Cryptography & Cypherpunks: What are those?

The importance of privacy, anonymous transactions, cryptographic protection – all these ideas have subsequently been implemented in one form or another in cryptocurrencies.

When and How did Cryptography Originate and Develop?

Cryptography as a text protection technique arose along with writing – secret writing methods were known in the ancient civilizations of India, Mesopotamia, and Egypt.

In the first period of the development of cryptography (approximately from the 3rd millennium BC to the 9th century), monoalphabetic ciphers were mainly used, the key principle of which is the replacement of the alphabet of the source text with another alphabet by replacing letters with other characters or letters. Monoalphabetic ciphers were known in Judea, Sparta, Ancient Greece, Ancient Rome.

In the second period (from the 9th century in the Middle East and from the 15th century in Europe to the beginning of the 20th century), polyalphabetic ciphers (a set of monoalphabetic ciphers used to encrypt the next plaintext character according to a certain rule) became widespread.

In the third period – from the beginning to the middle of the 20th century – the use of polyalphabetic ciphers continued. At the same time, a new communication technology, radio communication, arose and developed. It allowed instant transmission of large amounts of information, but was not protected.

The problem of strong encryption became urgent during the First World War and became especially acute during the Second World War, since small-sized transmitters and receivers became widespread, allowing belligerents to easily intercept enemy communications. Leading world powers actively introduced electromechanical encryption devices and competed with each other in the development of hacking methods.

The fourth period – from the middle to the 70s of the XX century – was marked by the transition to mathematical cryptography. By that time, such branches of mathematics as mathematical statistics, probability theory, number theory and general algebra were finally formed, the foundations of cybernetics and the theory of algorithms were laid.

In the early 1970s, James Ellis of the UK Government Communications Center put forward the concept of public-key cryptography. In this system, a public key is used to encrypt a message and verify an electronic signature, which is transmitted over an insecure channel available for observation. His colleague, British mathematician Clifford Cox, developed the mathematical basis for this model.

Neither the British Government Communications Center nor the US NSA adopted public-key cryptography because there was no technology to do so. This required a computer communication network (Internet), but in the 1970s such systems had not yet been developed.

In the 1980s, computer scientists, and in the 1990s, with the spread of the Internet, even ordinary users were faced with the problem of protecting data in an open environment. Meanwhile, small groups of hackers, mathematicians, and cryptographers began to work on bringing public-key cryptography to life. One of them was an American cryptographer, Dr. David Chaum, who is sometimes called the godfather of cypherpunks.

How Did the Cypherpunk Movement Start?

As early as 1982, Chaum introduced the blind digital signature method, a public key encryption model. The development made it possible to create a database of people who could remain anonymous, while guaranteeing the accuracy of the information they reported about themselves. Chaum dreamed of digital voting, the process of which could be verified without revealing the identity of the voter, but primarily of digital cash.

Chaum’s ideas inspired a group of cryptographers, hackers and activists. It was they who became known as cypherpunks – members of the movement advocating computer technology as a means of destroying state power and centralized control systems.

One of the ideologists of the movement was an American cryptographer, former leading researcher at Intel Timothy May. In 1987, May met American economist, entrepreneur, and futurist Philip Saline, who founded the American Information Exchange (AMiX), an online data trading platform.

May, on the other hand, did not like the idea of an online market where people could sell each other little bits of information for low prices and across borders. He wanted to make a global system that would let anyone send and receive any kind of information anonymously and look like a corporate information system.

May later turned this idea into the BlackNet system, which needed a digital currency that wasn’t backed by the government and the ability to make payments with it that couldn’t be tracked. In 1985, he read “Security without Identity: The Transactional System That Will Make Big Brother an Antiquated Idea” by David Chaum. In the article, Chaum talked about a system that uses cryptography to hide who the buyer is. May heard about this idea, and it made him want to learn more about public-key cryptographic security.

Soon, he realized that this kind of cryptography and network computing could “destroy the structures of social power.”

May wrote The Crypto-Anarchist Manifesto in September 1988. It was based on Karl Marx’s Communist Manifesto. It said, “The ghost of crypto-anarchy haunts the modern world.” With the help of cryptography, digital currencies, and other decentralized tools, the manifesto says that people will be able to run their lives without the government.

In 1992, May, who was one of the founders of the Electronic Frontier Foundation, along with John Gilmour, a mathematician at the University of California at Berkeley, and Eric Hughes, also a mathematician, invited 20 close friends to a casual meeting. During the meeting, they talked about the most important cryptography and programming issues at the time. These kinds of meetings started happening regularly, laying the groundwork for a whole movement. A mailing list was made so that people who share the interests and basic values of the people who started the group could get in touch with each other and work together. Soon, there were hundreds of people on the mailing list. They tested ciphers, shared ideas, and talked about new developments.

How did the cypherpunk movement influence the emergence of cryptocurrencies?

David Chaum began DigiCash in Amsterdam in 1989. It was an expert in digital money and payment systems, and the eCash digital money system with the CyberBucks currency was its best-known product. Chaum’s blind digital signature was used by eCash. Even though some banks tested the system and Microsoft is said to have talked about putting eCash into Windows 95, the business did not do well.

In 1997, British cryptographer Adam Back created Hashcash, an anti-spam mechanism that required a certain amount of computing power to send emails. This made spamming economically unprofitable.

A year later, computer scientist Wei Dai published a plan for b-money, another digital payment system. The person who made the system came up with two ideas. The first was to create a protocol where each participant maintains a copy of the database with information about how much funds the user has. The second idea was based on the first one, but it was changed so that not every member of the network kept a copy of the registry. Instead, new concepts were introduced: regular users and servers. In this case, only servers that are network nodes kept copies of the registry. Participants in the network made sure to be honest by putting money into a special account that was used to give rewards or fines if there was evidence of dishonesty.

It was the first concept that was subsequently adopted by the creator of bitcoin Satoshi Nakamoto, while the second turned out to be the closest to what is known today as Proof-of-Stake.