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Satoshi Nakamoto warned that Bitcoin could become a significant consumer of energy in 2009 emails.
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Proof of Work is central to Bitcoin’s security but debated for high energy consumption.
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Satoshi foresaw non-financial uses for blockchain and expressed concerns about legal scrutiny.
In a recently released batch of emails posted by Martii ‘Sirius’ Malmi, an early collaborator on Bitcoin’s code, Satoshi Nakamoto warned that the cryptocurrency – now the world’s largest digital asset – could become an energy guzzler.
The email release comes as Craig Wright is on trial in a case brought by the Crypto Open Patent Alliance (COPA) to determine whether he is indeed Satoshi Nakamoto, the anonymous creator of Bitcoin.
“Proof of Work is the only solution I’ve found to make p2p e-cash work without a trusted third party,” Satoshi wrote in May 2009, calling Proof of Work (PoW) “fundamental to coordinating the network and preventing double-spending.”
PoW is a consensus algorithm used in cryptocurrencies like Bitcoin to secure the network and prevent double-spending by requiring miners to solve complex computational puzzles, which in turn validates transactions and adds new blocks to the blockchain.
PoW is at the center of a debate around Bitcoin’s energy consumption. While the cryptocurrency industry points to miners’ use of clean or orphaned power, which would otherwise go to waste, critics are laser-focused on the raw numbers of energy consumption it generates.
As a result, some jurisdictions like New York State or British Columbia have placed moratoriums on Bitcoin mining, citing the high energy consumption.
“If it did grow to consume significant energy, I think it would still be less wasteful than the labour and resource intensive conventional banking activity it would replace,” Satoshi wrote. “The cost would be an order of magnitude less than the billions in banking fees that pay for all those brick-and-mortar buildings, skyscrapers, and junk mail credit card offers.”
2021 research from Galaxy Digital showed that Bitcoin uses half the energy of the banking or gold mining industries.
“Ironic if we end up having to choose between economic liberty and conservation,” Satoshi continued.
Non-financial uses of Blockchain
Blockchain serving as a sort of open-source notary was one non-financial use of Bitcoin that Satoshi saw in the technology, which would allow users to securely timestamp documents to prove their existence at a specific point in time.
“Bitcoin is a distributed secure timestamp server for transactions,” Satoshi wrote. “A few lines of code could create a transaction with an extra hash in it of anything that needs to be timestamped.”
Legal concerns
Satoshi was also concerned that labelling Bitcoin as a sort of investment might bring legal scrutiny from authorities.
“There are a lot of things you can say on the sourceforge site that I can’t say on my own site,” he wrote. “Even so, I’m uncomfortable with explicitly saying, ‘consider it an investment’ … That’s a dangerous thing to say and you should delete that bullet point. It’s OK if they come to that conclusion on their own, but we can’t pitch it as that.”
Indeed, in the time since, the Securities and Exchange Commission (SEC) has engaged in a long campaign of legal warfare around the use of this word and might classify a cryptocurrency as a security and crypto exchanges as dealing with unregistered securities.
