The origins of decentralization and the man behind it
Cipher Punks is a collection of 500 hand drawn NFTs that recognizes all uncelebrated heroes who led the CypherPunk movement. We bring you this story to help you understand how everything we are witnessing in the crypto space came into existence. In the first part, we have seen three cryptographers who achieved the impossible by democratizing cryptography and publishing the first-ever paper on the public key.
Martin, Diffie, and Ralph laid the foundation for others to explore the field of cryptography and anonymous systems. In Part two, we will be seeing the continued work of the trio and learn more about David Chaum, the creator of a mix network, untraceable systems, and Digicash.
He played a major role in the CypherPunk movement and designed the origins of a blockchain. David’s technologies helped Satoshi invent the ultimate cryptocurrency: Bitcoin. Even outside of the crypto space, his ideas reflect in many real-world applications that are based on payments and anonymous communication systems.
David found something in his research that others weren’t even looking for. And that is decentralization. What made him explore cryptography? How did he come up with so many technologies? We will be looking for these answers today…
David Chaum, the pioneer in cryptography who created the first blockchain
David is one of the most important personalities in the CypherPunk movement and as a whole in the fight for privacy. He first learned about cryptography when “New Directions in Cryptography” was published. At that time, he was doing his Ph.D. in Computer Science from the University of Berkeley, California. Along with David, there were many academics who started their journey in the field of Cryptography.
To give you an idea about the landscape of things, it was when Apple had its record-breaking IPO of $1.3 billion and Starwars IV just came out. Almost every wealthy, tech enthusiast had access to a computer. Chaum was also from an affluent family, so spent most of their adolescent years staring at a computer screen. As he went deeper into every nuance of cryptography, David noticed Metadata was often overlooked by many researchers.
The metadata involved anything from the time of message being sent to who is sending the message. If this data is out, he believes the messages are not totally secure. So after his graduation, he went on to write his first major paper: “Untraceable Electronic Mail, Return Addresses, and Digital Signatures”.
The protocol he mentions leverages the nodes in the public key architecture to verify the legitimacy of the messages. The name of the protocol is mix network. As the name suggests, the messages are mixed or batched before sending to the other party. It is like juggling many balls at the same time and releasing one without anyone knowing. These mixed networks not only make communication systems more secure, but they also make them untraceable.
Now if we compare this mix network with any cryptocurrency protocol, we will see a lot of similarities. First of all, both are decentralized in nature. It is because each participant in the network is an authority. With this knowledge, Tor, an open-source software browser, was created.
Untraceable Payments using Blind Signatures
David knew the fundamentals of a mix network can be applied to other areas of the tech world. He understood the financial world needed this technology the most. Looking back now he was 100% correct. David reflected on this topic for quite some time and realized that — if one could track my payments, they could literally know everything about me — from lifestyle to buying choices and political opinions.
He believed there is a huge risk in the digital world when it comes to financial transactions. He wanted a payment that is secure and ownership of data is not handed out to a central entity. So in 1980, he patented a digital cash system powered by cryptography to secure the metadata in the best-known way. To put his paper in simple words, he aimed to create a protocol that proves the authenticity of transactions made without revealing who that person actually is.
From a technical perspective, he used an external system to link the ownership data and only the owner can access the stored data through cryptography. This was possible because of Blind Signatures. He laid out three main properties for his new kind of cryptography:
- Inability of third parties to determine payee, time or amount of payments made by an individual.
- Ability of individuals to provide proof of payment, or to determine the identity of the payee under exceptional circumstances.
- Ability to stop use of payments media reported stolen.
The problem statement he used to illustrate this whole untraceability factor is carbon paper lined envelopes. He designed the example in such a way that — if someone signs on the outside copy, it will leave another copy within the envelope. Here is the statement he took for Blind signatures:
He warned everyone thirty years ago
Being the pioneer in privacy protected technologies, David understood what’s actually going on in this digital world. He knew big companies were sharing data and secretly conducting surveillance, monitoring lifestyles and activities. He warned them about how computerization could rob people of their privacy. He points that everyone is in control of some or the other networks, creating more single-point failures.
He believed decentralization is the only thing that could private data in this ever-expanding interconnected world. We saw many instances where metadata was breached and millions of people’s data were exposed. At that time, crypto wars between cryptographers and governments was a real thing. No one was allowed to disclose their work publicly even after Martin and Diffie published their paper. This is when David decided to build the first-ever digital cash system on a blockchain.
The business failed, but spawned a whole new dream
The first digital money system Chaum created was eCash. It used blind signature scheme to transfer the funds anonymously. He wanted the foundation of financial transactions to be the same but with a slight variation- digital forms. eCash was the flagship partner of Digicash. David worked for over a decade before creating his company Digicash in 1990. He had a super talented research group and top cryptographers like Eric Hughes and Nick Szabo wanted to work on the Digicash project.
Everyone in the technical team believed in David’s vision and saw this technology as something that could revolutionize payments once and for all. In a way, it did help others get inspiration for their blockchain networks. After relentlessly working on Digicash for four years, the first successful payments were tested and banks and top software companies were interested to make financial deals with David.
The biggest banks in the world offered millions of dollars to integrate the technology, but David did not accept any offers. Later, the great Bill Gates promised a 100 million paycheck to incorporate eCash into Microsoft. David wanted to do a different deal where he would get two dollars for every version of Windows 95. The deal was not entertained by the other party.
Even after being recognized as one of the best technologies in the decade, Digicash was not able to close any deals. To fast track the progress and bring in new voices, they appointed a new CEO and other industry professionals. That also did not help. The banks that integrated the tech were not able to get enough consumers to accept this new form of money. In the end, both Digicash and eCash failed.
The series of failed companies did not stop Chaum to continue his research and build better products based on decentralization. By the end of the decade, he was known as one of the best cryptographers to ever exist. His work inspired many people worldwide. It was not just cryptographers. Hackers and activities also actively participated. This brings us to the famous mailing list and the beginning of the 90s CypherPunk movement.
And Chaum himself? He went back to Berkeley, teaching graduate students and publishing papers on digital elections and reputation systems. He may not have any breakthrough discoveries like Satoshi, but his ideas served as the groundwork for a technology that could potentially impact millions of lives and change the goddamn world.
In our next part, we will discuss the origins of CypherPunk, the famous emailing list, technologies born out of the movement, and most importantly- the original designs of bitcoin. Stay tuned for part three!
If you have missed the previous part one, you can check it out here.
