Relief representing Romans paying taxex || Image source: historyhit.com
Governs are oppressing people for centuries. One of the first forms of such oppression was born during the Roman Empire, 2000 years ago. Time has passed, but this practice remained. The methods are various, including direct taxes, indirect taxes, inflation, censoring access to information, indictments, prohibition, slavery, unfair trials, collecting personal information and using it against honest people. However, all these lead to the same supreme goal: the power has to stay in the hands of the elites, while the poor has to work for the benefit of the elites. People fought back, but empty handed most of the times. This epic battle which lasts since ancient times is best described by Murray Rothbard as "
the great conflict which is eternally waged between Liberty and Power".
One way for obtaining freedom and liberty was through private money, but governs don't agree with such competition. And the governs have monopoly over minting coins also since the Roman Empire. However, people's desire for private money started centuries ago and the history tells us that in many occasions private money existed in various forms.
The illustrious economist and philosopher Friedrich August von Hayek, winner of Nobel in Economic Sciences in 1974, raised a very legitimate debate in his
masterpiece Denationalisation of Money: The Argument Refined: "[...] cannot help wondering why people should have put up for so long with governments exercising an exclusive power over two thousand years that was regularly used to exploit and defraud them". Another emblematic figure which sustained the need of private money is Murray Rothbard.
Between 1700 and 1900 various private coins circulated in United States. The first private coin from the US history is the Higley copper coin, minted in 1737 by the Higley family. Maybe the most popular ones are the Bechtler gold coins (first being issued in 1831), known for having a greater purity than the coins issued by the state. The San Francisco company Moffat&Co also wrote a page of history during the gold rush, with its minted coins. One of the most wanted coin was the Brasher Doubloon, minted by Ephraim Brasher in 1787. Other notable private minted coins to mention: Morgan Dollars, Saint-Gaudens Double Eagles, Barber Quarter. Of course, the govern didn't agree with the private mints but what is certain is that at various points in time the private minted money existed. These coins were used at a large scale, no matter the states efforts to shut them down.
Libertarianism and anarchismMurray Rothbard || Image source: fee.org
“I define anarchist society as one where there is no legal possibility for coercive aggression against the person or property of any individual” -- Murray Rothbard
Years have passed and the state kept banning the private money through any possible mean. The oppression grew even stronger. But people's wish for liberty became stronger as well. In the past, they used to express these ideas through
liberalism, which later evolved into
libertarianism. The first forms of libertarianism appeared between 18
th and 19
th centuries. The modern libertarianism, started since 1950 was spoken by great minds, such as Murray Rothbard, Milton Friedman or Hayek. According to Rothbard, "The libertarian creed rests upon one central axiom: that no man or group of men may aggress against the person or property of anyone else. This may be called the "nonaggression axiom." "Aggression" is defined as the initiation of the use or threat of physical violence against the person or property of anyone else. Aggression is therefore synonymous with invasion". At large, we can say that libertarianism was focused on individual rights, limitation of the govern, encouragement of free market and peace.
One particular side of the libertarianism is the
anarchism. Although this movement is more radical, it is still oriented towards individuals. Basically, the anarchism presumes a govern-free society, free individuals, which are not governed by laws, but by free agreements. The "anarchy" term itself means "absence of government". However, the anarchism should not be associated with violence: it never was about violence and it will never be. A great explanation on this matter is given by the Canadian theoretician L. Susan Brown: "While the popular understanding of anarchism is of a violent, anti-State movement, anarchism is a much more subtle and nuanced tradition than a simple opposition to government power. Anarchists oppose the idea that power and domination are necessary for society, and instead advocate more co-operative, anti-hierarchical forms of social, political and economic organisation".
Crypto warsMunition t-shirts, according to US law, originally created by Adam Back || Image source: Twitter
"If privacy is outlawed, only outlaws will have privacy" -- Phil Zimmermann
We leave behind the years 1950 and enter the technology era: ARPANET, the ancestor of Internet, is born in 1967; microprocessors are evolving based on
Moore's law; personal computers (PCs) are launched in 1975; World Wide Web is launched in 1989.
Cryptography was flourishing with Friedman's brilliant mind. But all these technological developments were not meant for public (yet): the state just discovered a new way of oppression, maybe the most dangerous one - the surveillance. Which was a continuous process for invading people's privacy. If an individual is spying his neighbor through the window he may face a Court of Law; if the govern spies an entire nation there is no problem. If a normal person tries to find the financial transactions of someone else he may be sued; if the state wants to find out
all financial transactions of every individual there is no problem.
Technology offered a great weapon to the govern and it started to use it at full capacity, in order to have full control, mainly through agencies such as NSA. Governs' permanent hunger for information about citizen became a hunger for
big data: each individual is conditioned by govern-issued documents. You can not give birth without a govern-issued ID, you can not get married without a govern-issued ID, you can not die without a govern-issued ID, you can not prove your identity without a govern-issued ID, you can not access hospitals without a govern-issued ID and so on. And all this information is recorded in databases, which are controlled by various arms of the state; ultimately, they are controlled by the state.
During these harsh times, in 1975, Whitfield Diffie
invented the public-key cryptography, bringing the brilliant tool to the public. The govern reacted, offering its help to "keep secure" people's private keys. This never happened and from these moment
the crypto wars have begun. In 1977 RSA encryption algorithm was invented by Ron Rivest, Adi Shamir and Leonard Adleman; the algorithm was using the public-key cryptography. NSA's next move was to ban public access to Diffie's invention and the export of encryption algorithms outside the US. NSA director Bobby Inman became worried because people could access encryption technology which, until that point in time, was used only by the agencies. A 1993
article from Wired leaked an address sent by Inman in 1979, warning that "non-governmental cryptologic activity and publication [...] poses clear risks to the national security". The encryption algorithms were considered classified information and protected by Federal Regulations, such as ITAR (International Traffic in Arms Regulations, 22 CFR 121-128). Exporting them could lead to 10 years in jail. As a response, the public printed a few lines of the RSA code on t-shirts and the agency warned that wearing these kind of t-shirts while traveling outside the US or exporting them would mean jail time for the "offenders", as these kind of t-shirts were considered "munitions". Those wearing tattoos with RSA algorithm were also considered as offenders. Maybe that was the first time when the govern feared that it may lost the control. This fear can be seen in the name of the address issued by Inman: "
iSky is falling".
John Gilmore, a brave young man, stood tall in front of the agency. The same Wired article quotes him emphasizing: "Show us. Show the public how your ability to violate the privacy of any citizen has prevented a major disaster. They're abridging the freedom and privacy of all citizens—to defend us against a bogeyman that they will not explain. The decision to literally trade away our privacy is one that must be made by the whole society, not made unilaterally by a military spy agency."
Cypherpunks and crypto-anarchy: "Rebels with a cause"Front cover of Wired magazine ("Rebels With a Cause"), May/June 1993 || Image source: Wired.com
"I am fascinated by Tim May's crypto-anarchy. Unlike the communities traditionally associated with the word "anarchy", in a crypto-anarchy the government is not temporarily destroyed but permanently forbidden and permanently unnecessary. It's a community where the threat of violence is impotent because violence is impossible, and violence is impossible because its participants cannot be linked to their true names or physical locations." -- Wei Dai
Fast forward to 1992. A group of three code enthusiasts and cryptographers, formed by
Timothy C. May, John Gilmore and
Erich Highes, discover that all of them have a similar vision about govern's surveillance and censorship. All of them had deep knowledge in Computer Science. May used to work as a chief scientist at Intel, Gilmore spent years at Sun Microsystems prior starting his own company, while Hughes was a programmer and a mathematician. They started to see each other at Gilmore's office, in San Francisco Bay area, trying to find ways to protect people's privacy through cryptography. Soon, another enthusiat joins them: the hacker Jude Milhon, also known as St. Jude. She finds also a name for the group: by combining the words "cipher" (related to cryptography) and "cyberpunk" (which is a part of the science fiction genre based on dystopian reality and anarchy) she invented the name "Cypherpunks".
The group evolved and many other have joined. For keeping in touch they launched a mailing list; the mails archive can be found on
Metzdowd.com and
Cypherpunks.venona.com. At peak, it had about 2000 subscribers.
Cypherpunk's ideology took libertarianism and anarchism to a whole new level:
crypto-anarchy. "A specter is haunting the modern world, the specter of crypto anarchy", stated Tim May in 1988, in what came to be known as a masterpiece in Cypherpunks literature: "
The Crypto Anarchist Manifesto".
"Cypherpunks write code", emphasized Eric Hughes, in "
A Cypherpunk's Manifesto", another illustrious writing which represents a piece of history. And through code, they wanted to offer people privacy. They wanted the public to have free access to cryptography. Other points of interests were online anonimity, game theory, secure file sharing, reputation systems, free market and civil disobedience. Steven Levy, the author of the above mentioned Wired article, called them with a term impossible to translate in a foreign language: "
techie-cum-civil libertarians".
Another big desire of the Cypherpunks was to create electronic cash. A form of untraceable money which could stop the govern's surveillance over the financial life of the individuals.
In time, many enthusiasts sharing this ideology adhered to the group. Among the most notorious ones, we can mention
Philip Zimmermann, inventor of PGP,
Julian Assange, the founder of WikiLeaks, Jacob Appelbaum, the developer of Tor and
Hal Finney, the developer of PGP 2.0 and Reusable Proof-of-Work. Other remarkable Cypherpunks can be found
hereDigiCashSome of these cryptographers started working on this dream they had: electronic cash. And they had a role model: Dr. David Chaum's DigiCash. David Chaum's work represented an inspiration for the Cypherpunks group and he can be called the grandfather of Cypherpunks. His writings (such as "
Untraceable Electronic Mail, Return Addresses, and Digital Pseudonyms", "
Blind Signatures for Untraceable Payments" or "
Security without Identification Card Computers to make Big Brother Obsolete") proved he was thinking way ahead of his time. In 1989 he already managed to launch the electronic money company DigiCash Inc. The company offered to the public the eCash payment system and the CyberBucks coins, which were based on blind signatures. The proposal was actually applied in real world payments, being adopted by several banks, such as Mark Twain Bank from St. Louis, Deutsche Bank, Credit Suisse, Norske Bank and Bank Austria. Other big players became interested in Chaum's creation: Visa, Netscape, ABN Amro Bank, CitiBank and ING Bank. Even Bill Gates tried to embed DigiCash in Windows '95. Unfortunately, these last mentioned players never signed the contracts with Chaum. In the end, in 1998, DigiCash Inc. went bankrupt. People were not attracted to use the system. Chaum's proposal was also above of its times.
The Cypherpunks thought also that the failure of DigiCash Inc. was determined by the fact that it was based on a central authority.
The key to success was a totally decentralized form of money.e-GoldA similar business was developed between 1996-2009 by the company Gold & Silver Reserve, Inc. This company started a subsidiary named e-gold Ltd. for operating electronic gold. The users could remotely transfer gold between them, in grams or troy ounces units. The business was flourishing, having at peak about 5M users. Many exchanges adopted this electronic gold and the users could also transfer it through their phones. However, in 2007 the owners were accused by US govern for operating money without a license. The owners pleaded guilty and they were found guilty (in 2008); the exchanges were closed. For admitting that they broke the law and for accepting that they need a money operating license, they received easier charges. However, according to the US law, as they were found guilty, they were not allowed to obtain such a license and e-Gold ceased to exist.
HashCashImage source: Cypherpunks mailing list
In 1997,
Dr. Adam Back came with a
proposal on the mailing list called
HashCash. It was an era when Internet spams (especially email spams) started to be a serious problem. The problem came into big companies' radars, thus a first step was taken in 1992 by IBM, with a proposal named
Pricing via Processing or Combating Junk Mail. The IBM researchers proposal will be named somewhere in the future as
Proof-of-Work.
Adam Back's invention was not based on the IBM proposal; however, it had many things in common. HashCash concept presumed a Proof-of-Work procedure for limiting the email spam and DDos attacks, based on a cost of each email which, in the end, would make the spam to be too costly for being used. Later, HashCash will become a part of Bitcoin's engine, being also mentioned in the Bitcoin white paper.
Besides, Adam Back remains known for being the one pointing Satoshi Nakamoto to Wei Dai, after finding similarities between their electronic money proposals. There were just two individuals contacted personally by Satoshi in regard of Bitcoin: the first one is Adam Back; the second one is Wei Dai.
b-moneyWei Dai rare photo, which may (or may not) picture him; according to his statement from WeiDai.com, "Please note that as of this writing, any purported photos of me on the Internet are actually of other people named Wei Dai" || Image source: steemit.com In 1998, another remarkable Cypherpunk came with an electronic money proposal:
Wei Dai introduced
b-money. The draft was based also on Proof-of-Work and it was presented in two versions. Unfortunately, b-money was vulnerable to Sybil attacks and Wei Dai did not finish his work. The proposal was never implemented.
And he never finished his invention because he did not trust anymore the utility on b-money nor the crypto-anarchy ideology. In a later discussion on LessWrong forum, he
admitted: "I didn’t take any steps to code up b-money. Part of it was because b-money wasn’t a complete practical design yet, but
I didn’t continue to work on the design because I had actually grown somewhat disillusioned with cryptoanarchy by the time I finished writing up b-money,
and I didn’t foresee that a system like it, once implemented, could attract so much attention and use beyond a small group of hardcore cypherpunks". This allegation was doubled down in a
discussion he sent to Adam Back and to the others Cypherpunks, proving that he did not believe in a practical application of b-money: "I think b-money will at most be a niche currency/contract enforcement mechanism, serving those who don't want to or can't use government sponsored ones".
However, although Wei Dai did not trust too much his invention, someone else did. A decade later, following Adam Back's advice, Satoshi Nakamoto contacted him for taking a look over his proposal of electronic cash named
Bitcoin. They exchanged
three emails. In the first one, from August 22
nd, 2008, Satoshi wrote:
"I was very interested to read your b-money page. I'm getting ready to release a paper that expands on your ideas into a complete working system. Adam Back (hashcash.org) noticed the similarities and pointed me to your site.
I need to find out the year of publication of your b-money page for the citation in my paper. It'll look like:
[1] W. Dai, "b-money,"
http://www.weidai.com/bmoney.txt, (2006?).
You can download a pre-release draft at
http://www.upload.ae/file/6157/ecash-pdf.html. Feel free to forward it to anyone else you think would be interested."
Wei Dai replied to this email. He wrote:
"Hi Satoshi. b-money was announced on the cypherpunks mailing list in 1998. Here's the archived post:
http://cypherpunks.venona.com/date/1998/11/msg00941.htmlThere are some discussions of it at
http://cypherpunks.venona.com/date/1998/12/msg00194.html.
Thanks for letting me know about your paper. I'll take a look at it and let you know if I have any comments or questions."
But Wei Dai didn't analyze Satoshi's draft nor he came back with a response to Satoshi. He received on January 10
th, 2009 another email from Satoshi, informing him that Bitcoin is fully working:
"I wanted to let you know, I just released the full implementation of the paper I sent you a few months ago, Bitcoin v0.1. Details, download and screenshots are at
www.bitcoin.orgI think it achieves nearly all the goals you set out to solve in your b-money paper.
The system is entirely decentralized, without any server or trusted parties. The network infrastructure can support a full range of escrow transactions and contracts, but for now the focus is on the basics of money and transactions."
Wei Dai did not keep the connection to Satoshi for reasons only he knew. Maybe he did not trust the Bitcoin potential or maybe he did not agree with a currency without a stable value. What is certain is that after years he
regretted his action:
"I would consider Bitcoin to have failed with regard to its monetary policy (because the policy causes high price volatility which imposes a heavy cost on its users, who have to either take undesirable risks or engage in costly hedging in order to use the currency). (This may have been partially my fault because when Satoshi wrote to me asking for comments on his draft paper, I never got back to him. Otherwise perhaps I could have dissuaded him (or them) from the "fixed supply of money" idea.)"
Although without knowing at that time, Wei Dai remains in the history as one of the two persons personally contacted by Satoshi Nakamoto prior launching Bitcoin.
Bit GoldAnother proeminent Cypherpunk which tried a solution for a private form of electronic money was Nick Szabo. He was familiarized with the idea, working in the past with Dr. Chaum at DigiCash. In 2005, he went public with a proposal called Bit Gold. But he created the proposal since 1998. According to the
white paper, his invention was supposed to "use benchmark functions, as well as techniques of cryptography and replication, to construct a novel financial system,
bit gold, which serves not only as a payment scheme, but also as a long term store of value independent of any trusted authority". More details about this proposal can be found also on Szabo's
blog.
Bit Gold was using Reusable Proof-of-Work but it was also vulnerable to Sybil attacks, similar to b-money. The concept never launched as a real life application and remained in the history as a blog post, as it faced too many technical difficulties for working in a real environment. However, the basic ideas behind Bit Gold inspired Satoshi even more for his masterpice - Bitcoin.
Satoshi, the last (?) CypherpunkThe Times, January 3rd, 2009, London issue, morning edition || Image source: TheTimes03Jan2009.com
"The root problem with conventional currency is all the trust that's required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. We have to trust them with our privacy, trust them not to let identity thieves drain our accounts." -- Satoshi Nakamoto
Picture
Satoshi Nakamoto in the morning of January 3
rd, 2009. He just bought the newspaper The Times from the downstairs kiosk. Getting back to his home, he is drinking a hot coffee and reading the main title: "
Chancellor on Brink of Second Bailout for Banks. Still waiting for the genesys block to be found. What thoughts could he have? Maybe he whispered for himself "now this is way too much! The govern crossed any possible limit! But Bitcoin is here now...".
Nobody knows what he could think in that day. But what is certain is that on January 3
rd, 2009, Bitcoin's genesys block was mined. And stamped with the title of the main article from The Times.
The work at Bitcoin started almost 2 years before, in 2007. Satoshi, which also joined the Cypherpunks mailing list, must have assisted to what happened to e-Gold and to its owners. The state was clear about its intentions for private forms of money. The economic and politic context was bad, as the world was facing a huge crisis. Maybe Bitcoin was a personal dream of Satoshi. Or maybe the world context determined him to work at his invention. Whatever the truth is, the fact is that he followed this dream of the Cypherpunks, dream also shared by the libertarian ancestors.
Based on a libertarian and crypto-anarchyc ideology, following the concepts of his predecessors, Satoshi Nakamoto managed to
create "a new electronic cash system that's fully peer-to-peer, with no trusted third party". The system "would allow online payments to be sent directly from one party to another without the burdens of going through a financial institution. Digital signatures provide part of the solution, but the main benefits are lost if a trusted party is still required to prevent double-spending."
With other words, Bitcoin was the first electronic form of private money, which was able to finally eliberate people from govern's surveillence, as the funds could be transferred directly between individuals, without the intervention of any third party - such as the banks, which act as the long arms of the govern.
Bitcoin genesys block || Image source: Reddit
Satoshi's libertarianism is present in many of his words.
“The traditional banking model achieves a level of privacy by limiting access to information to the parties involved and the trusted third party. The necessity to announce all transactions publicly precludes this method, but privacy can still be maintained by breaking the flow of information in another place: by keeping public keys anonymous. The public can see that someone is sending an amount to someone else, but without information linking the transaction to anyone. This is similar to the level of information released by stock exchanges, where the time and size of individual trades, the ‘tape’, is made public, but without telling who the parties were.”
Another good example on this matter is given in a 2015
article from The Verge, which illustrates his first discussion with Martti Malmi, which later will become the
administrator of BitcoinTalk. Martti was also an individual with anarchic views, as he was member of the defunct forum anti-state.org. The article reads:
"In his first email to Satoshi Nakamoto, in May 2009, Martti had offered his services: "I would like to help with Bitcoin, if there’s something I can do," he wrote.
Before reaching out to Satoshi, Martti had written about Bitcoin on anti-state.org, a forum dedicated to the possibility of an anarchist society organized only by the market. Using the screen name Trickster, Martti gave a brief description of the Bitcoin idea and asked for thoughts: "What do you think about this? I’m really excited about the thought of something practical that could truly bring us closer to freedom in our lifetime :-)"
Martti included a link to this post in his first email to Satoshi, and Satoshi quickly read it and responded.
"
Your understanding of Bitcoin is spot on," Satoshi wrote back."
Satoshi's answer is crystal clear about his vision.
And his lesson should never be forgotten.The same is true about him when we talk about sharing the Cypherpunks' points of interest - he gave people free access to Bitcoin, to the privacy offered by Bitcoin. Free access and ease of use of the cryptographic keys used by his protocol. Bitcoin was supposed (and succeeded to) fully change the free market. Ultimately, it was a form of civil disobedience. A method to take position in front of govern's money - the traceable money, the inflated money, the money which day by day lose their value, as govern's printers are constantly issuing new money.
He wanted to help people to be free again. And this was possible through Bitcoin. No bank and no govern could "milk" the people off of their money anymore with more or less sophisticated mechanism, such as taxes for transferring their funds, taxes for selling their products, taxes for selling their work power.
Bitcoin is free for anyone and freedom resides inside it; if you want to have control over your privacy and finances, all you need to do is to embrace it.Bitcoin was forseen many years, with multiple occasions, by Tim May. For example, in his 1994
essay Crypto Anarchy and Virtual Communities he said "Technology has let the genie out of the bottle. Crypto anarchy is liberating individuals from coercion by their physical neighbors—who cannot know who they are on the Net—and from governments. For libertarians, strong crypto provides the means by which government will be avoided".
Bitcoin is true and it is here to last. Sky started to fall since 1979 and it kept falling since then. The govern lost the war. Freedom is in our hands.
This is my 1000th post.
And it is a sequel of my previous writing related to Cypherpunks, history and crypto-anarchy. The Cypherpunks' spirit lives through many of us. It is our duty to keep it alive.
It is our duty to keep fighting for freedom and liberty!References:
-
Governs are coming for the traders!-
Cryptocurrency vs digital money issued by the state-
The Crypto Anarchist Manifesto - We all should read it-
Governs try to limit access of public to information and freedom since ages-
Phil Zimmermann's thoughts about PGP - We all should read them-
When the govern wants to hold your private keys-
The call for Julian Assange || The WikiLeaks Manifesto - We all should read it
Translations (in chronological order):
