Back when Bitcoin was cool, hip, and anti-establishment, even the mainstream intellectual thought leaders liked it. In October 2011, Joshua Davis wrote a long celebratory piece for The New Yorker of all places. It was a different time, a different era, with different hopes and partisan fault lines.  

Den was bumbling around in its first post-high-school gap year, having not yet acquired a taste for economics or sarcasm, and barely learned to read deeply or write for an audience (#1506425). The Silk Road was just getting started, and America was still suffering from the post-GFC debacle: low growth, a reined-in financial system with deleveraging ensuring close-to-0% CPI.

Official inflation was basically flat (0.7%) between Oct 2008 when Satoshi emerged from the shadows and Dec 2010 when he posted his last post to bitcointalk. The media talking heads were worried about the banks; how much the Fed ought to print, scientifically speaking; how large the Treasury’s bailout packages should be; and, in the background, the European debt crisis was looming. Was this the end of capitalism?!

Nobody was looking at a fringe, technobabbling, cryptography creation aspiring to be money — or a peer-to-peer electronic cash system. To some extent, it didn’t make sense, clashing head-on with all the ways in which the intellectuals (implicitly) think about money.

There are lots of ways to make money: You can earn it, find it, counterfeit it, steal it. Or, if you’re Satoshi Nakamoto, you can invent it. That’s what he did on the evening of January 3, 2009, when he pressed a button on his keyboard and created a new currency called Bitcoin. It was all bit, and no coin. There was no paper, copper, or silver—just thirty-one thousand lines of code and an announcement on the Internet. 

The tone is neutral and curious, almost celebratory — not the sort of _gotchas_ and pearl-clutching we've endured recently (#1467408, #1467667). Amid never-before-seen money printing, it was pretty cool to make a new, predictable, uncontrollable money. Davis’ piece even uses a hyphen in the title (“The Crypto-Currency”) and the definitive article: It’s not just that there is no second best; there literally is no other.

We’ve come a long way from those innocent, exciting roots; from undermining and outcompeting the banks to becoming a bank. #1493902. We understood back then that financialization was, if not outright bad, then at least undesirable, icky, and not an appropriate devotion for a gentleman. #1475688, #1291642

Nakamoto wanted to create a currency immune to the predations of bankers and politicians. The currency was controlled entirely by software. At first, a single bitcoin was valued at less than a penny. But merchants gradually began to accept bitcoin, and at the end of 2010 the value began to appreciate rapidly. By June of 2011, a bitcoin was worth more than twenty-nine dollars. Market gyrations followed, and by September the exchange rate had fallen to five dollars. Still, with more than seven million bitcoins in circulation, Nakamoto had created thirty-five million dollars of value.

Davis interviews Dan Kaminsky, a leading internet researcher and hacker who was convinced he could break Nakamoto’s creation. Yet every time he inserted a bug, or attempted a novel attack approach, “there was a message waiting for him. ‘Attack Removed”

“Either there’s a team of people who worked on this,” Kaminsky said, “or this guy is a genius.”“Either there’s a team of people who worked on this,” Kaminsky said, “or this guy is a genius.”

Notice the positive connotation around cryptography, with no immediate “money-laundering” or “bad people/terrorist” incantation.

If Nakamoto ran the world, he would have just fired Ben Bernanke, closed the European Central Bank, and shut down Western Union. “Everything is based on crypto proof instead of trust,” Nakamoto wrote in his 2009 essay.

Davis doesn’t shy away from the clear legal precedent, and understands the very good reasons for Satoshi to be paranoid. What he was doing was considered treason — precisely why the fashionable elites found this mysterious underdog so captivating.

“Today,” Davis writes, from a nostalgic past of 15 years back,

bitcoins can be used online to purchase beef jerky and socks made from alpaca wool. Some computer retailers accept them, and you can use them to buy falafel from a restaurant in Hell’s Kitchen.In late August, I learned that bitcoins could also get me a room at a Howard Johnson hotel in Fullerton, California, ten minutes from Disneyland.I booked a reservation for my four-year-old daughter and me and received an e-mail from the hotel requesting a payment of 10.305 bitcoins

“a simple transaction that masked a complex calculus”“a simple transaction that masked a complex calculus”

Davis is shockingly blasé about the monetary underpinnings for both the dollar and bitcoin; no “lacks fundamental value” (#1506177) or “muh intrinsic value” here. “We trust that dollars will be valuable tomorrow, so we accept payment in dollars today,” Davis writes, accidentally formulating Mises’ regression theorem (#1426207)

Bitcoin is similar: you have to trust that the system won’t get hacked, and that Nakamoto won’t suddenly emerge to somehow plunder it all. Once you believe in it, the actual cost of a bitcoin—five dollars or thirty?—depends on factors such as how many merchants are using it, how many might use it in the future, and whether or not governments ban it.

He expertly outlined the merchant logic of avoiding extreme credit card fees and not having to suffer charge-backs — and, appropriately, the price volatility risk involved.

It’s a wonderful, honest, slightly subversive, and investigative piece — complete with visits to a crypto conference and a Kentucky-based mining facility. Davis tracks down a Satoshi candidate or two, and interviews them. He finally identifies “a Satoshi,” though not the Finnish cryptographer you know about:

And he wraps it up so beautifully, with a quote from an interviewee concluding that “You can’t kill it.”

The system was built so that we don’t have to trust an individual, a company, or a government. Anybody can review the code, and the network isn’t controlled by any one entity. That’s what inspires confidence in the system. Bitcoin, in other words, survives because of what you can see and what you can’t. Users are hidden, but transactions are exposed. The code is visible to all, but its origins are mysterious. The currency is both real and elusive—just like its founder.

We used to look up and wonder at our place in the stars. Now we just look down and worry about our place in the dirt.

Originally published in the October 10, 2011 issue of The New Yorker, available online here.
No clue which stated History Month category this fits under, but that’s for the judges to figure out, not me. (#1492293).