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In expectation of the historic Bitcoin trial: Kleiman v. Wright

After many delays, the Kleiman v. Wright case is set for trial this November 1, 2021.

Many are watching the progress and outcome of the case, because not only will it decide the ownership of a large amount of BTC coins (over $60 billion at the current BTC price), but it may also for the first time provide some clear answers to the question of who is (are) Satoshi, the inventor(s) of Bitcoin.

To be clear, the court is not going to decide on the identity of Satoshi, because it is not part of the pleadings. However, the case has a direct bearing on the identity of Satoshi, because the entire case is premised on the fact that Craig Wright is in possession of at least 1.1 million bitcoins that are known to be, and can only be, that of Satoshi. This fact is undisputed among the parties. The plaintiff (David Kleiman’s estate) alleges that Wright and Kleiman together are the true owner of those coins. The plaintiff does not place Wright’s ownership of his portion in controversy. The only controversy is how much David Kleiman also owned. The plaintiff asks for up to 50%, not for 100%, because even the plaintiff in this case does not dispute Craig Wright’s role in inventing Bitcoin and continuing to advance it after that.

For some background, I recommend you read “Why I Believe Craig Wright is Most Likely Satoshi”.

Meanwhile, the outcome of this case will also decide on a critical issue which seems ancillary to the case itself but is extremely important to Bitcoin and the entire cryptocurrency industry:

Can bitcoin be recovered and/or moved by a court order without a private key?

Predictions

The following are my predictions of the most likely outcome of the November trial (not that I believe the following results are all the right ones based on the facts):

1. The jury finds that Craig Wright and David Kleiman indeed worked as a partnership, and awards a substantial amount of bitcoin held in the Tulip Trusts to Kleiman estate.

Note: I do not personally believe they were true partners at all (see below “the Truth”), but my study of the case history and my somewhat cynical view of the American courts and juries have led me to incline toward this prediction. But I’d be glad if I am wrong on this.

Note: The Tulip Trusts collectively refers to a complex system, both technical and legal, designed to keep bitcoins and certain intellectual property mined and developed by Wright, allegedly with Kleiman as a partner. The nature of the Trusts is an important matter in this case, and much detail of which will come under light during the trial. Such detail will not only have to do with the division of the ownership, but perhaps more importantly, how the coins are going to be moved. See below.

Note: The jury may find only a part of the Tulip Trusts is relevant to the Wright and Kleiman partnership. There is also another possible alternative that is less favorable to Kleiman: the jury may find that, although Wright and Kleiman was a partnership, Kleiman the exiting partner’s interest was constructively liquidated in dollar value at the time of the exit (David’s death in 2013).

2. The court orders the awarded portion of coins to be moved, or recovered if the private keys are no longer available.

3. The BTC core developers and nodes face a tough decision on whether and how to comply the court order, and what they eventually end up doing may carry the real impact of the Kleiman v. Wright case on Bitcoin and the entire crypto industry.

4. Coins will move. And the reason and the mechanism of the coin move will surprise most people, both technologically and legally. The bitcoin blockchain will be able to do something (perhaps in the nature of a smart contract implemented in locking and unlocking scripts working in concert with an off-chain external input) which the supporters of BTC have thought impossible. Meanwhile, the exposure of the actual control of the blockchain by the core developers will also pop people’s illusion of BTC being completely decentralized.

5. At the same time, while not part of the explicit court decision, both the evidence shown in the trial and the court decision confirm the fact that Craig Wright invented Bitcoin, and advanced the invention with the help of others, especially David Kleiman.

6. People twist the verdict to mean that the court has found that Kleiman was at least a joint-inventor of Bitcoin and Craig Wright has lied about it. Even worse, people will say that David Kleiman was the real Bitcoin inventor, and Craig Wright stole it from Kleiman, whose estate was only able to regain part of what’s being stolen. These people will not understand, nor do they care, the fact that a partnership is a business law concept and has nothing to do with inventorship, which is an entirely different legal concept, most notably well defined in patent law.

The truth

But the following is a version of the Satoshi story closest to the truth:

1. Craig Wright is the inventor of Bitcoin; Wright was not only the originator of the idea and the creator of the overall architecture, but also the designer of most of the OP_codes.

2. Craig Wright also authored the Bitcoin white paper, but had another person‘s input to polish it.

3. Craig Wright participated in but was not the primary person of coding Bitcoin as an actual computer program.

4. David Kleiman worked closely with Craig Wright in promoting Bitcoin, mining bitcoin, and building Coin-Exch (including coding). David was a close friend of Craig Wright. The two knew each other for a long time, even before the existence of Bitcoin, due to their shared interest in cryptography. There is evidence that the two had worked closely on promoting Bitcoin since 2009 (according to Craig’s own words) shortly after the release of Bitcoin network. Along with Craig himself, David could have even played a part of the Satoshi persona who interfaced with others, although this is hard to prove. Unfortunately, due to his unexpected death in April 2013, it is now hard to determine the extent of David Kleiman’s actual contributions.

However, one thing is clear: David wasn’t and couldn’t have been an inventor of the original Bitcoin. There is absolutely no evidence that David played any part in inventing Bitcoin. David never even implied that he did, not even in private communications when no pretense was necessary or even possible. In fact, all evidence points to the opposite. The trial will reveal many such communications, especially that between David and Craig themselves, some of them months before the release of Bitcoin white paper in 2008, to provide direct and explicit support.

Bitcoin is a product of a polymath who not only understands computer sciences, but also economics, accounting, law and many other related fields. David was no polymath. Craig is. David knew how to work with computers, but he did not have much faith in Bitcoin as an economic system, wasn’t sure if the whole thing was going to work, and had to trust Craig and be assured by Craig that what they were doing was going to be worthwhile for a “wage”.

5. W&K Info Defense Research LLC (W&K) was just a vehicle for post-invention activities such as programming, promoting, and mining bitcoin, and had nothing to do with the invention of Bitcoin. W&K was formed in February 2011, with three shareholders, Craig Wright’s ex-wife Lynn Wright, David Kleiman, and Craig Wright’s own company Info Defense, each supposedly having 1/3 of the company shares. Both Lynn Wright and Info Defense’s shares were later transferred to another company Craig Wright R&D, which ultimately ceased to exist but named “Tulip Trust”, a trust organized under the laws of Seychelles, successor-in-interest.

W&K was a convenient way for Craig to move the “legal presence” of the business to the United States, where David was located. But it’s likely that plaintiff will focus on the actual relationship between Craig and David, which started much earlier, rather than W&K the entity, and allege that W&K was the embodiment of the partnership as a whole, including the work that had occurred before the formation of the entity.

W&K as a company had rather casual incorporation, with an operating agreement that is not formal, detailed and strict enough in defining member duties/responsibilities, rights/powers, and exit rules, nor what exactly constitutes the company’s business scope and assets. The company’s registration and correspondence were under control of David Kleiman simply out of convenience and proximity, with no consideration of any actual organizational and operational structure and procedure. As a result, the unexpected death of David Kleiman created a total chaos, which eventually led to this messy lawsuit by David’s brother Ira Kleiman.

6. Ira Kleiman initially had absolutely no understanding nor interest in Bitcoin, nor did he care about what his brother was doing, and as a result carelessly and selfishly reformatted David’s hard drives for his own personal use. Ira’s uncorroborated claim that the hard drives had no important data on them was either a lie or perhaps just a cover of his total ignorance at the time, being unable to see or even suspect anything of significance related to bitcoin. Those hard drives almost certainly contained extremely valuable bitcoin information, the consequence of which will only start to show in the trial and subsequent events.

7. Upon David’s death, Craig Wright had some regrettable dealings with Ira Kleiman. Instead of offering Ira a straight buyout of David’s interest, he offered a scheduled payout over a long period of time. Ira had no understanding or interest in the underlying work itself, and even refused to renew a public mailbox for the company. He probably would have been happy to get half a million dollars from his brother’s estate. But Craig’s offer gave Ira the benefit of hindsight, as bitcoin price subsequently went up significantly, which became a motivation to initiate this lawsuit. But then again, it was 2013, the coin price was only around $100, and Craig was fighting the Australian Taxation Office, so all these things only seem foolish with hindsight.

Note: Member interest buyout is the most common and sensible way to terminate or reorganize a partnership or LLC upon death of a member, and is usually explicitly stipulated in a partnership or LLC agreement, because unlike common passive shareholders, a partner or LLC member comes with active personal contributions and cannot be passed along.

The W&K saga teaches a great lesson for inventors not to ignore the legal and organizational side of a business.

Noises

There are a lot of noises out there surrounding the case and the Satoshi story.

First, people confuse “the invention of Bitcoin” with all other matters related to implementation, including coding in a specific language, writing and polishing a whitepaper and the subsequent mining. Through hundreds of years of legal prudence, the US patent law has established clear definitions of “inventorship” and “joint inventorship”, and these definitions clearly exclude actions that do not constitute the conception of the original idea but only relate to specific implementation and the perfection of the invention. Anyone who knows anything about the process of invention would understand what I am saying here.

Craig Wright never denied that he received help from others in coding, implementing, perfecting and advancing Bitcoin. He has been forthcoming and consistent in this regard, and all evidence supports his claim that he alone invented Bitcoin. None of the public statements and court documents contradict to that claim.

Second, allegations accusing Craig Wright being a fraud enlist things that have nothing to do with invention of Bitcoin, even if allegations were truthful.

People seem to confuse “Craig being Satoshi” and “Craig being absolutely truthful”. Two different matters.

Third, people focus on ostensible inconsistencies and call them “basic mistakes” and further use that to prove “fraud.”

In one example, Wright was quoted for saying Bitcoin was a decentralized system, but then in another occasion saying that Bitcoin is not about decentralization. The allegation is that Wright has not only lied, but also could not possibly be Satoshi because the real Satoshi would not make such a “basic mistake” about Bitcoin. But the simple truth is that the quoted incidences occurred years apart, during which the term “decentralization” has evolved and now carries different connotations to different audience and in different contexts. Taking someone’s sayings out of context, you will find everyone in the world self-contradictory and therefore a liar.

At the same time, people who make such allegations probably have not listened to Craig Wright’s lectures and interviews on Bitcoin showing unparalleled level of understanding of the entire system, and in many cases the only one who originated certain ideas and explanations about Bitcoin and only to be proven right later.

Fourth, beyond the inventorship of Bitcoin are the “BTC has already won” narratives, pointing to the current price difference between BTC and BSV, and difference in hashing rates, etc.

But all these narratives show how little people understand Bitcoin as an economic system rather than an abstract coded machine doing hashing competition.

For more detailed discussions to help you clear up the noises, I recommend reading:

BTC and BSV, what is the real difference?

Why BSV is a value creating system, while BTC a value absorbing system

Economics of Bitcoin Mining — BTC miners face growing avalanche pressure due to BSV’s exponential growth of network fees

What has happened in the public forums are mostly noise, and it is for this reason that Craig Wright prefers to settle the truth in the courtroom, which, although not perfect, is a far better venue to prove truth.

And that brings us back to the November trial of the lawsuit.

The key issue of recovering/moving bitcoin with a court order

Regardless of how the court decides on the question of ownership, I expect that the court decision will result in moving of certain coins.

If Kleiman wins, even partially, Craig Wright would need to move coins to Kleiman estate.

If Craig Wright wins a sweeping victory, he would have no need to move coins to Kleiman estate. He would be vindicated on all accounts, but whether he would gain freedom to access the coins held in the Trusts will depend on the exact terms of the Trusts, and this will also become clear in the trial.

However, in a recent message posted by Craig Wright in an internal working group, he said:

No bitcoin owned by those companies [the Trusts] will move now without a court order.Those bitcoin will move.

Other than that Kleiman at least wins partially and is entitled for some of coins in the Trusts, in what circumstances would there be a court order to move those coins owned by the Trusts?

An interesting possibility is that the court reaches the following conclusion: Kleiman estate is only entitled to the coins separately mined by David, and since the private keys of those coins were lost, the court will order that those coins be recovered without the private keys. That’s fine, except that how to identify those lost coins may be a big issue. But it would not move those coins owned by the Trusts.

Is Craig Wright implying that he expects Kleiman to at least win some of the bitcoin even though he believes Ira Kleiman is just greedy and does not deserve any? Is he going to concede to Kleiman’s claims just for the sake of proving a point which he believes is important as a legal precedent to the entire blockchain industry?

But before the trial, one cannot assume any of the following: (1) the court order will be exactly and explicitly that the coins must move (because it’s possible that the court order relates to a certain legal ruling, but that ruling will necessarily cause the coins to be moved by virtue of a sophisticated bitcoin transaction design even though it is not what the court order directly stipulated or even intended); (2) coins will move only as a payment to the plaintiff; (3) coins owed to Kleiman estate (if any) must come from the Trusts, or even from Wright.

We will all have to wait and see.

The legal principle of ownership of property

Nevertheless, on the key issue of recovering/moving bitcoin with a court order, I agree with Craig Wright’s legal theory:

Possession of the private key does not equal to legal ownership of the coins. Alternatively, legal ownership does not require possession of the private key.

In other words, if a court has decided upon the question of ownership, it has the power to order the core developers and nodes to collaborate to move or recover coins with or without a private key.

The BTC community has long held a strong belief that possession of private key is ownership of the coin, to an extent that they are contemptuous to anyone who would even mention the idea of using traditional method to prove ownership. This belief or mentality does have an understandable pragmatic origin which is that if you lose your private key, you’d have practically no way to gain access to the coins. So in a way it is a pragmatic advice.

But pragmatism cannot change the fundamental property law. When a property of a very high value is involved, the fundamental principles of the property law will overcome any barrier that exists due to pragmatism.

In addition, an even more fundamental issue beyond possession and ownership is the matter of identity, which is one of the most important elements of a human society. Anonymity may have its purpose in certain circumstances, but a normal human society cannot function without reliable identities. Assuming that possession of a private key is ownership might work in some limited circumstances, but assuming that possession of a private key alone is definite proof of identity is a whole different matter.

The matter of identity goes way beyond mere ownership of property. It is self-centeredness to assume that a private key equals identity. Many think of this only from a coin-owner’s viewpoint, and still others think of it as merely academic issue of how digital signature works (to the extent that they’d call Craig Wright has no understanding of how digital signature works). But once you start to approach this from the viewpoint of the society as a whole, you will see why it cannot possibly work. A private key can be passively lost to others (stolen or misappropriated), and can also be actively distributed to others (with whatever intention), and if such an act causes incorrect ownership it is unfairness, but if it causes confusion in identity, it is chaos that would undermine the entire societal system.

Mainly due to Craig Wright’s proper understanding of these issues that BSV has taken a firm stand with respect to the existing legal paradigm of establishing identities and ownership of properties.

Due to the sharp contrast between Craig Wright’s position regarding the legal ownership of bitcoins and the widespread mantra of “my key my bitcoin” in the BTC community, this is one of the reasons why Craig Wright has resisted the challenges for him to prove ownership using a private key, but has decided to rather test it out in a courtroom.

A fuller picture of how coins will move

There is no guarantee that things will happen according to the theory. Even if the court issues an order to BTC the core developers and miners, it could be a lengthy struggle to get compliance. At least the initial resistance is going to be widespread, both due to defiance and ignorance.

On the other hand, there are several factors related to the trial outcome that are not fully considered or understood by the public.

First, one must understand that the coins in the Trust are not in the control of Craig Wright, but in that of the Trust (which in this case is broader than an actual legal entity of a regular trust, but may still be understood on the same lines). So when Wright says the coin-move needs a court order, he firstly refers to this part of the property structure with the Trust, not necessarily to himself personally.

Second, the exact relationship between a court order and the movement of coins may have surprises. Both the reason and the mechanism of the coin move will surprise most people, and the surprise may be both technological and legal in nature. The bitcoin blockchain will be able to do something which the supporters of BTC have thought impossible. The mechanism of the coin move may happen in the nature of a smart contract implemented in locking and unlocking scripts working in concert with an off-chain external input.

A trial, especially one that has so much at stake, does not happen in abstract nor in vacuum. The court (judges, jurors), lawyers and the parties are all aware of the history, which gives context, and they all examine the evidence within the context closely.

And there will be things coming out of the trial that are not only evidentiarily convincing, but may also provide actual mechanisms to move the coins, to the surprise of many.

For example, the following is a simple scenario where a court order is necessary even though the private keys to access the bitcoin addresses are still in (indirect) control of the Trust:

The Trust used Shamir’s Secret Sharing Algorithm to share a private key needed to access an encrypted file containing bitcoin data (including private keys to various addresses), and only upon the court order can a sufficient number of secret-sharing parties be brought together to reconstruct the private key for Shamir’s Secret Sharing Algorithm.

However, there are other scenarios where bitcoin’s own design plays a critical role:

For example, what if as a part of the Trust’s terms and conditions, a bitcoin transaction script had already been created, and the script had a time lock but was not yet broadcasted?

Such a transaction would effectively put the coins in a timed trust account or escrow. To be able to create such a transaction script, the creator would necessarily have had the private key in the first place. However, once the transaction script has been created, there would no longer be any need of the private keys to execute the transaction, as the coins will automatically move when a predefined trigger condition is met.

So what if the court orders the Trust to move the bitcoin, but the Trust claims that it has no access to the keys, and tells the court that, by the design of the time lock in this script mandated by the Trust, the court now has the power to unlock it?

Will the court pass an opportunity to exert its judicial power?

Then what if, as the court decides to exercise its power, it learns that BTC Core developers had previously changed the codes, and the change rendered the transaction script inoperative?

People probably will again start to imagine that the whole thing must have been made up to trick the court.

But, here comes the big news: what if there is proof (by actual demonstration) that the BSV coins associated with the same BTC coins at the same addresses can be moved by the same transaction script exactly the same way it was designed?

Will the world not understand it still?

And further, what if the following fact has also become clear to the court: for BTC to do the same, the only thing that needs to happen is to allow the same transaction script to be processed and validated the way the system did when those same bitcoins were acquired as property (mined or last transacted)?

Seeing that it was the very act committed by the Core developers that rendered a legally owned property unusable in the first place, the act was without the property owner’s consent, and the only just solution is restitution, will not the court issue an order to restore the original functions of the script?

And further, what if the necessary restoration only takes a few lines of codes and a bit of coordination among the Core developers and miners? Will not the condition remove all excuses for not to obey?

If the Core and miners refuse to obey, would not the court find them in contempt?

The trial will have answers to these questions.

There are a lot of things that people don’t know about Bitcoin, what it is, could be, and should be, and we will have to wait and see how it is played out in the hands of its real creator.

Craig Wright has been planning to use the trial of this case not just to defeat Ira Kleiman, but to prove several principles he has believed in. The trial will be a final show of what he has up his sleeve.

Third, one shouldn’t assume that Craig Wright’s saying “moving coins with a court order” implies that the private keys have been all lost and his only hope is a court order disregarding the private keys. It is unclear (hopefully the trial will clarify) exactly how much of the bitcoin’s information was on David Kleiman’s hard drives and thumb drives, and how much of that had no backup. If it had all the coins mined by Craig and David, even those prior to W&K’s formation in 2011, and there is no backup, then all private keys have been lost due to Ira Kleiman’s actions, and Craig Wright’s only hope is a court order disregarding the private keys. But if only the information of coins mined later in relation to W&K’s operation were lost, then Craig Wright’s saying “moving coins with a court order” means a different thing.

It is possible that there are coins that are not only separate from W&K legally but also separate from David Kleiman’s system, and the Trusts still has the keys of those, except that Craig Wright is not allowed to and/or has chosen not to use them, and he is just trying to use the lawsuit to emphatically make that point (that is what he has been claiming consistently anyway).

But clearly at issue are also the coins of an owner who has lost the keys for whatever reason(accidental loss or as a victim of theft, robbery, hacking or misappropriation). This type includes both Craig Wright himself (because he was a victim of thievery for some of the coins that belong to him) and David Kleiman (because his brother Ira reformatted the hard drives), but it is also a general point to make. Craig Wright speaks on behalf of any legal owner of coins who has lost keys (although as a practical matter, this is only applicable to large amounts).

Fourth, and perhaps more important, people underestimate the power of a US court order, especially when it relates to the global banking system. Thanks to its global reserve currency status, the US dollar system is disproportionally powerful, even in comparison to its economic and political powers (which are diminishing but still strong). To be more specific, the GDP of the US accounts for about 16% of the global GDP, but the US dollar accounts for about 60% of the global currency reserves. In practical terms, any bank connected with the global banking system will find it extremely hard to defy a US court order. Depending on how serious the US side is, it may amount to committing suicide for a bank to do so.

If one wishes to see an example, just look at how HSBC quickly complied with the US demand on the matter of Huawei despite facing the certainty of retributions from China.

If the Kleiman v. Wright case’s outcome becomes a test of the US court system, I think the result may be quite predictable.

The fact is that the core developers and even diehard BTC miners cannot survive outside of the current global banking system. The Chinese miners might have some ability to resist, but they are now being outlawed in China. So in an ironic way, China’s ban of crypto mining kind of coadjuted to help Craig Wright’s case. Such a coincidence may even be a sign of a certain destiny.

Why couldn’t this be a hoax conspired by Wright and Kleiman?

In the words of a reader’s correspondence, if bitcoin could be recovered or moved by a court order without a private key, why couldn’t a random Person A and Person B who wish to falsely achieve fame and success sue each other claiming a “dispute” about how these bitcoin should be split between the two of them?

If you think in abstract, it could be just that. But these things are not happening in abstract nor in a vacuum. The Kleiman case has a rich history. The trial itself will provide a lot of answers.

If the court is not interested in deciding the actual ownership, but only in a division of partner interests, it could easily just decide on which party owns what percentage, but leave the question of private key and accessibility completely to the parties. This would be the easiest way for the court to avoid being fooled.

But suppose the parties bring in the question of fiduciary duty of a third-party, in this case the Bitcoin core developers.

Let’s use a safe box as an analogy. Suppose a couple put some property in a safe box, which is managed by a third party having either actual or imputed fiduciary duty.

Now the couple have divorced and are fighting a property battle in a court, which decides that they have 50–50. But the couple have lost the key.

Normally, the court would say that’s not our business. That’s your business.

But what if the third party with fiduciary duty is brought into the court?

The court will be struggling with a different legal question at least.

Certainly the court will raise the standard of ownership proof higher in order not to become a victim of a hoax (in which the property really belongs to somebody else, but the couple are conspiring to trick the court). Many other questions will also arise, including whether there is a claimant claiming to be the real owner of the property, whether there are effective ways to give notice to find such a possible claimant, etc.

But it would not be easy for the court to simply say the law doesn’t care. The purpose of law is to reach equity to the extent that’s possible and practical, not to find the absolute truth.

Furthermore, still following the above safe box analogy, what if the lock of the safe box contains an additional secret?

Say, the additional secret provides not only exclusive corroborative evidence of identity, but also a mechanism that makes the unlocking far easier than usual, designed to deliberately requiring a court order as the last piece of the puzzle to unlock the safe?

This is what I mean by saying the exact relationship between a court order and the movement of coins may have surprises. The surprise may be both technological and legal in nature. The bitcoin blockchain will be able to do something which the supporters of BTC have thought impossible. For example, the mechanism of the coin move may happen by virtue of a smart contract implemented in locking and unlocking scripts working in concert with an off-chain external input.

How could the court enforce such an order when the BTC is ruled by a perfect decentralized network of nodes?

“Nodes rule” is a part of the myth or illusion that BTC has created over the years. According to the myth, not only do nodes set the rules, but there are millions of nodes out there forming a perfectly decentralized network, untouchable by the government.

In reality, the Core (core developers) sets rules, and nodes enforce the rules, and only the relatively few who actually create blocks are actually nodes and do matter. (Note: in the case of Bitcoin SV, the base protocol has been locked — “set in stone”, and the governance has be transferred from developers to Bitcoin Association, an independent nonprofit organization.)

The reason why there is an appearance of “nodes rule” with BTC is because the Core chooses to make it to appear that way. They do this for multiple reasons.

First, to hide from the public eyes the actual control of BTC by the Core.

Second, to avoid frequent forks.

Third, the Core, miners and every BTC fan understand that the appearance of “decentralization” is absolutely critical for the “digital gold” narrative.

In other words, it is simply a great idea within the carefully designed paradigm for the nodes to be elected the ruler.

However, the law couldn’t care less. The law only cares about the rule of law. With a court order, the Core will have to decide which ruler to obey, and major nodes will have to decide who really is the ruler.

The exposure of the actual control of the blockchain under the core developers will also pop people’s illusion of BTC being completely decentralized.

Speaking of a “hoax”, it’s quite possible that in the future people will look back and find BTC to be the biggest hoax ever played on humanity.

But it is not going to be easy for the court alone to enforce its order in this case. I do have a quite high confidence in the law and the power of US court, but not sure about its application in this specific case. I know what the right result is, but don’t know for sure what will be the result. At the same time, I have confidence that the Bitcoin blockchain technology contains solutions in itself to work under the law and in assistance to the law, rather than anti-law. So in this case, the law is not alone. Anything could happen.

But doesn’t complying with a court order defeat the purpose of Bitcoin?

Quite the opposite. Coins moving according to a court order in this case will be good news for Bitcoin as it is originally designed, and good news for the society as a whole.

Bitcoin does not just accept the rule of law, it promotes the rule of law.

The purpose of Bitcoin was never to become a new system defying the legal system. Anyone who has read Satoshi’s Bitcoin white paper must agree with this. Yet the narrative subsequently created by BTC has always carried a strong resonance of “digital renegade”. People who believe in this have been misled.

There’s a very basic misunderstanding in this regard. People confuse the rule of law with authoritarian state, failing to understand that the two are the opposite. The rule of law is the guarantor of freedom, while authoritarian state is the enemy of freedom. It is one thing to have the courts of the law to decide ownership of a crypto asset (currency or not) when the default consensus is in controversy, but entirely another to have some kind of government agency overseeing the ownership, distribution and management of the crypto asset. Both are undesirable, but the former is a necessary remedy to an inevitable human problem (namely injustice), while the latter a disease in itself. People confuse these two things, making it very difficult to have even a basic dialogue on this subject.

Fortunately, bitcoin is such a robust system that it makes the need of court help very rare. It would happen only in extreme cases; in fact so far, the present case (Kleiman v. Wright) is the only known case to go into a court trial, and it involves billions of dollars.

However, many do have an honest reason in hoping bitcoin to become a different kind of money to stop central banks from printing money free-handedly.

But that is a rather different problem, requiring political and social changes that are far beyond a technical solution.

There is not an adequate technological solution to that problem.

BTC especially is not a solution. By both design and practice, it doesn’t earn its right to “rule”, as it doesn’t create values but only absorbs existing values, and by rejecting the rule of law, it has to destroy fundamental property rights in the first place in order to rule.

For BTC to rule the global monetary system is to save people from an imperfect government and place them under the rule of anarchy created and controlled by opportunists. It should be clear which one is preferable.

But if one day the societies are enlightened to see that it is necessary to stop the current practice of central banks, the original bitcoin according to Satoshi Vision (BSV) would come to serve, legally, more naturally and competently as an alternative global money and currency.

In other words, bitcoin is a competing money/currency to the existing monetary systems. But at the same time, it has not been proposed nor being developed as a system going against the government and the legal system. These are two different matters. Bitcoin will have the capability to even replace the traditional currency when a society is ready for it, but it does not have to do that to be successful and useful to the society.

In addition, Bitcoin blockchain technology has a broad spectrum of potential applications. There is a strong following in the school of “remove government control of the currency,” but there are more who focus on utilities, mostly under the umbrella of the next generation Internet, at least including the following disruptive applications:

(1) decentralization of money(2) decentralization of assets through tokenization(3) decentralization of data(4) decentralization of computation (different from distributed computation)(5) decentralization of AI (a combination of the above #3 and #4).

In the above, even the first one, decentralization of money, is not the same as, and is far broader than the notion of removing government control of currency. For people who follow the BTC narrative, that is what they focus on, but unfortunately, they have been fed with carefully designed narratives and propaganda and most don’t realize it. This of course brings up the entire history of Bitcoin, which is a whole different topic.

Again, I suggest reading the following articles:

BTC and BSV, what is the real difference?

Why BSV is a value creating system, while BTC a value absorbing system

Potential impact on BSV price

There are two things coming out from the trial that may impact BSV price:

  1. The public perception of the Satoshi identity.
  2. What Craig Wright will decide to do with the BTC coins.

It is quite possible that the outcome of the trial may cause a change in the public opinions in recognizing Craig Wright being Satoshi the inventor of Bitcoin, and therefore a jump in the BSV price.

However, unless Craig Wright does something dramatic with the BTC coins he owns (see below), I do not expect BSV to suddenly become a darling among the crypto speculators. BSV can only succeed on actual utility. It is better this way. It may sound like a handicap in a speculative market, but it really is its strength.

Furthermore, if the court reaches the conclusion that David Kleiman was indeed a partner of Craig Wright in their early collaboration, people will twist the verdict to mean that the court has found that Kleiman was at least a joint-inventor of Bitcoin, and Craig Wright has lied about it. But in reality, a partnership is a business law concept, which has nothing to do with inventorship, which in turn is an entirely different legal concept, most notably in patent law. Two people can work together as “partners” (in a colloquial sense) without being a legal partnership; and likewise two people can form a legal partnership to do business without being joint-inventors.

Even worse, you may hear that David Kleiman was the real Bitcoin inventor, and Craig Wright stole it from Kleiman, whose estate was only able to regain part of what’s being stolen.

Twisting they will do, as they have always done. The public do not understand these matters. They only understand what actually impact their lives in terms of utility. So once again, the long-term hope of BSV cannot be a lawsuit, but has to be actual adoption and utility.

But what if Craig Wright does something with the BTC coins?

He did once claim that he’s going to convert all his BTC coins into BSV and eventually give most of that away to the poorest in the world.

That is, not only is he going to give most coins away, but also he will give them away not in BTC, nor even sell them and give away in US dollars, but rather convert BTC coins into BSV, and give them away in the form of BSV coins.

It’s clear that if that happens, it would have a dramatic impact on BSV price.

Imagine converting $30 billion-$60 billion worth of BTC into BSV which currently has a total market cap of around only $3 billion.

And imagine the impact of actual adoption and utility on BSV when that much BSV coins are in the hands of 1 billion people!

But that would be too much speculation at this point.

Cautionary words

Even with near certainty that Craig Wright is Satoshi, we all need to remember that even Satoshi the inventor of Bitcoin is mere human. He could be exaggerating his claims and power. He could be simply bluffing on what he did and could do. Or, he could be honest, but just wrong (as he was many times before). Or, he may be honest and also correct in theory, but he just does not have power to change others and the system, and have to live with a less-than-ideal reality.

As far as the imminent trial is concerned, I advise not having too high an expectation on a short-term impact of the trial on the public opinion (and therefore BSV prices). Rather, always focus on the long term.

I am watching the state of the case with a high level of interest. But my long-term hope of BSV is always set on the actual adoption and utility, not on Satoshis identity. The BSV community has become largely silent on this topic because they are tired of it. People may still wait for the outcome of Kleiman lawsuit, but largely most people are just busy building.

PS:

This article was written earlier, but posted here on powpress on the eve of the historic Bitcoin trial: Kleiman v. Wright.   Ironically, the date of the trial coincides with the 13th anniversary of the publication of the Bitcoin whitepaper by Satoshi Nakamoto.  

May the truth prevail.  

Zem G.   October 31, 2021.

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