12 years ago tomorrow, on May 22, 2010, a Florida man named Laszlo Hanyecz purchased two pizzas for 10,000 BTC, and a legend was born.
It’s Bitcoin’s oldest epithet: the poor bastard who liquidated a million dollar fortune when it was worth pennies (or in this case, the price of two large pizza pies). In Hanyecz’s case, he forfeited this fortune multiple times over, as he revealed to me in a Bitcoin Magazine interview three years ago; he estimates that he spent somewhere around 100,000 BTC in 2010 on pizza and other purchases.
There’s a theory as to why he spent so much BTC on pizza, and that theory (or at least, the discovery that would ultimately inspire the theory) is the subject of today’s letter.
Specifically, that Laszlo Hanyecz, the Bitcoin pizza guy, invented graphics card (GPU) mining–and if he hadn't, then the world famous Bitcoin pizza transaction probably wouldn't have happened.
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Every year, the “Bitcoin pizza guy” story hits headlines, and stays under wider society's scandalous lens for a week before pop culture's capricious eye blinks and moves on.
The story often elicits flabbergasted guffaws, disbelief, or something of sympathy from folks. But few think to ask: where did he get all of those coins in the first place? After all, this was before Bitcoin’s first proper exchange. So of course, he acquired them the way anyone who was involved did back then: mining–mining with GPUs.
On April 16, 2010, Hanyecz joined Bitcoin Talk Forum, a discussion board spun up by Bitcoin creator Satoshi Nakamoto. He joined a few months after Bitcoin’s 1st birthday, a time when orange coin’s earliest community was evolving beyond the early days of Satoshi and Hal Finney (Indeed, Satoshi was on his way out, his last post on Bitcoin Talk coming in December, 2010).
For his part, Hanyecz became an active and prolific member Bitcoin’s salad days hobbyist community. In addition to mining bitcoin on his computer processor (CPU)–the only way to do it until Hanyecz introduced GPUs into the mining mix–he also put his skills as a programmer to work.
In his first post, he mentioned wanting to run “Bitcoin on other platforms like iPhone.” Well, the iPhone 3G couldn’t mine BTC, but Hanyecz figured a Mac PC would be good, too. So he built and released the first version of Bitcoin Core for MAC OS.
Laszlo Hanyecz paid for the world’s most expensive pizzas with GPU mining
8 days later, Hanyecz would take his experimentation farther and alter the course of Bitcoin history.
In a post titled “Generating Bitcoins with your video card,” he introduced the first program to mine bitcoin using a computer’s graphics card (GPU), as opposed to a computer processor (CPU). The GPU mining method was much faster and efficient than the traditional CPU method, and just like that,
Pandora’s Hanyecz’s box was opened: GPU Bitcoin mining was officially in play.
For context, this gave miners as much as a 10x improvements on their computing power output over the CPUs they were using.
Hanyecz posted his discovery on May 10, 2010. On May 19, 2010, Bitcoin would undergo its first ever downward adjustment. In part thanks to Hanyecz’s breakthrough (in addition to the increase in users during Bitcoin’s first adoption cycle), Bitcoin’s second downward adjustment wouldn’t come until March, 24, 2011, and Bitcoin’s third ever downward adjustment (August 15, 2011) wouldn’t happen until Bitcoin was entering its first bear market.
So put another way: Bitcoin’s difficulty only adjusted downward three times for the first 32 months of its existence, and GPU mining is a big part of the reason why.
How much bitcoin did Laszlo Hanyecz mine?
So as evidenced by the charts above, our pizza guy had some time before other miners really jumped on to the GPU train. From analyzing inflows to the wallet address he published on his first Bitcoin Talk post, it appears that he began mining with his GPU at least a week before his May 19, 2010 post.
Using blockchain explorer OXT’s charting tool, we can see that Laszlo’s wallet sees significantly more inflows starting in May, 2010, culminating with a peak balance that month of 20,962 BTC.
He was mining so much BTC, in fact, that it only took him a week to replenish the stack he spent on the infamous BTC pizzas on May 22.
And so he kept spending. The offer for the pizza was “open,” he posted on Bitcoin Talk, for one. He also asked if anyone would be willing to sell a canon camera / equipment for bitcoin (he posted the ask on June 15th, 2010, and it’s unclear whether or not he bought such equipment, though his wallet does show total outflows of 37,592 and 8,600 BTC on June 30 and July 2, 2010, respectively).
Some of these transactions could have been pizza orders, though–or Hanyecz just giving BTC away to newcomers, a common custom back then.
All in all, Laszlo Hanyecz saw 81,432 BTC come through this wallet. His wallet's balance hit an all-time high of 43,854 in June, 2010. After that, the wallet's balance trickled out slowly over the next year or so, and now it's basically inactive (save a few novelty transactions that Bitcoiners send in homage to the legend, like this one transaction for 1337 satoshis, 1337 being gamer slang for “leet” or “elite”).
Why did Laszlo Hanyecz spend all that bitcoin?
The above address wasn’t Laszlo Hanyecz’s only bitcoin address (we have records from Bitcoin Talk of one more, and it’s probable that he had others).
When people learn that Laszlo kept spending bitcoin, they often ask “Why?”
Well, besides the fact that Bitcoin was hobbyhorse technology back then and worth very little, nobody expected it to be a trillion dollar asset. In the 2019 Bitcoin Magazine interview, Hanyecz put it in more playful, charming terms.
“A trade happens because both parties think they’re getting a good deal,” he said. “I felt like I was beating the internet, getting free food. I was like, Man, I got these GPUs linked together, now I’m going to mine twice as fast. I’m just going to be eating free food; I’ll never have to buy food again.
“At the time it was Monopoly money. Nobody cared — people would just give you some, so I didn’t figure I needed to be greedy with it.”
So some of the impetus, no doubt, was the novelty and excitement of it. Pizza bought with magic internet money! What’s there not to like?
But here’s where Satoshi comes in: Bitcoin’s creator actually emailed the father of GPU mining and asked him to tone down the GPU mining posts. Satoshi knew that people would mine with GPUs eventually, but he did not want to “hasten that day,” in his own words.
“A big attraction to new users is that anyone with a computer can generate some free coins,” Satoshi wrote to Hanyecz. “GPUs would prematurely limit the incentive to only those with high-end GPU hardware. It's inevitable that GPU compute clusters will eventually hog all the generated coins, but I don't want to hasten that day.”
Bitcoin was still very young, after all, so Satoshi wanted to ensure that it scaled appropriately (Satoshi was very careful about nurturing the Bitcoin network in its earliest days when it was most vulnerable to centralization, as evidenced by the fact that Satoshi likely curtailed his hashrate in the early days to let other early miners have an equal shot at the action).
Very much an enthusiastic member of Bitcoin’s fledgling community, Hanyecz admitted in our 2019 interview that he felt a tinge of guilt when Satoshi expressed his concern.
“That’s when I was like, ‘Man, I feel like I crapped up your project. Sorry, dude.' He was concerned that some people might be discouraged because they can’t mine a block with a CPU. So, I stopped advertising it after that.”
Many Bitcoiners (including myself) can’t help but speculate that Laszlo Hanyecz’s prodigal bitcoin spending habits in 2010 resulted (at least partially) from the fact that he accelerated Bitcoin’s hashrace. His BTC purchases were a monetary penance of sorts.
So did Laszlo Hanyec buy those pizzas to ease the guilt? You can read Satoshi’s email to Laszlo below and judge for yourself.
A big attraction to new users is that anyone with a computer can generate some free coins. When there are 5000 users, that incentive may fade, but for now it's still true. GPUs would prematurely limit the incentive to only those with high end GPU hardware. It's inevitable that GPU compute clusters will eventually hog all the generated coins, but I don't want to hasten that day. If the difficulty gets really high, that increases the value of each coin in a way since the supply becomes more limited. The supply is the same: 50 coins every 10 minutes. But GPUs are much less evenly distributed, so the generated coins only go towards rewarding 20% of the people for joining the network instead of 100%. I don't mean to sound like a socialist, I don't care if wealth is concentrated, but for now, we get more growth by giving that money to 100% of the people than giving it to 20%. Also, the longer we can delay the GPU arms race, the more mature the OpenCL libraries get, and the more people will have OpenCL compatible video cards. If we see from the difficulty factor that someone is using too much GPU, we can certainly pick this OpenCL stuff up again then. Maybe my effort to maintain GPU innocence is running out of time. It's worked out so far.
Happy Hashing, and Happy Bitcoin Pizza Day!
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