Tuesday, August 21, 2018

How Satoshi Could Sell his Stash without Tanking the Bitcoin Price

Satoshi Nakamoto, the anonymous creator of bitcoin, is believed to hold up to 10% of all bitcoins in existence, from his mining operation in 2009 before bitcoin was on the scope of anyone outside a handful of cypherpunks on a mailing list.
The market concensus is that these coins are lost. Backup failed, paper wallet got wet in the 2012 Tsunami. Something destroyed those coins forever.
But they are not burned — an operation that Satoshi could have performed, to prove the coins were unrecoverable — by sending to an unspendable address.
The “lost” coins are priced in. If they are ever found, and the consensus is broken, the result would be catastrophic for the bitcoin price. There are monitoring scripts watching the suspected “satoshi” addresses, so any movement would be news instantly.
Can satoshi ever sell his coins, without rendering them worthless?
In fact, there *is* a way satoshi nakamoto could move his “lost” coins without tanking the bitcoin price. A way to retain ownership, whilst reassuring bitcoin owners that no sudden moves will destroy their investment.
The means to accomplish this became possible in November 2015, with the activation of the OP_CHECKLOCKTIMEVERIFY protocol op code, CLTV for short, or as it is popularly known, OP_HODL.
This transaction op code makes it possible to send bitcoins to an output that only become spendable after a set amount of time has past. OP_HODL was widely hailed as a necessary building block for lightning network, a technology in-the-works that would enable bitcoin transaction volume to safely scale many orders of magnitude. With lightning, funds would be locked up for a short amount of time (usually under a day) while clearing nodes shuffle funds between themselves in a risk-free way before eventually settling funds. But CLTV is just an op code. It doens’t care what it’s used for, or how long the lock times are.
Using OP_HODL, satoshi could (for example), move 1% of his coins to an address that is spendable immediately, and spread the other 99% between outputs spendable between one one week and ninety-nine weeks in the future.
As the coin lockouts expire, satoshi could either dump his coins gradually, tumbling them of course to preserve anonymity, or send them unspendably into the future again with a rolling lockout, reassuring the market that there will be no sudden moves from his end. Depending on his lifestyle needs, I suppose there would be a little of both.
There’s already a lot of eyes on the “lost satoshi coins” today, but this is nothing compared to the attention public “hodl” addresses would get if satoshi followed this plan. In effect, satoshi would become like the bitcoin fed, the de facto prime influencer of bitcoin monetary policy. The weekly rebalancings would be one of the prime indicators of what the future would hold. And of course, the end game here would be an orderly liquidation with funds finallly widely distributed.
I don’t know if this can really be accomplished while maintaining anonymity, but it would be fun to try.
It’s heartening to see how the bitcoin technical evolution can be repurposed into tools that can secure its long term stability.
So if you are worried about satoshi selling his coins: keep calm and hodl.


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If you can’t provision a good hiding place for your hardware wallet seed phrase… maybe you don’t need to back it up in the first place. (Use multiple wallets plus pin instead)

Hiding stuff is hard. Too easy, and an attacker can find it. Too hard, and you may wind up hiding it from yourself. Or from the people that...