Bitcoin at 10: star turn or bit player

Is it a Ponzi scheme or the herald of a new world order? We may need another 10 years to find out

Who is Satoshi Nakamoto? It’s a decadeold question that has attracted attention since this mythical figure came up with the idea for bitcoin and its underlying blockchain technology. Bitcoin, the world’s newest and most controversial currency, turned 10 this month, prompting much commentary.

Nakamoto proposed the idea to a cryptography mailing list in October 2008. He released the first bitcoin software in January 2009 and mined the first block of bitcoins, called the genesis block or block number 0, in which he embedded this text: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.” It refers to a headline in The Times of London that is considered not only a timestamp for bitcoin’s genesis but also a comment on the banking system the blockchain aims to disrupt.

And then in 2010 Nakamoto vanished. Investigations into his identity have produced a list of likely candidates but we’re no closer to knowing who he is — except the bitcoins are worth about $6.2bn based on the million or so accumulated in his name since those early blocks were mined.

How closer are we to knowing if his creation is as good as he foretold?

Late last year bitcoin soared in value from $4,000 to almost $20,000 by December, before taking the shirts of hapless investors who bought too late in the run. It traded at about $6,000 since August and last week fell to $5,549, its lowest since October 2017, just before its spectacular surge. This Tuesday it fell to $4,387, taking its losses to almost 30% in the past week.

From the outside it’s hard to argue with those who say bitcoin is just a Ponzi scheme. The fact is that by the time the casual investor got involved, the gold rush was most likely over.

In that way, it’s not unlike many other digital investments. Some people likened it to the property booms of previous generations, and the internet boom then bust of the early 2000s. The millennials’ property boom.

Some people made a lot of money. Many lost a lot. Like the internet dotbomb, they blame the technology as much as the lack of a business plan.

But bitcoin has been a test case for new technology which is the real star of the show, the enabling blockchain.

It has been successful as a cryptocurrency but has been infinitely more successful as a proof of concept for the cryptocurrency. And proof of blockchain proponents’ aspirations that it is the distributed ledger of the future. There is significant momentum across a broad range of applications for this kind of way of accounting for things to suggest blockchain does have great potential. It has been likened to TCP/IP, the underlying data transfer technology that underpins the internet. It may be that big.

I suspect bitcoin may be a bit like Netscape, the first internet browser. After pioneering access to the internet, the Netscape browser was overtaken and is now only a distant memory. Let’s see in another 10 years.