The Basics of Cryptoeconomics. Its History and Origin.

Li₿ΞʁLiøη
Coinmonks

--

If you think that the crypto space is recent and started with Bitcoin, you are missing part of its history, and to better understand its fundamentals, you need to read it.

In this article I will make a brief review of the history of crypto space, and I will leave you with material so that you can deepen your knowledge, if that is what you want.

First it is imperative to define ‘cryptoeconomics’. It is an area of ​​economic sciences that tries to solve the coordination problems of participants in digital ecosystems, through cryptographic and economic incentives. The economy was taken to the digital world, and executed in networks, mostly with blockchain technology, with cryptographic codes for its security and reliability, decentralizing the production of information, and in a Peer to Peer (P2P) manner, avoiding intermediaries.

Spoiler alert: You will see throughout the article, the historical coherence of those who formed the crypto space, in the search for privacy and sovereignty for individuals, and that it is very far from the speculative nature that the crypto industry has today, and in my opinion, it is the product of massiveness and its “hasty and thoughtless” adoption.

The Beginning

Until the mid-1970s, cryptography was mainly practiced in secret by military or spy agencies. However, that changed when two US government publications made it public, the Data Encryption Standard (DES), and then the widely used Block Cipher, a deterministic algorithm that operates on fixed-length groups of bits, called blocks.

First of all, you must understand that the current crypto industry is an evolution of the Cypherpunk movement, born in the ’80s of the last century, as a group of digital activists that focused on protecting the privacy of users, based on the use of cryptography. The term “Cypherpunk” is a combination of “cypher” and “punk”, which refers to a countercultural movement.

All started when Timothy C. May, John Gilmore and Eric Hughes they formed a small group to hold monthly meetings that were held in the San Francisco Bay (CA), at Cygnus Solutions, Gilmore’s workplace, a well-known company in the world of free software, was the primary provider and maintainer of the GNU compiler C/C++, the heart of many free software systems, including Linux.

With the advent of the internet, the struggle of these activists deepened, and the Cypherpunks became more relevant. In this group the debate focused on cryptography, technology and privacy.

The first to use this term was Jude Milhon, (1939–2003). She learned to program in 1967 in a self-taught way, after reading the ‘Teach Yourself Fortran’ guide. Internet newspapers described her as the “Holy protector of hackers”, upon his death, and later better known as St. Jude. She was detained by the police on more than one occasion, for her participation in demonstrations and marches. She was co-author of Cyberpunk Handbook:: The Real Cyberpunk Fakebook’ (First published on August 22, 1995).

The idea was to decentralize information, and avoid being victims of surveillance by governments and large companies, which could use information technology to accumulate more and more power and exercise control over citizens. As we well know today for Alphabet, Inc. behind Google, and for Meta Platforms, Inc.​​​ behind Facebook, Instagram and WhatsApp, among others, the abuse of personal data is the order of the day. We can understand that these people were visionaries.

Timothy C. May, (1951–2018) was an American political and technical writer, electronics engineer, and senior scientist at Intel, co-founder of the Cypherpunk Mailing List. Tim May published several documents that are fundamental to understanding the essence of the Cypherpunk movement:

One could consider ‘Libertaria in Cyberspace’ as the first idea, and then ‘Crypto Anarchy and Virtual Communities’ as the origin of the current Decentralized Autonomous Organization (DAO).

His partner Eric Hughes, co-founder of the Cypherpunk Mailing List, is an American mathematician and computer programmer. One of the projects for which Eric Hughes received the most recognition was the creation of the Internet’s first anonymous remailer, a service that receives and forwards emails, acting as a gateway to anonymize the sender’s address, and which he created together with Hal Finney in 1992.

Eric Hughes was the author of A Cypherpunk’s Manifesto — March 9, 1993, which begins like this: “Privacy is necessary for an open society in the electronic age. Privacy is not secrecy. A private matter is something one doesn’t want the whole world to know, but a secret matter is something one doesn’t want anybody to know. Privacy is the power to selectively reveal oneself to the world.”

John Gilmore (born 1955) was the other co-founder ofCypherpunk Mailing List and is one of the founders of ‘Electronic Frontier Foundation’ y from Cygnus Solutions.

The Present

Stuart Haber and W. Scott Stornetta had a vision in 1991 of what we know today as blockchain. The first job consisted of a cryptographically protected blockchain where no one could tamper with the timestamps on documents. Then, in 1992, they updated their system to incorporate efficiency-improving Merkle trees, allowing the collection of more documents in a single block.

The current crypto economy is based on its vast majority of uses, on blockchain technology, since there are alternative cases such as Hedera Hashgraph that, although it is a distributed ledger technology, unlike blockchains, hashgraphs do not group data into blocks, nor do they use miners to validate transactions, but individual nodes in the network broadcast the transactions, creating directed acyclic graphs that temporally sequence the transactions.

In a simple definition, the blockchain is a structure of blocks that records information linked with hashes of codes, in an ordered and immutable way, in a distributed registry throughout the network. It is an on-chain ledger.

One of the major players that ended up being critical to Bitcoin was Hal Finney, which he published in 2004 RPOW — Reusable Proofs of Work, which was a review of HashCash, a product by Adam Back. Previously, in 1993, he had published a study on ‘Detecting Double Spend’ and another on ‘Digital Cash and Privacy’.

Until the advent of Bitcoin, Finney served on various crypto mailing lists and was one of the most influential people in the Cypherpunk movement.

In 2007, the first step towards the creation of Bitcoin was taken, thanks to the work of a person (or group of people) with the pseudonym of Satoshi Nakamoto, who started (or started) writing the Bitcoin Code.

Nakamoto had a very clear intention in mind, he wanted to create an alternative to the traditional financial world, facilitating transactions that could not be manipulated, and eliminating intermediaries. This author created his design for open source and decentralized participation, and it is believed that he preserved his identity so as not to be a point of vulnerability for network attack.

It was in 2008 that the history of the blockchain began to gain relevance, with the publication by Satoshi Nakamoto of Bitcoin: A Peer-to-Peer Electronic Cash System on October 31, 2008.

You can read the emails that Nakamoto shared with the developer community. The email announcing Bitcoin was sent to the mailing list on 2008–10–31 18:10:00 UTC, Bitcoin P2P e-cash paper: “I’ve been working on a new electronic cash system that’s fully peer-to-peer, with no trusted third party. The paper is available at: http://www.bitcoin.org/bitcoin.pdf

On January 3, 2009, the first block ofBitcoin, the genesis block and its hash is: 000000000019d6689c085ae165831e934ff763ae46a2a6c172b3f1b60a8ce26f

The first Bitcoin miner was Hal Finney who downloaded the blockchain. The other early Bitcoin enthusiasts were Wei Dai, Nick Szabo and Gavin Andresen.

A curious aspect about the Bitcoin genesis block is that in the block code Satoshi Nakamoto left a message: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks“, in reference to Chancellor Alistair Darling on brink of second bailout for banks.

Final Thoughts

Now that you know a little more about the history, you can see the coherence of the crypto space over time, from its beginnings in the 1980s, beginning with cryptography, as a privacy tool in people’s communications, driven by the Cypherpunk movement, and then incorporating this science into blockchain technology, to transmit value, and thus be able to develop the P2P digital economy.

The message that Satoshi Nakamoto left in block 0 makes clear the intentions of why he created Bitcoin.

The rest of the story is known, you are living it.

Bonus

I present a list of the most outstanding documents of those who were forging the foundations of the crypto-economy:

Philip R. Zimmermann: PGP Encryption

David Chaum: DigiCash. Literature

Nick Szabo: Bit Gold — December 29, 2005

Wei Dai: b-money — November 1998

Adam Back: Hashcash — A Denial of Service Counter-Measure — August 1, 2002

Julian Assange: WikiLeaks ; State and Terrorist Conspiracies & Conspiracy as Governance — November 10,2006 ; Cypherpunks: Freedom and the Future of the Internet — 2012

If you want to go deeper, I present an extensive Literature that you can read to understand crypto philosophy.

This article of my authorship was originally published in AdaPulse.

liberlion.com

--

--

Li₿ΞʁLiøη
Coinmonks

Researcher • Ϛʁyptø_Writer • Content Creator | 𝕏 @liberlion17 | nostr liberlion@iris.to | website: liberlion.com