States began experimenting
with DigiCash, Hal signed up
for an account.
But Chaum’s effort would
rub Hal and others the wrong
way.
With
DigiCash,
a
central organization, namely
Chaum’s company, needed to
confirm
every
digital
signature. This meant that a
certain degree of trust needed
to be placed in that central
organization not to tinker
with balances or go out of
business.
Indeed,
when
Chaum’s
company
went
bankrupt in 1998, DigiCash
went down with it. These
concerns pushed Hal and
others to work toward a
digital cash that wouldn’t rely
on any central institution. The
problem, of course, was that
someone needed to check that
people
weren’t
simply
copying and pasting their
digital money and spending it
twice.
Some
of
the
Cypherpunks simply gave up
on the project, but Hal wasn’t
one to fold so easily.
Ironically for a person so
eager to create new money,
Hal’s
interest
wasn’t
primarily
financial.
The
programs he was writing, like
PGP,
were
explicitly
designed to be available to
anyone, free. His political
distrust
of
government,
meanwhile, was not driven by
selfish
resentment
about
paying taxes. During the
1990s Hal would calculate
the maximum bill for his tax
bracket and send in a check
for that amount, so as to
avoid the hassle of actually
filling out a return. He bought
his modest home on the
outskirts of Santa Barbara
and stuck with it over the
years. He didn’t seem to mind
that he had to work out of his
living room or that the blue
recliners in front of his desk
were wearing thin. Instead of
being motivated by self-
interest, his work seemed
driven by an intellectual
curiosity that bubbled over in
each e-mail he wrote, and by
his sense of what he thought
other people deserved.
“The work we are doing
here, broadly speaking, is
dedicated to this goal of
making Big Brother obsolete.
It’s important work,” Hal
would write to his fellow
travelers. “If things work out
well, we may be able to look
back and see that it was the
most important work we have
ever done.”
CHAPTER 2
1997
The notion of creating a new
kind of money would seem,
to many, a rather odd and
even pointless endeavor. To
most modern people, money
is always and everywhere
bills and coins issued by
countries. The right to mint
money is one of the defining
powers of a nation, even one
as small as the Vatican City
or Micronesia.
But that is actually a
relatively recent state of
affairs. Until the Civil War, a
majority of the money in
circulation in the United
States was issued by private
banks,
creating
a
crazy
patchwork of competing bills
that could become worth
nothing if the issuing bank
went down. Many countries
at
that
time
relied
on
circulating coins from other
countries.
This was the continuation
of a much longer state of
affairs in which humans
engaged in a seemingly
ceaseless effort to find better
forms of money, trying out
gold, shells, stone disks, and
mulberry bark along the way.
The search for a better
form of money has always
been about finding a more
trustworthy and uniform way
of valuing the things around
us—a single metric that
allows a reliable comparison
between the value of a block
of wood, an hour of carpentry
work, and a painting of a
forest. As sociologist Nigel
Dodd put it, good money is
“able to convert qualitative
differences between things
into quantitative differences
that enable them to be
exchanged.”
The money imagined by
the Cypherpunks looked to
take
the
standardizing
character of money to its
logical extreme, allowing for
a universal money that could
be spent anywhere, unlike the
constrained
national
currencies we currently carry
around and exchange at each
border.
In their efforts to design a
new
currency,
the
Cypherpunks were mindful of
the characteristics usually
found in successful coinage.
Good money has generally
been durable (imagine a
dollar bill printed on tissue
paper), portable (imagine a
quarter that weighed twenty
pounds), divisible (imagine if
we had only hundred-dollar
bills and no coins), uniform
(imagine if all dollar bills
looked different), and scarce
(imagine bills that could be
copied by anyone).
But beyond all these
qualities,
money
always
required something much less
tangible and that was the faith
of the people using it. If a
farmer is going to accept a
dollar bill for his hard-earned
crops, he has to believe that
the dollar, even if it is only a
green piece of paper, will be
worth
something
in
the
future. The essential quality
of successful money, through
time, was not who issued it—
or even how portable or
durable it was—but rather the
number of people willing to
use it.
In the twentieth century,
the dollar served as the global
currency in no small part
because most people in the
world
believed
that
the
United States and its financial
system had a better chance of
surviving
than
almost
anything else. That explains
why people sold their local
currency to keep their savings
in dollars.
Money’s relationship to
faith has long turned the
individuals who are able to
create and protect money into
quasi-religious figures. The
word money comes from the
Roman god Juno Moneta, in
whose temple coins were
minted. In the United States,
the governors of the central
bank, the Federal Reserve,
who
are
tasked
with
overseeing the money supply,
are treated like oracles of
sorts; their pronouncements
are scrutinized like the goat
entrails of olden days. Fed
officials are endowed with a
level
of
power
and
independence given to almost
no other government leaders,
and the task of protecting the
nation’s currency is entrusted
to a specially created agency,
the Secret Service, that was
only later given the additional
responsibility of protecting