A few hours after Newsweek released its story about the man it alleged to be Satoshi Nakamoto, in March 2014, four men took the stage at an auditorium in the New York headquarters of the Wall Street giant Goldman Sachs to talk about Satoshi's creation.

This was a private conference for some of the bank's most powerful hedge fund clients. In addition to appearances from former New York City mayor Michael Bloomberg, the former head of the Bank of England, and the former president of the World Bank, Goldman had put together a four-person panel to educate its clients on virtual currencies. The panel, according to several attendees, was led by the co-head of technology at Goldman, a tall, bald physics PhD named Paul Walker. He opened the fireside chat by describing the two things about Bitcoin that everyone seemed to be able to agree on: "It's something on the Internet that seems to be worth money, and it seems to have been invented by a mysterious person." But, Walker said, in a joking reference to the morning's story from Newsweek, "the last part may no longer be true."

Sitting next to Walker were Barry Silbert, Bitcoin's biggest advocate in the New York financial community, and Chris Larsen, the chief executive of a San Francisco-based cryptocurrency startup, Ripple Labs. Most men in the room were wearing ties, but in true Silicon Valley style, Larsen and Silbert were not. The fourth member of the panel was the former head of the Financial Crimes Enforcement Network, or Fincen, James Freis.

Silbert asked how many people in the room were skeptical about virtual currencies, and a good majority of them put their hands up. Silbert noted how different this gathering was from the elite circles on the West Coast, where at recent events he'd attended a minority of the participants had expressed skepticism. Silbert said it reminded him of the early days of the Internet when everyone in the tech industry was leaving good jobs to try to cash in on the new idea.

"It's either going to change everything, or nothing," Silbert said.

To appeal to all the financial minds in the room, Larsen said that all the early problems surrounding Bitcoin had obscured the fact that the technology underlying it made something possible that had never been possible before.

"The world now knows how to confirm financial transactions without a central operator," he said.

It was, though, Walker, the high-ranking Goldman executive, who provided the most encouraging comments about the technology. He said the conceptual advances made by Bitcoin weren't just clever; they were useful in ways that could influence the future financial system. He had obviously been spending a lot of time studying this and was clearly impressed by what he saw. He suggested that Goldman was not planning to buy or sell bitcoins, but he indicated that the bank was taking a hard look at how the blockchain might be used to change basic things about how banks do business.

It currently took the bank three or so days to settle stock trades. What if that could happen instantly and be recorded on a blockchain for everyone to see?

Barry Silbert and Chris Larsen were beaming. Few things could help a financial cause more than getting the imprimatur of the firm known as "the smartest on Wall Street," a bank renowned for always seeing what was coming around the next corner and making the right bets. Walker wasn't making any official announcements, but everyone could see the Goldman executive was into this.

Walker reflected an increasingly widespread fascination in financial circles with the blockchain concept underlying the Bitcoin technology. Many bankers had begun to understand what Gavin Andresen, the longtime Bitcoin software developer, had seen back in 2010 when he first became entranced by the idea of a financial network with no single point of failure. For banks that were terrified of cyber attacks, the idea of a payment network that could keep running even if one player, or one set of servers, got taken out was incredibly attractive. More broadly, the banks were waking up to several increasingly viable efforts to decentralize finance and take business that had belonged to the big banks. Crowdfunding companies like Kickstarter, and marketplace lending services like Lending Club, were trying to directly connect borrowers with savers and investors, so that a bank was not necessary. The blockchain seemed to present a decentralized alternative to an even more basic part of the banking industry's business — payments.

The banks were notably not becoming any more friendly toward working with Bitcoin the currency. JPMorgan Chase's operating committee, led by Jamie Dimon, decided in the spring of 2014 that it would not work with any Bitcoin companies. At events in California with tech moguls, Dimon spoke derisively about Bitcoin and the ambitions of Silicon Valley to take over Wall Street's business, according to people who attended the meetings. Dimon said that JPMorgan and the other banks weren't going to go down without a fight. At one point, JPMorgan threatened to stop providing services even to other banks that had Bitcoin companies as customers — like the European bank working with Bitstamp, according to a person involved in the discussions. [Editor's note: JPMorgan did not comment on the record after repeated requests from American Banker.] Other American banks went so far as to close down the accounts of individuals who transferred money to Bitcoin exchanges.

But inside almost all these banks, there were people who loved the concept of a decentralized financial system like Bitcoin. JPMorgan maintained a so-called Bitcoin Working Group, with about two dozen members from across the bank and around the world, which was led by the bank's head of strategy and which was looking at how the ideas behind Bitcoin might be harnessed by the financial industry.

This JPMorgan group began confidentially working with other major banks in the country that belong to The Clearing House, on an experimental effort to imagine a new blockchain that would be jointly run by the computers of the largest banks and serve as the backbone for a new, instant payment system that might replace Visa, MasterCard, and wire transfers. Such a blockchain would not need to rely on the anonymous miners powering the Bitcoin blockchain. But it could ensure there would no longer be a single point of failure in the payment network. If Visa's systems came under attack, all the stores using Visa were screwed. But if one bank maintaining a blockchain came under attack, all the other banks could keep the blockchain going.

For many technology experts at banks, the most valuable potential use of the blockchain was not small payments but very large ones, which are responsible for the vast majority of the money moving between banks each day. In the stock trading business, for example, the lengthy settlement and clearing process means that the money and shares are all but frozen for three days. Given the sums involved, even the few days that the money is in transit carry significant costs and risks. As a result, various banks began looking at ways they could use the blockchain technology to make these sorts of large transfers quickly and securely. For many banks, the biggest stumbling block was the inherent unreliability of the Bitcoin blockchain, which is, of course, powered by thousands of unvetted computers around the world, all of which could stop supporting the blockchain at any moment. This increased the desire to find a way to create blockchains independent of Bitcoin. The Federal Reserve had its own people looking at how to harness the blockchain technology and potentially even Bitcoin itself.

Many in the existing Bitcoin community scoffed at the idea that the blockchain concept could be separated from the currency. As they viewed it, the currency, and the mining of the currency, was what gave users the incentive to join and power the blockchain. Given that a blockchain could be taken over and subverted if an attacker controlled more than 50% of the computing power on the network, a blockchain was only as secure as the amount of computing power hooked into the network. A blockchain run by a few dozen banks would be much easier to overwhelm than the Bitcoin network, which now commanded more raw computing power than all the major supercomputers combined.

A year after the Goldman conference, the firm invested in Circle Internet Financial, a startup that sells and stores bitcoins for consumers, and the Nasdaq disclosed a pilot test of the Bitcoin blockchain for trading securities.

Nathaniel Popper is a reporter at The New York Times. This article is excerpted from his book "Digital Gold: Bitcoin and the Inside Story of the Misfits and Millionaires Trying to Reinvent Money." Copyright © 2015 by Nathaniel Popper. Reprinted courtesy of Harper, an imprint of HarperCollins Publishers.