receive a public key—a
unique jumble of letters and
numbers that serves as a sort
of address that could be
distributed
freely—and
a
corresponding private key,
which is supposed to be
known only by the user. The
two
keys
are
related,
mathematically, in a way that
ensures that only the user—
let’s call her Alice, as
cryptographers often did—
with her private key, can
unlock messages sent to her
public key, and only she can
sign
off
on
messages
associated with her public
key. The unique relationship
between each public and
private key was determined
by
complicated
math
equations
that
were
constructed so cleverly that
no one with a particular
public key would ever be able
to work backward to figure
out the corresponding private
key—not even the most
powerful supercomputer. This
whole setup would later play
a central role in the Bitcoin
software.
Hal was introduced to the
potential
of
public-key
cryptography in 1991 by the
pathbreaking
cryptographer
David Chaum, who had been
experimenting with ways to
use public-key cryptography
to protect individual privacy.
“It seemed so obvious to
me,” Hal told the other
Cypherpunks of his first
encounter
with
Chaum’s
writing. “Here we are faced
with the problems of loss of
privacy,
creeping
computerization,
massive
databases, more centralization
—and
Chaum
offers
a
completely different direction
to go in, one which puts
power into the hands of
individuals
rather
than
governments
and
corporations.”
As usual, when Hal found
something exciting, he didn’t
just passively read up on it.
On nights and weekends,
after his job as a software
developer, he began helping
with a volunteer project,
referred to as Pretty Good
Privacy, or PGP, which
allowed people to send each
other messages that could be
encrypted using public-key
cryptography. The founder of
the project, Phil Zimmerman,
was an antinuclear activist
who wanted to give dissidents
a
way
to
communicate
outside
the
purview
of
governments. Before long,
Zimmerman brought Hal on
as the first employee at PGP.
Idealistic projects like
PGP generally had a small
audience. But the potential
import of the technology
became
apparent
when
federal prosecutors launched
a criminal investigation into
PGP and Zimmerman. The
government
categorized
encryption technology, such
as PGP, as weapon-grade
munitions,
and
this
designation made it illegal to
export. While the case was
eventually dropped, Hal had
to lie low with his own
involvement in PGP for years
and could never take credit
for some of his important
contributions to the project.
THE
EXTROPIANS
AND
Cypherpunks were working
on
several
different
experiments that could help
empower individuals against
traditional
sources
of
authority. But money was,
from the beginning, at the
center of their efforts to
reimagine the future.
Money is to any market
economy what water, fire, or
blood is to the human
ecosystem—a basic substance
needed for everything else to
work.
For
programmers,
existing currencies, which
were
valid
only
within
particular national borders
and subject to technologically
incompetent banks, seemed
unnecessarily
constrained.
The science fiction that Hal
and others had grown up on
almost always featured some
kind of universal money that
could span galaxies—in Star
Wars it was the galactic credit
standard; in the Night’s Dawn
trilogy it was Jovian credit.
Beyond
these
more
fanciful
ambitions,
the
existing financial system was
viewed by the Cypherpunks
as one of the biggest threats
to individual privacy. Few
types of information reveal as
much about a person like
Alice, the cryptographers’
favorite, as her financial
transactions. If snoopers get
access to her credit card
statements they can follow
her movements over the
course of a day. It’s no
accident that financial records
are one of the primary ways
that fugitives are tracked
down.
Eric
Hughes’s
Cypherpunk Manifesto had
dwelled on this problem at
great length: “When my
identity is revealed by the
underlying mechanism of the
transaction,
I
have
no
privacy.
I
cannot
here
selectively reveal myself; I
must always reveal myself,”
Hughes wrote.
“Privacy in an open
society requires anonymous
transaction
systems,”
he
added.
Cold, hard cash had long
provided an anonymous way
of making payments, but this
cash did not make the
transition over to the digital
realm. As soon as money
became digital, some third
party, such as a bank, was
always involved and therefore
able to trace the transaction.
What Hal, Chaum, and the
Cypherpunks wanted was a
cash for the digital age that
could
be
secure
and
uncounterfeitable
without
sacrificing the privacy of its
users. The same year as
Hughes’s
manifesto,
Hal
wrote an e-mail to the group
imagining a kind of digital
cash for which “no records
are kept of where I spend my
money. All the bank knows is
how much I have withdrawn
each month.”
A month later, Hal even
came up with a cheeky
moniker for it: “I thought of a
new name today for digital
cash: CRASH, taken from
CRypto cASH.”
Chaum
himself
had
already come up with his own
version of this by the time the
Cypherpunks got interested.
Working out of an institute in
Amsterdam, he had created
DigiCash, an online money
that could be spent anywhere
in the world without requiring
users to hand over any
personal information. The
system harnessed public-key
cryptography to allow for
what Chaum called blind
digital
signatures,
which
allowed people to sign off on
transactions
without
providing
any
identifying
information.
When
Mark
Twain Bank in the United