Earliest Bitcoins Seen Moving

satoshi bitcoin announceTransaction records in the blockchain show that bitcoins mined during the earliest days of Bitcoin have been transacted during the past year - after remaining 'dormant,' for the most part untouched, since being mined between 2009-2011.

The bulk of these 67,000 coins (worth $67mil) were transacted during the months surrounding the Bitcoin all-time-high price in November 2013. Speculation has been brewing as to the reasons why these previously 'dead' bitcoins have moved, and, also, who the owners may have been - some saying that there may have been spends by Satoshi himself.

Earliest Coins, Earliest Blocks, Who Is That?

Research conducted (and published on Let's Talk Bitcoin) by John Ratcliff has established, beyond doubt, that these earliest bitcoins, mined between January 2009 and December 2011 had begun being spent in August 2013. Ratcliff had conducted a forensic analysis of the blockchain, the results of which are shared below, and combined his findings with information pieced together from bread crumb trails left in forums posts during 2009-2010 by some of the earliest Bitcoin adopters, including Satoshi himself.

The summarized findings outlined below presents the blockchain evidence pertaining to the original coinbase transactions, their spend amounts and dates of expenditure, as well as clarification of the identity of the parties. In order to stem the flow of wild speculation, some credible reasons as to the "Why?" of this activity are also provided.

Blockchain Archaeology

The first Bitcoin block was mined, by Satoshi, on 3 January 2009:

https://blockchain.info/block/000000000019d6689c085ae165831e934ff763ae46a2a6c172b3f1b60a8ce26f

And then he mined the second block on 9 January 2009:

https://blockchain.info/block/00000000839a8e6886ab5951d76f411475428afc90947ee320161bbf18eb6048

From this date onward Satoshi's client began mining in earnest, running several concurrent mining threads, presumably with the objective of sustaining the early Bitcoin network for more and more people to join by adding their own Bitcoin mining clients. Others did join, as this Tweet from Hal Finney attests:

Hal Finney via Twitter:

Based on research conducted by Sergio Lerner and Taras, we are able to distinguish blocks mined by Satoshi's client from those mined by other early miners. Sergio Lerner identified the extraNonce footprint left by Satoshi's client in the blocks it mined. They are characterized by a strict increment of 1 in each series of successive blocks:

satoshi mining footprint

Blocks not mined by Satoshi can, therefore, also be identified and for some of these documentary evidence of the mining party exists, such as block 78, the coinbase of which, Hal Finney (see Tweet above), had committed to a paperwallet. Taras's research has gone a long way to identifying some of the earliest miners and interested readers can read more in his BitcoinTalk forum post. His findings point to a small group of about six individuals (including Satoshi and Hal Finney) who were actively mining Bitcoin blocks during January and February 2009.

All Chips Down

John Ratcliff discovered that the coinbase rewards (50 BTC) of a series of blocks dating from this early period had been spent during the past year.

For example, the following four coinbase rewards were obtained for blocks mined on 30 January, 4 February, 6 February and 7 February 2009:

https://blockchain.info/address/15coobWGLz5rTPPLwMqDrC848g5rSqgXX1

https://blockchain.info/address/1CgrbzKje66Pcz1egaAnhr7qEGfdk9atS2

https://blockchain.info/address/1KiCeqdXxzTYeq1dDUi6B1265cqFwsihzm

https://blockchain.info/address/14pDPbeBCCn4CoNKc7YZJnJSWnqfoxf1XF

and they were all spent within minutes of one another on 6 February 2014 when Bitcoin price decisively dropped below $800 (and stayed below, since).

Conspiracy or Not a Conspiracy, or...

In the language of Bitcoin 'spend' does not translate directly to 'buy something', nor does it specifically imply 'sell.' Remember, that Bitcoin transactions involve the transfer of unspent outputs, so even the action of sending bitcoins from one of your wallets to an address in another of your wallets, is referred to (and recorded in the blockchain) as a spend.

Neither John Ratcliff nor this author believes that the movement, after years of dormancy, necessarily implies collusion or a decision to 'cash-out' by these early adopters. What is of significance, instead, is that we now have proof that the addresses relating to the earliest Bitcoin mining rewards - assumed 'dead' coins for a long time - have, in fact, been controlled by people, and that they exercised that control during the past year.

What are the likely destinations of these early block rewards?

Reasons To Move Your Bitcoins

A great perceived fear seems to be that early adopters would 'cash out' - meaning that they would sell all of the bitcoins they had accumulated as early adopters, take profit and walk away. Whilst taking profit on an investment is not a crime, and a sensible action when your investment had increased by 12.5mil percent after five years ($0.008 to $1,200), it is understandable how many people in the Bitcoin space would become grievously concerned if Satoshi started selling off his holdings, and appear to 'cash-out' from his grand scheme.

Most people in the community understand how the Bitcoin innovation is just too revolutionary to ever be reduced to a Ponzi-scheme, yet, for some myopic souls and nervous dispositions, this fear is a great concern.

Other than taking profit on a commodity that had increased in value from $0.008 to $1,200 in a few short years, there are several valid reasons why these early coins could be showing up in the blockchain as spent.

Wallet Security

As alluded to previously, the action of sending coins into cold storage, or just to another wallet, involve a spend transaction.

User king-six remarks in r/Bitcoin:

The earliest wallets were secured with truecrypt volumes. TC has been abandoned and deemed potentially insecure. It is conceivable that whoever holds those coins would want to move them to a different setup.

The development of multi-signature clients as well as sophisticated Bitcoin contracts during the past year would surely attract large holders with the options of securing, storing and contracting their holdings. Opting for any one of these would see the original coinbase transactions 'spent'.

Allure of The Amazing US Dollar

Sure, tongue-in-cheek, but the point is this: Why would someone with a large holding of Bitcoin necessarily want to exchange those for fiat? By participating in the beginning years, the early adopters show their affinity for Satoshi's vision of the need for the creation of a new distributed token of value. Unlike a few years ago, one can now purchase "virtually" everything you need or desire using Bitcoin, so why weaken your purchasing power by dumping what you had acquired through great risk and acute vision? Besides, the US Dollar has lost both value and esteem over the past 5 years, so how is exchanging your bitcoins for a diminutive paper currency a smart move?

Conversely, some things cannot be bought with Bitcoin and are only for sale in Dollars. Hence, it would be expected that at least some of the early adopters took advantage of the price near $1,000 to sell some (or all) of their bitcoin holdings in order to invest in other necessities, such as real estate, etc. Nothing to get hung about.

Who are the candidates?

User bitcoinsSG provides the following valuable information in r/Bitcoin:

Satoshi Nakamoto was in close correspondence with a few identities (real/pseudonymous) before the launch of the compiled code. Once the much anticipated code was circulated amongst the small group of cypherpunks, I can only speculate that they ran it. Note, the original client had a dropdown menu "Options-> Generate Coins." Here are some of those identities...

So, with five potential candidates, was Satoshi Nakamoto responsible for any of the recent spends of early bitcoins?

The answer is no, and the following visualization was prepared by Coinometrics, to show that none of Satoshi's extraNonce-related Coinbase rewards have been spent. The originating blocks of the February 2014 example outlined above, are shown in orange. Satoshi's long strands of mined blocks are clearly visible - and they all remain unspent.

coinometric satoshi footprint

Smallest Portion

John Ratcliff's research shows that approximately 30% of all early bitcoins are still dormant:

Their worth, in US Dollars, is in the billions with a 'b.' If some early bitcoin adopters are cashing out a statistically insignificant amount of bitcoins, in the order of millions with an 'm,' one shouldn't overstate the case.

Featured image by Shutterstock.

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Venzen Khaosan

Market analyst and Open source developer with a keen interest in blockchain technology, consensus mechanisms and the decentralizing effect.

He has found a solution to the PKI mechanism. Email me to discuss.

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