin Standard this past March through the same payroll provider.

• Bitwage allows anyone in the world to convert their paycheck into bitcoin without the need for employer consent.

Bitwage, a payroll service provider specializing in bitcoin and other cryptocurrencies, has partnered with Luana Pinheiro, making her the first female Ultimate Fighting Championship (UFC) fighter to get her paycheck in bitcoin, according to a press release sent to Bitcoin Magazine.

Pinheiro is ranked #15 in the strawweight fighting class. The Brazilian fighter has a 10-1-0 record and is currently on a winning streak of eight matches. In March, Pinheiro’s boyfriend Matheus Nicolau (18-2 record), who is ranked seventh in the Flyweight UFC class, also partnered with Bitwage.

Thus, both fighters have adopted a Bitcoin Standard and also noted a low-time preference as it relates to training. They explained how that transcends into their financial well-being and patience.

“I do not think I will have a problem with Bitcoin going down or up,” says Pinheiro. “If it was not volatile it would not go up either. Think about this: it takes on average 10-15 years for an individual to get a black belt in Brazilian Jiu Jitsu, so my time preference here is equally long if not longer.”

Nicolau echoed his partner’s sentiments for low-time preference but also spoke to his need to act, not only for the sake of his own future, but for that of his future family.

“Luana joining me in going onto the Bitcoin standard makes me very happy and I am more than confident that bold and courageous steps taken today will be a huge win in the future, for both of us,” Nicolau said. “We stand and do things together, united and fully in sync, because that is how we are – never above, never below, but always beside each other.”

Pinheiro noted the experience she witnessed as Bitwage flew in to personally discuss the transition to a Bitcoin Standard with Nicolau blew her away and that not investing in bitcoin was a risk she was unwilling to take. Pinheiro’s personal experience in Brazil also influenced her decision to partner with Bitwage.

“And don’t forget that I am from Brazil, so I know a thing or two about inflation and its effects,” said Pinheiro. “I was born around 1994, at that time Brazilian currency Real was introduced and pegged 1:1 to the U.S. dollar at that time. Now it is 5 BRL for 1 USD. What do we use Bitcoin again for?!”

Nicolau embraced his partner’s adoption of a Bitcoin Standard and low-time preference, which Pinheiro refers to as “Black belt time preference,” and he made a lasting comment on the price of inaction when it comes to bitcoin adoption:

“Opportunity is a naughty goddess that wastes no time with those who are unprepared,” said Nicolau. 

UPDATED (Jul 29, 2022 – 3:04 p.m. ET): Removes wording that Pinheiro was the first Latin American athlete to be paid in bitcoin and clarifies she was the first female to receive a Bitcoin payroll.

Why Does Bitcoin’s Price Make Random, Sudden Downward Moves?

Mimesis Capital: Inside The Event Horizon, Report #15

Why Does Bitcoin’s Price Make Random, Sudden Downward Moves?

A common knock on bitcoin is that it is “too volatile.”

There is no denying that bitcoin is a volatile asset. Its price action supports this conclusion on nearly all time frames (including minute, hour, daily, and yearly).

However, volatility isn’t necessarily a bad thing. In fact, volatility creates opportunity.

Over long time horizons (4+ years), bitcoin’s volatility has been mainly to the upside. Using this longer time horizon helps to eliminate the noise and focus on the signal.

Volatility and return can be assessed using something called the Sharpe ratio, which measures risk-adjusted return. The Sharpe ratio is the result of dividing the asset’s return by its risk/volatility over a 4-year HODL period.

Bitcoin’s Sharpe ratio has been higher than that of every other asset class throughout its entire existence. This is one of Wall Street’s favorite financial metrics, and it screams, “Buy bitcoin,” as it shows that the return of holding bitcoin has more than compensated holders for its historical level of downside volatility.

Large, Quick Downward Moves

Why does bitcoin have such large, sudden downward price moves? What is causing these massive corrections in such short times?

Unlike equities (stocks), which tend to be traded aggressively on earnings days (days when companies’ performance and future guidance fundamentally change), bitcoin tends to be traded aggressively on seemingly random days.

This strange phenomenon tends to confuse traditional commentators and journalists as they struggle to find any news piece that could have affected the price so drastically.

Eventually, someone finds some possible explanation, and it immediately gets circulated as a result of confirmation bias.

Examples:

• “Bitcoin fell 10% because of the Biden tax hikes”

• “Bitcoin fell 10% because of a (false) exchange inflow of 10,000 BTC”

• “Bitcoin fell 10% because Yellen is pushing for an 80% capital gains tax on crypto” (fake news)

Although a small number of individuals may be placing buy or sell orders based on one-off news stories, they likely aren’t the sole driver of the sudden bitcoin price crashes that we regularly see.

In reality, many people retweeting and spreading the news that bitcoin’s price crashed because of X are simply being “Fooled by Randomness.”

Leverage Liquidations

Although X may be one of many catalysts, the large downward moves are often driven by excessive leverage in the system.

This may confuse some people because by definition, for every buyer of a futures or perpetual swap contract, there must be a seller. However, the prices of those contracts change based on the market’s balance between longs and shorts.

For example, a funding rate is charged that helps exchanges to keep the perpetual swap price in line with the spot price. If the general market sentiment leans long, then the funding rate likely results in longs paying shorts every 8 hours. This is why bitcoin futures contracts trade in contango during a bull market.

#Bitcoin eliminates imbalance as soon as it appears. This is a feature of a monetary system with a fixed inelastic supply and variable demand. It is the polar opposite of how the legacy system functions, which allows imbalances to grow causing fragility and long term instability. https://t.co/4QHVEluSlK

— Parker Lewis (@parkeralewis) April 23, 2021

Parker Lews from Unchained Capital explains leverage liquidations well by stating that “Bitcoin eliminates imbalance.”

If there are too many leveraged longs on bitcoin without simultaneous buying pressure in the spot market, the current price may temporarily be unsustainable.

As @WClementeIII explained, an overleveraged market is similar to a Jenga tower built on a fragile base. If the funding rates and the futures contango are extremely high without significant buying pressure in the spot market, the Jenga tower only needs a slight push before it comes crashing down.

These leverage liquidations result in an ugly negative feedback loop:

1. Price falls.

2. Highly leveraged longs get liquidated (forced sellers).

3. Price falls further.

4. Less-leveraged longs get liquidated (more forced sellers).

5. Traders see falling prices and jump on the trend.

6. Price falls.

7. Repeat until the fragility of systemic leverage is eliminated.

This imbalance, driven by excessive leverage, results in volatility. This volatility results in coins getting transferred from weak hands to strong hands that understand bitcoin. After weak hands sell, the price must adjust to the new equilibrium.

A new base of strong holders is then built at a more sustainable price level, and then bitcoin’s parabolic bull run continues, as it has for more than a decade. This is all due to individuals game theoretically converging on Bitcoin as a Schelling point because of its superior monetary properties.

Contango? Hyperbitcoinization?

Some may ask, if excess leverage is a key reason why these sudden downward price moves occur, how can the futures curve contango be good for Bitcoin, especially if the curve is driven by the demand to place leveraged long bitcoin purchases?

First, the contango basis trade still exists, and it is profitable for a low-risk USD-denominated trader to buy spot, sell futures, and capture the spread. With that said, if the curve gets too high without enough capital coming in to execute the basis trade or buy spot, the contango/funding rate could get unsustainably high.

If the funding rate or contango curve gets too high without significant buying pressure in the spot market driving up the price, then the price could be driven up on a fragile base of leveraged longs paying high funding rates. If so, it could potentially crash violently.

This is a guest post by Mimesis Capital. Opinions expressed are entirely their own and do not necessarily reflect those of BTC, Inc. or Bitcoin Magazine.