The Birth of CypherPunks
This is it. This is the final part of our Cipherpunk story. In the first part, we understood the origins of cryptography and the people who helped create the first big wave of public interest. Martin, Diffie, and Merkle — laid the foundation for cryptographers to explore anonymous communication and payment systems. David Chaum was among the top cryptographers back then to research public key cryptography and decentralized services.
In Part Two, we learned how he created the world’s first blockchain and digital cash using blind signatures. Although David failed to create sustainable companies, his ideas continue to inspire cryptographers around the world. The cypherpunks adopted his techniques and found a solution to prevent exploitation of metadata, which later spurred the concept of Bitcoin and Cryptocurrency.
In this final part, we will deep dive into how the cypherpunks movement helped in the ultimate creation of Bitcoin, which is considered the Holy Grail of cryptocurrencies. Many people think the concept of cryptocurrencies and decentralization was created by Satoshi Nakamoto, who wrote the blueprint for Bitcoin. But they could not be more wrong. Several events had to happen for bitcoin to become what it is now. Understanding the cypherpunks and what they stood for — will help you find a retrospective view of bitcoin and its meaning not as currency but in the form of technology.
The world of cryptography and computing made some massive strides in the 80s and 90s. Some of the biggest companies in the world today were established. Adobe, Sun Microsystems, Cisco, and Dell — were founded in the first half of the decade. Apple also had its breakthrough moments when it was ranked in the top 100 US companies in terms of revenue. In the field of cryptography, we had not seen any major discoveries that would solve what David was missing in his blockchain ventures. Cryptographers worldwide recognized that the online space was heading in the wrong direction regarding personal privacy and corporate and government control.
To develop a solution, three world-class cryptographers in the 90s: Hughes, May, and Gilmore — invited 30 libertarians to discuss global issues surrounding government surveillance and online privacy. On September, 25th 1991, cypherpunks met at the southwest corner of Whisman Station Plaza for the first time. This is how it all began.
The meeting started with Tim reading out his “Crypto Anarchist Manifesto”, written in 1988. He had originally written it for the cryptography conference, CRYPTO ’88. But no one ever cared about the political implications of cryptography. The people in that meeting, however, resonated with Tim’s basic principles of crypto-anarchism.
After covering a few concepts, they landed on a major issue faced by David Chaum — metadata. They talked about it in-depth and how they would be implementing David’s mix network to make metadata more secure. Their discussions never seemed to catch a break, and everyone ended up sleeping on the floor.
The next morning, while eating bagels for breakfast, Hughes and Tim discussed expanding access to their cryptography club. In less than one week, Hughes came up with mailing list 1.0. You can think of this as an email chat room. To make a list more secure and private, Hal Finney implemented PGP 2.0 to hide the sender’s identity. Another cypherpunk called Cottrell also added its creation with message batching that would hide the timestamps.
The Mailing List
If the mailing list did not exist, the cypherpunks could not have joined forces to fight for privacy and create some of the best projects in the history of cryptography. If the mailing list did not exist, Satoshi wouldn’t share his ideas or take inspiration from the members on the mailing list to create the ultimate peer-to-peer network, bitcoin. That’s how significant the mailing list is to the cypherpunk movement.
The mailing list had over 100 subscribers in a week. And by the end of the year, 2000 cryptographers and academics worldwide were sharing ideas and solutions to solve some of the biggest problems the world was facing. It was also a nice platform to arrange online and offline meetings. The second meetup was decided on the 10th of October 1992.
The cypherpunks had some of the most thought-provoking discussions about global surveillance, the democratization of private technology, and many more. While many members on the list had deep expertise in computer science and cryptography, they also had a great understanding of economics. They knew centralized systems were not the right solution to process transactions safely and cost-effectively.
The most active member on the list was Adam Back. He truly wanted to be a part of the cypherpunk movement, as he believed code could create systems to change society for the greater good. Later that year, Hughes prepared the first Manifesto of the cypherpunk group.
You can view the archives of the mailing list here.
CypherPunk’s Manifesto
CypherPunks had a simple manifesto that points to only one thing- Privacy. They believe one should decide their own privacy, not the other way around by government and corporate.
They believed writing code could help match and defeat the government without any direct action. They were extremely devoted to cryptography and loved practising it.
This is the kind of thinking that could potentially change society. And the cypherpunks had no doubt it was possible. But the rate at which it was changing was disappointing. People were lagging behind government policy, and it could only be enhanced by investing in new technologies.
The Crypto Wars
The cypherpunks movement was initiated to fight against the government and protect technologies from falling into the wrong hands. In 1993, the PGP 2.0 got into trouble, as its creator was a target for the Clinton Administration. They wanted to get rid of the technology as it democratizes encryption to millions of people. And the government would no longer have the power to control private messaging.
The conflict became known as the “Crypto Wars,” and Back was a frontline soldier. The creator of PGP was Zimmerman. And when he approached a businessman to licence his software and allow users to use it for free. When he was denied that opportunity, Zimmerman started releasing the “guerilla freeware” in the form of floppy disks and message boards. Hal Finney also played a major role in helping push the project.
The government did not like the idea of software being open-source. They wanted to take critical action against Zimmerman for violating the Arms Control Export Act. In Zimmerman’s defence, he was only enacting his First Amendment rights.
To put an end to this, the Clinton Administration ordered all top companies to insert a backdoor key to control their equipment and read encrypted messages. They were of the mindset that criminals and terrorists could leverage cryptography.
The cypherpunks showed utmost support to Zimmerman and fought for what was right. They were only expressing the freedom of speech and were not violating any laws. Finally, in 1996, the US Department of Justice dropped all charges against Zimmerman. Also, companies were no longer forced to insert clipper chips.
This may sound hyperbolic, but this movement and fight against the government for security and encryption- is what helped top companies like Amazon and WhatsApp to secure messages and payments.
Circling back to DIGICASH
In part two, we saw how DigiCash came down crashing and failed to get the right funding. But it provided a great lesson to other members of the cypherpunk group. They understood the software and systems had to be decentralized. It is the only way to avoid single point failure.
In 1997, Adam announced Hashcash, an anti-spam concept that even Satoshi used in his whitepaper. Hashcash helped innovate a new way of mining monetary units like cryptocurrencies, making money more sound and fair.
However, Adam faced a major challenge with Hashcash. The system allowed users to hyperinflate the currency if they had superior computers. This not only makes it unfair for the rest of the network participants but also voids everything decentralization stands for. Satoshi also addresses this issue in his whitepaper. He introduces something called the “difficulty algorithm”, which resets the difficulty of mining every two weeks after considering the total power spent by the users.
In 1998, another cryptography enthusiast and computer engineer named Wei Dai — created an anonymous electronic cash system that inherited several elements of decentralization. While Wei’s work did include untraceable payments without third-party involvement, it was practical and could not be implemented.
Several years passed, and there was nothing new happening in the world of cryptography. Bit gold made its entrance in the same year, but it had many security concerns. In the next few years, we saw e-commerce rising and mega-corporations were strongly established on the internet. But no major advancement for another five years.
In 2004, Finney shared his reusable proof of work paper, which helped Satoshi in the path towards creating bitcoin.
The Email from Nakamoto Arrived in August 2008
Adam received an email from Satoshi Nakamoto in August 2008. He mentioned he was working on a peer-to-peer network that could allow online payments without needing a bank account or any intermediary.
Satoshis’s approach not only created the best decentralized network in bitcoin but also solved the double-spending problem. His whitepaper also highlights one-of-a-kind methods to issue new coins without a centralized entity.
Back and other cypherpunks were impressed by Satoshi’s work. They realized he solved almost every problem previous blockchains faced. Before he disappeared from the mailing list and online forum, he wrote:
“A lot of people automatically dismiss e-currency as a lost cause because of all the companies that failed since the 1990s. I hope it’s obvious it was only the centrally controlled nature of those systems that doomed them. I think this is the first time we’re trying a decentralized, non-trust based system.”
There were many improvements made to the bitcoin network over the last 10 years. But the stability and nature of decentralization of the network remained the same. Adam implemented Schnorr signatures to add more flexibility and privacy for users. Nakamoto could not use it as it was under a patent. The next major upgrade is coming in November. The Taproot upgrade will make bitcoin more efficient and private to the users.
Closing Statement
Bitcoin is the final product of cypherpunk’s vision. But it is not what started the fight for privacy and decentralization. If bitcoin becomes the ultimate store of value and people view it as teleportable digital cash, its cypherpunks movement can be considered a huge success. It may not have impacted directly, but it did play a significant role in all of this innovation.
This is the cypherpunk dream, and we are all in it together.
Our CipherPunks NFT collection honors everyone involved in the CypherPunk movement. They are our heroes, and we need to recognize them. We hope by sharing their story, more people will realize how cryptography has evolved in the last four decades.
It is never too late to celebrate our heroes. And with CipherPunks NFTs, we want you to be a part of the history and hold one of fifty characters in our collection.
Thank you for reading till the end. We hope you enjoyed it!
If you missed the previous two parts, here you go
Part 1- The Trio that set free Cryptography
Part 2- The origins of decentralization and the man behind it
