Planting Bitcoin  Part Three: Soil

Dan Held is the founder of crypto portfolio service Picks & Shovels. He previously founded data service ZeroBlock, which sold to Blockchain, and served as VP of product at ChangeTip. 

This exclusive opinion piece is part of CoinDesk’s “Bitcoin at 10: The Satoshi White Paper” series.

In my last article, “Seasons,” I covered the precise moment in which Satoshi planted Bitcoin, the 2008 Financial Crisis. In this article, I cover the Cypherpunks or the “Soil” in which he planted the Bitcoin seed giving it the best chance for success.

 (I’ve paired this song to “Soil” because I think it fits the feel of the piece and adds additional depth. If you enjoy listening to this, please follow my playlist on Spotify.)

Cypherpunks

Sending the Bitcoin white paper to the cryptography mailing list on October 31, 2008 was the obvious choice.

This was the right group to gather feedback from, the right channel to engage with. The list was predominately populated by the Cypherpunks* who were activists advocating widespread use of strong cryptography, as a route to social and political change.

*”Cypherpunks” is a play on the word ‘cipher’ or ‘cypher’, for encryption; and cyberpunk a genre of sci-fi.

The group was originally comprised of Eric Hughes, Tim May and John Gilmore. At first, the meetings were in-person meetings in the San Francisco Bay Area, but they decided to expand the group via the cryptographer mailing list which would allow them to reach other Cypherpunks.

The mailing list was a place to exchange ideas freely through the use of encryption methods, such as PGP, to ensure complete privacy. The basic ideas behind this movement can be found in the Cypherpunk manifesto written by Eric Hughes in 1993. The key principle which underpins the manifesto is the importance of privacy and finality in transactions — PetriB

“Therefore, privacy in an open society requires anonymous transaction systems. Until now, cash has been the primary such system.” — A Cypherpunk’s Manifesto

We want the ability to ensure that others cannot use the information in the history of our transactions against us. For example: a purchase indicating that someone is wealthy, an embarrassing purchase, or one that would make you subject to spam or harassment. We do not want our financial purchase to haunt us further down the road. We want an endpoint beyond which we do not have to worry about further contingencies.

In the world of payments, this is closely related to the concept of “finality” — ideally we want to be able to state with certainty that at some point the payment has been made, the debt has been cleared, and the funds are secure. But recent developments have increased the ability for more powerful parties to clawback funds (via trusted third parties, legal funds, etc).

We hope that existing laws would provide protection against these difficulties. However, we can remove that moral hazard by not having to trust third parties or more powerful adversaries which can revert transactions solely based on their capabilities. This is what the Cypherpunks were fighting for with cryptography.

They were the “Men of words,” or anti-establishment intellectuals that laid the foundation for individuals like Satoshi to come along.

“The words of anti-establishment intellectuals sow the seeds for revolution. They present ideas and sometimes discredit the establishment, paving the way for a charismatic leader to package their thinking into a movement.” — Tony Sheng

Elliot Alderson, the “Cypherpunk” in the fictional show “Mr. Robot.” He joins a group that aims to destroy all debt records by encrypting the financial data of the largest conglomerate in the world, E Corp.

The first attempts at making an anonymous transacting system were made by Cypherpunks on that cryptographer mailing list, including:

Adam Back, the inventor of hashcash, the proof-of-work (PoW) system used by several anti-spam systems. A similar PoW system is used in Bitcoin
Nick Szabo, designed a mechanism for a decentralized digital currency he called “bit gold.” Bit gold was never implemented, but has been called “a direct precursor to the Bitcoin architecture”
Wei Dai, who published “b-money”, an “anonymous, distributed electronic cash system”
Hal Finny, who created the first reusable proof of work system before Bitcoin (And in January 2009 he became Bitcoin network’s first transaction recipient). He was also a developer of the secure communication method known as Pretty Good Privacy (PGP)
David Chaum, founded DigiCash (1989) as a form of centralized “electronic money” that deployed the same kinds of cryptographic protocols — public key cryptography — that support the nature of Bitcoin transactions. It is often called “Chaumian eCash.”

Satoshi cites many of these Cypherpunks in the Bitcoin whitepaper and references their influence on Bitcoin’s development in public statements made post code launch.

“Bitcoin is an implementation of Wei Dai’s b-money proposal……

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