The First Bitcoin Miner

From 2009 until early 2011 the founder of Bitcoin, Satoshi Nakamoto, mined more than one million Bitcoins. Then he stopped. A small circle of online friends were also running his mining software Bitcoin.exe and accumulating large quantities of Bitcoins.

As Satoshi saw it, Bitcoins only have value if they are widely distributed. If one person owns all the Bitcoins, then they are worthless.

He asked his fellow geeks, to give their machines a rest, so that others could have a go at mining.

He wasn't against capitalism or the accumulation of wealth. For Bitcoins to start to become a currency, they needed to be in many hands.

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Bitcoins start to have value

By 2011 Bitcoins started to have some value. It was just a few cents at first, then a few dollars. By the end of the year Bitcoins were changing hands for around 4 dollars each. With a hoard of more than $4 million in Bitcoins, you might have thought that Satoshi would have spent a few, - to buy himself a treat – a new computer perhaps?

Satoshi knew you couldn’t sell any meaningful number of Bitcoins, even in 2011. It would have taken the sale of 1000s of coins to buy a new computer. In practice you couldn’t actually trade more than 2 or 3 coins at a time.

The $45 million Pizza

The first recorded transaction using Bitcoins was on 22nd May 2010. A developer successfully bought 2 pizzas for 10’000 Bitcoins. That’s around $45 million based on today’s price for Bitcoin. It was definitely the most expensive pizza ever.

Bitcoin wallets gathering dust

We know that Satoshi didn’t spend any of his Bitcoins. The beauty of the Blockchain is that you can see every transaction right back to the beginning of time. You can see where every single fraction of a Bitcoin sits. We can see the wallets that Satoshi created for himself. They’re gathering dust.

Satoshi mined the Bitcoins, put them in his wallets, and that’s it. He never touched them again.

$4.5 billion waiting to be spent

Satoshi’s hoard of Bitcoin is worth more than $4.5 billion. If it were me, I would have attempted to spend a few. I would have split the hoard so as to avoid having too many eggs in one basket.

His billions lie untouched. Many geeks, journalists and robots are watching his wallets. The moment he buys anything, even a cup of coffee, using his Bitcoins, the whole world will know it.

The real Satoshi, alive or dead, will probably never spend his Bitcoins. They will most likely remain dormant forever.

Dormant Bitcoins

Satoshi’s Bitcoins aren’t the only Bitcoins lying dormant. There are more than three million Bitcoins that haven’t moved in over two years. A Bitcoin is considered “dormant” if the wallet in which it lies has no movements for two years. A wallet might contain 200, 50, or 25 Bitcoins. If even one-hundredth of a Bitcoin is “spent”, then none of the Bitcoins in that wallet are considered dormant. At a price of $4500 per Bitcoin, that’s $13.5 billion of value lying around waiting to be spent.

How can they resist selling?

What’s wrong with the owners of these wallets? They are already looking at profits of 50'000+ percent. How can they resist selling? If you’d bought some Bitcoins for a few dollars each, wouldn’t you be tempted to sell? I’m sure I would have sold a few at $100, $500, $1000, and today’s $4500.

Million dollar Bitcoin?

Perhaps these Bitcoin holders are just hanging on. They know that someday Bitcoin is going to be big. Maybe a Bitcoin will become worth more than a million dollars. They would rather risk it all, for that grand prize, rather than buy a new bicycle for their boy.

Wouldn’t you diversify? Buy yourself a treat? Or maybe just move them to a safer wallet. Wouldn’t you test the system, just to make sure it’s real?

Private Keys

The truth is probably far more mundane. They lost their private keys. Private keys are what you need to access your Bitcoin. If you lose them, that’s it. Your Bitcoin are gone forever. There’s no password reset. There’s no institution you can appeal to, for a second chance. It’s scientifically impossible to guess a private key. If it could be done, then all the Bitcoins would have already been stolen.

Landfills contain millions of dollars

Before 2011, Bitcoin was worth virtually nothing. There was no reason to protect your Private keys. Many of the Private keys to the early Bitcoins probably lie on hard-drives at the bottom of landfills.

Zombie Bitcoins come back to life

Something is happening. Some of the dormant Bitcoins are awaking. Like Zombies, some of these long-dead Bitcoins are on the move. Why? With the Bitcoin price up over 200% this year, these formerly worthless wallets are now worth thousands or much more.

It’s not a lot of Zombie Bitcoins so far. The estimate is that a little over 25’000 Bitcoins have come back from the dead. That’s a small number out of the 3 million dormant Bitcoins. Why are these coins only coming to life now? Why not two years ago when the price was $500 and already up 1500%?

Old computers could be worth hundreds of thousands

Probably some 20-something year-old x-box player has just remembered he mined Bitcoins a few years ago. A single block of 50 coins would be worth $225k today. You can buy a Lambo with that. Six years ago it was worth nothing. The spotty ex-teenager has returned to his mum’s house to retrieve his old computer from the attic, and recovered his Private Keys. Now he can play Fast-and-Furious for real.