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The Man Who Really Built Bitcoin

Outside his temple city, California, suburban home in march, a befuddled retired man was confronted by journalists shouting questions about virtual currencies. Dorian Nakamoto, 64, was named by Newsweek as the brains behind bitcoin—a claim that, like prior efforts to identify the pseudonymous creator, Satoshi Nakamoto, was quickly debunked. Meanwhile, on the other side of the nation, in Amherst, Massachusetts, the person potentially most responsible for the currency's rise to $7.7 billion in value and with the most control over its future was hidden in plain sight.

Gavin Andresen, a mild-mannered 48-year-old who was chosen as satoshi nakamoto's successor by the original Satoshi Nakamoto, whoever he or she is, in late 2010. Andresen was appointed "Core maintainer" (chief developer) of the open-source code that describes bitcoin's rules and provides the tools used to do it. The combination of Nakamoto's endorsement and Andresen's years of dedicated, full-time work on the bitcoin code has given him considerable clout within the bitcoin community and beyond. He's been tapped by the CIA and Washington regulators to clarify the cryptocurrency.

Some bitcoin supporters make bold promises, claiming that the stateless virtual currency will free Americans from the shackles of the federal reserve and that developing countries will grow to wealth as a result of the low-cost transactions enabled by the currency. Other bitcoin proponents have the air of a salesman seeking a deal, reciting excuses why you should invest in the currency that make you feel like you're not getting the whole picture. Andresen, on the other hand, seems to be seeking quiet personal fulfillment, cheerfully describing himself as a "Geek interested in nuts and bolts stuff."

He may make a compelling case for bitcoin, but he easily devolves into mathematical details that most people will find repulsive. When asked about what 2014 holds for bitcoin, he says, "We say this is going to be the year of the multi-signature wallet." Despite this, Andresen has had and continues to have the most effect on the code that decides how bitcoin operates—and, eventually, whether it should thrive. Despite the lack of a central bank, the currency's architecture needs major improvements if it is to gain widespread acceptance. The way Andresen wields his influence over Bitcoin would have a significant impact on not just its future but also the outlook for other virtual currencies.

Lucky Bet

While the sources of Bitcoin are unknown, much is known about Andresen and his background. Formerly known as Gavin Bell, he has worked as a software developer since graduating from Princeton with a bachelor's degree in computer science in 1988 and joining Silicon Graphics in Silicon Valley. He spent seven years there before moving on to a series of startups where he developed products ranging from 3-D drawing software to online games for blind and sighted people to play together. Then, in 2010, he came across Bitcoin.

Bitcoins were almost useless at the time, and they were incredibly difficult to obtain and use. But Andresen saw technological beauty in Nakamoto's concept, and the idea of a currency free of government interference appealed to his "mostly libertarian" politics.

Bitcoins are developed by people running software that competes to solve a mathematical puzzle and win a reward of freshly minted bitcoins, rather than by a central bank. The mining process is programmed to pay out fewer and fewer bitcoins over time, until there are 21 million, and it also helps to validate bitcoin transactions. Andresen launched the Bitcoin Faucet website in 2010 to encourage people to start using Bitcoin. Each visitor received five free bitcoins.

(A bitcoin was only worth a few cents at the time, but now each one is worth $600; Andresen decreased the scale of the handout as bitcoins increased in value, then shut down the platform in 2012.) He also started sending Nakamoto code tweaks and enhancements. The founder of Bitcoin admired his work and quickly made his protégé's e-mail address the only one on the project's homepage. In a December 2010 post on the Bitcoin website, Andresen officially stated his intentions. He wrote, "With Satoshi's blessing and considerable trepidation, I'm going to start doing more aggressive project management for Bitcoin."

He's been working on it full-time since then. In 2013, the Bitcoin Foundation paid him $209,648 in bitcoins as a pension. Andresen has been accused of being Nakamoto, despite the fact that he dropped the pseudonym after the currency achieved momentum. He still rejects it categorically. After giving a talk in April, he said, "I am not Satoshi Nakamoto; I have never met him; I have had several e-mail conversations with him." “I believe no one knows who he is.” Andresen is a remarkable scam artist if it was a fabrication. His style has been distinct from Nakamoto's in hundreds of forum threads, e-mail addresses, and lines of code.

Andresen committed himself to Bitcoin out of "enlightened self-interest," but without expecting anything in return. He said, "This was a dream that I wanted to see achieve." His risk has paid off, providing him with a lucrative new job and bolstering his family's safety net. Andresen hasn't said how many bitcoins he owns, but he has said that the return on the bitcoins he accumulated in the currency's early days was sufficient for him to retire comfortably. He boasts that his partner, a geology professor, no longer refers to Bitcoin as "fake Internet currency." Last Christmas, his children became persuaded that their father was onto something when he used Bitcoin to pay for a white-water rafting trip in New Zealand.

Upwardly Mobile

The site of our meeting, in the lobby of the Beverly Hilton Hotel in Beverly Hills, California, emphasizes the rise of Bitcoin during Andresen's engagement with the project. After presenting at the Milken Global Conference, a dressed Andresen is sipping oatmeal stout, an affair that draws leading figures in the finance world who pay $8,500 for a ticket. Bitcoin seems to fascinate—if perplexes—some financiers and Andresen is the ideal individual to represent it to them. He makes it sound like a sensible, long-overdue update to the antiquated money in your wallet. When Andresen takes on from Satoshi Nakamoto in 2010, he set out the project's operations, drawing on his background leading software development teams and his knowledge of big open source projects like Linux.

Andresen was the most senior of a group of five key developers. Only they had the authority to alter Bitcoin's code and incorporate ideas by other volunteers. They had unrivaled control over the currency's basic activity and economic parameters as a result of this. As the price of Bitcoin rose over time, Andresen and the other key developers worked tirelessly to refine the program that enabled it all. They patched security flaws that had allowed for automated heists, improved the software's stability, and spruced up the GUI to make it more user-friendly.

That was no easy task because, as Mike Hearn, an ex-Google software developer who has contributed code to the initiative, puts it, "what Nakamoto left was not the sort of software you'd expect to create a product on, let alone an economy." Hearn explains, "He published Bitcoin to show his theories would succeed." “It wasn't published with the intention of becoming a long-term viable product.” According to Hearn, the majority of the work to correct this was undertaken by Andresen and Wladimir van der Laan, an Amsterdam-based coder who takes over as the main maintainer from Andresen in April (van der Laan, who is also paid by the Bitcoin Foundation, did not respond to an interview request).

Most of what Nakamoto wrote vanished as glitches were patched, dirty code was cleaned up, and new features were introduced. Just about a third of Nakamoto's code exists. “He was a genius coder, but he was eccentric,” Andresen says. Andresen, according to Peter Todd, a developer who has contributed to the Bitcoin project, seems to be in a rush to tweak Nakamoto's concept, presumably inspired by an urge to bring the currency into the hands of millions or billions of consumers. Todd says, "I'm much more conservative in making improvements than he is, and I believe that's true for other developers as well." He cites Andresen's latest reforms that make payments on Bitcoin transactions rise and fall as the number of transactions changes as an example. Todd argues that more time spent researching potential drawbacks may have aided the creation of those reforms.

Even after Andresen helped create the Bitcoin Foundation to fund the program with contributions from individuals and businesses, the number of people working on the code remains limited. However, the software that powers Bitcoin has never been more important. As the currency has risen in value to nearly $8 billion, its supporters have expanded beyond early libertarians to include Wall Street and Silicon Valley investors (see "Bitcoin Hits the Big Time"). Legislators and regulators in the United States also shown support for Bitcoin and have attempted to restrict it (see "Regulators See Value in Bitcoin and Other Digital Currencies").

Security Fixes

Andresen is constantly concerned with security bugs. When he tells how someone alerted Nakamoto in 2010 about a bug that allowed someone to use anyone else's bitcoins, he laughs. Andresen explains that Satoshi just modified the code and instructed everyone, "Run this new code, I'm not going to tell you why." However, although the majority of today's tech glitches are mild, related issues can also exist. “That is why I believe Bitcoin is an experiment in which you do not spend your whole life savings,” he says.

Unfortunately, letting users check other people's code, which is the strongest protection against security vulnerabilities, is difficult to implement for Bitcoin. Unpaid interns would rather write their own code than read the code of others. The latest Heartbleed flaw, which compromised the security of hundreds of thousands of websites, serves as a cautionary story, according to Andresen. It was the result of a single, unnoticed error made by a volunteer contributor to open source applications. Even architecture defects that don't allow for simple robberies could be fatal to Bitcoin. Since the currency's valuation is almost exclusively based on speculation, any suggestion that the scheme isn't bulletproof will result in a significant price drop. “It would certainly survive,” says Andresen, “but it would be bad.”

Meanwhile, Andresen is dealing with a significant flaw in Nakamoto's architecture. The Bitcoin network can't handle more than seven transactions a second, which is a small number for technology with global aspirations. (At the moment, only about one Bitcoin purchase is made per second, but the majority of people who own Bitcoin do so to bet on its value rather than to buy or sell products or services.) Visa handles about 480 transactions per second globally, with a peak capacity of 47,000 transactions per second.

“I'm concerned about it because there's a lot of discussion in the Bitcoin world about how we're going to do it,” Andresen says. His preferred approach is to increase the size of the “blocks” of transactions that are validated every 10 minutes by the bitcoin mining network. If it doesn't happen, he notes, making a transaction handled quickly would necessitate paying a large transaction fee to push it ahead of others. Not everyone is on board with Andresen's suggested solution. Any critics claim that it would further centralize Bitcoin. They claim that larger blocks would make mining the currency so computationally expensive that only big companies could do it, granting them centralized control of the currency's use. Andresen uses the Bitcoin interpretation of scripture to emphasize his own point of view. “It's clear from Satoshi's writings that he meant it to be a day-to-day transaction network for everyone,” he says.

Everything Andresen determines will almost certainly be carried out. He vows that before making any changes to Bitcoin's code, he and the core developers will still seek out different perspectives. He says, "It's really a consensus-driven operation." He also points out that since the code is open-source, someone who disagrees with it will build a competing version with their preferred style. Other Bitcoin developers and consumers, on the other hand, have no reason to challenge the status quo and Andresen's position in it. Any currency's worth is largely determined by a group's confidence. The trust in Bitcoin is based not only on Nakamoto's code but also on the people who maintain it.

Andresen provides a different reason for why Bitcoin would not undergo significant changes. Once the transaction problem is settled, he believes that maintaining the code will become more of a task for caretakers rather than master builders. Andresen expects to spend less time thinking about keeping Bitcoin running and more time in his Amherst home office pondering ideas on virtual currency economics and reading the growing scholarly literature on Bitcoin. He says, "I'm very hopeful going forward." “I hope Bitcoin is really dull in ten years.”

About The Authors

Paolo Reyna

Paolo Reyna - Paolo is a senior at the University of Illinois at Urbana-Champaign, majoring in International Studies with a Latin American emphasis. During the fall semester of 2012, he had the opportunity to study abroad in Peru, which piqued his interest in international growth. He learned about the disparities that impact indigenous peoples, got a taste of Peruvian culture, and improved his Spanish skills. Mitchel interned with the Chicago Council on Global Affairs, conducting research on food security in Latin America, after being inspired by his foreign experience. He wants to work in international development and for a government department, writing legislation. He loves playing intramural basketball and practicing for the Chicago marathon when he is not thinking about current events in Latin America.

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