“Them that die’ll be the lucky ones.”
Ten years ago, on January 12, 2008, the first Bitcoin transaction appeared on the blockchain. Satoshi Nakamoto, the still unknown founder of Bitcoin, sent a test transaction of 10 bitcoins to a cryptographer named Hal Finney. At the time, Finney also ran an early version of Bitcoin mining software in the background on his computer. Both the first transaction and the bitcoins he mined in the background on his old computer are worth about $219,000 at today’s prices.
That’s a staggering amount of money for someone to earn from an afternoon’s project. But Hal Finney isn’t around to enjoy it because nine months after that transaction, he was diagnosed with ALS. He spent his final years in a wheelchair writing code with an eye movement sensor. And then he died.
Fast forward to today and you see that the person who claims to be Satoshi Nakamoto just lost the upper hand in a lawsuit against his fortune and a very public battle over control of Bitcoin Cash. The people who stood the most to gain from the crypto explosion didn’t always wind up on top.
“Those who were around 10 years ago weren’t supposed to be sitting on a yacht and doing nothing,” Craig Wright told Modern Consensus on the anniversary of the first Bitcoin transaction. “They should be taking that money and making more money. That’s what capitalism is designed to be. You get paid money because you can drive it back into the economy. You can invent things, write software, create systems of what you have as your base.”
At the time, Bitcoin was almost free. It cost a nominal amount of energy on a personal computer, roughly the amount of electricity it would cost to watch a streaming movie today. But perhaps you should not waste any energy wishing you were one of the people in the very beginning of Bitcoin. Because a few of those key people are now dead.
The original bitcoin project is wild for two reasons. One, that kind of project could never gain any interest today. Who started it? Who benefited and what were their motives? We don’t know. And we will probably never know. Two, anyone who could tell us anything about it died before we could learn anything from them. That includes Hal Finney and Craig Wright’s partner Dave Kleiman. Both men spent their last days in a state of paralysis and lost their savings to doctors who could do nothing to save them.
Phil Wilson, a fourth early partner, claims to be the deciding vote between Wright and the deceased Kleiman.
One thing that did not happen is that blockchain’s original users did not become fabulously wealthy in a way that would allow them to invest in their creation. Security expert Dave Kleiman’s home was in foreclosure when he died in a V.A. hospital. Finney spent all of his remaining money on his medical care and lost the rest when Costa Rican-based exchange Liberty Reserve was seized by the US Government.
But like the blockchain itself, there is a little bit of Hal Finney that lives on. ALS attacks the brain’s motor neurons, so he quickly lost the ability to walk, tie his shoes, and even speak. Near his death, however, he used a “commercial eyetracker system and a speech synthesizer” to communicate with his family. And also to post his memories on the bitcointalk forum. Finney posted 314 times between Thanksgiving 2010 and when he died in August 2014, five years after he was diagnosed.
These are the last objective clues to the early days of Bitcoin. Perhaps someday his children will unlock the drive containing all of his bitcoins and find a fully written account of the days. Until then, we are left with something closer to his lab notes.
“When Satoshi announced Bitcoin on the cryptography mailing list, he got a skeptical reception at best. Cryptographers have seen too many grand schemes by clueless noobs,” he wrote, well into his fifties by then. “I was more positive. I had long been interested in cryptographic payment schemes.”
Hal never claims to have spoken with or to have met Satoshi. But this never seemed to bother him much. As he rather poetically put it in one post, “For some, he was a guardian angel. For others, a ghost, who never quite fit in.”
But he was no less interested, “When Satoshi announced the first release of the software, I grabbed it right away. I think I was the first person besides Satoshi to run bitcoin. I mined block 70-something, and I was the recipient of the first bitcoin transaction, when Satoshi sent ten coins to me as a test.”
Working backwards with this information, we can see the original 10 BTC transaction on January 12, 2009 at 3:30 in the morning UTC. From there we can see that from the same address Finney mined blocks 73, 77 and 78. The wallet with the 50 bitcoin reward for mining block 78 contains the 10 bitcoins from Satoshi.
Wright has become cagey about whether he was the one sending that original Satoshi transaction. But via Skype, he told Modern Consensus that the first test was a huge moment for crypto. The normally stoic and single-minded Wright said wistfully, “That’s why you need people. You need to have someone else there. You need someone to say what’s happening. If you’re controlling all of the the terminals then it’s not really a test.”
Finney’s writings can attest to this need for a back and forth. “I carried on an email conversation with Satoshi over the next few days,” he wrote. “Mostly me reporting bugs and him fixing them.”
Through the magic of the internet, however, Finney didn’t know who he was talking to, but he did know that “Satoshi” knew what he or she was talking about. “Today, Satoshi’s true identity has become a mystery. But at the time, I thought I was dealing with a young man of Japanese ancestry who was very smart and sincere. I’ve had the good fortune to know many brilliant people over the course of my life, so I recognize the signs.”
In 2009, Hal would leave the program running on this computer. “Those were the days when difficulty was 1, and you could find blocks with a CPU, not even a GPU. I mined several blocks over the next days. But I turned it off because it made my computer run hot, and the fan noise bothered me.” If he mined just five blocks and kept that initial transaction, he would have $875,680 worth of bitcoin today.
After a few weeks he forgot about the project entirely. “The next I heard of Bitcoin was late 2010, when I was surprised to find that it was not only still going, bitcoins actually had monetary value. I dusted off my old wallet, and was relieved to discover that my bitcoins were still there. As the price climbed up to real money, I transferred the coins into an offline wallet, where hopefully they’ll be worth something to my heirs.”
Hal Finney had worked for Menlo Park’s PGP (“Pretty Good Privacy”) an email encryption company ever since cryptographer Phil Zimmerman started it in 2002. The firm was acquired by Symantec in 2010, which would have made Finney and Zimmerman wealthy anyway.
But by this time he had already been diagnosed with ALS, “I was in the best shape of my life at the start of that year, I’d lost a lot of weight and taken up distance running. I’d run several half marathons, and I was starting to train for a full marathon. I worked my way up to 20+ mile runs, and I thought I was all set. That’s when everything went wrong,” Finney wrote in 2013 with the aid of an eye-movement monitoring device he would detailed his condition. “My body began to fail. I slurred my speech, lost strength in my hands, and my legs were slow to recover…My symptoms were mild at first and I continued to work, but fatigue and voice problems forced me to retire in early 2011. Since then the disease has continued its inexorable progression.”
“Today, I am essentially paralyzed. I am fed through a tube, and my breathing is assisted through another tube.” Finney’s eye-tracking software could also synthesize his voice in the style of Stephen Hawking. “I spend all day in my power wheelchair. I worked up an interface using an arduino so that I can adjust my wheelchair’s position using my eyes.”
In a detailed post written in 2013, he took stock in a brief plateau in his condition. “It has been an adjustment, but my life is not too bad. I can still read, listen to music, and watch TV and movies. I recently discovered that I can even write code. It’s very slow, probably 50 times slower than I was before. But I still love programming and it gives me goals.” He began working with Google Engineer Mike Hearn to make use new processors to make Bitcoin wallets more secure. “It’s almost ready to release. I just have to do the documentation.”Thus even in hospice, Finney remained a coder to the end. Tinkering with how to ship a product that could measure up to the latest hardware.
He even found time to enjoy the fun part of watching crypto prices rise and fall. “And of course the price gyrations of bitcoins are entertaining to me. I have skin in the game. But I came by my bitcoins through luck, with little credit to me. I lived through the crash of 2011. So I’ve seen it before. Easy come, easy go.”
In another post meant to help other crypto types learn about their taxes he explained his own philosophy about saving mined coins. “I acquired most of my coins by mining. …so I intend to treat bitcoins as precious metals and declare my profits as capital gains. Since I mined them more than a year earlier, they are long term capital gains. This is not as favorable as usual because it turns out that precious metals, even bullion, are considered ‘collectables’ and taxed at a rate of 28%. Normal rate is 15%. If your overall tax rate is less than 28%, you can pay the lower rate. That is what I intend to do, based on my reading of the IRS documents.”
Of the original bitcoiners, Finney’s children seem to be the only one who came out well in the end. Craig Wright was sued by Dave Kleiman’s brother for $5 billion for and an alleged thumb drive of 1.1 million bitcoin in a Seychelles trust that may be lost forever. Dave Kleiman himself died shortly after a government sweep took his bitcoin from a Costa Rican exchange.
“My bitcoins are stored in our safe deposit box,” Finney wrote in 2013. “and my son and daughter are tech savvy. I think they’re safe enough. I’m comfortable with my legacy.”
But Bitcoin is a living entity. And having heavy-handed founders would be the least-decentralized thing about it. Finney didn’t go on to be the Steve Wozniak-like conscience to the industry that Satoshi breathed life into. Wondering what the founders thought about it is about as helpful as wondering what James Madison would think about the fact that 20 percent of Americans in California are represented by only two senators (“Cali-what-ia??” end quote, Madison’s ghost). But as we can see from the end of Finney’s life, there are something more important than digital money.
Incidentally this might not be the last time we hear from Hal Finney. His wife Fran Finney reports that he has been cryogenically frozen. “He’s always been optimistic about the future,” says Fran. “Every new advance, he embraced it, every new technology. Hal relished life, and he made the most of everything.”