The history of $BTC (-0,06 %) does not begin with Satoshi Nakamoto's Bitcoin whitepaper from 2008. Bitcoin did not just fall from the sky. It is the result of over 20 years of research, failed attempts and the tireless struggle of a group of activists who called themselves "cypherpunks". Without them, Bitcoin would not exist today.
In this article, we take a look at who the Cypherpunks were, what they fought for and how their work ultimately paved the way for Bitcoin.
The cypherpunks - activists for digital privacy
In the early 1990s, more and more people realized that the Internet would fundamentally change the world. E-mails, online communication, digital commerce - all this was just around the corner. But some people also realized that the Internet could become a huge surveillance tool. Every email, every message, every transaction could potentially be read by governments or companies. What sounds dystopian almost became reality.
This is exactly where the Cypherpunks come in.
In 1992, three people founded a mailing list that became the nucleus of an entire movement: Eric Hughes (a mathematician from Berkeley), Timothy C. May (a former physicist and engineer at Intel) and John Gilmore (co-founder of the Electronic Frontier Foundation)
Incidentally, the name "Cypherpunk" was coined by Jude Milhon - a play on words from "cipher" (encryption) and "cyberpunk" (the science fiction genre). On this mailing list, mathematicians, programmers, cryptographers and activists discussed how cryptography could be used to protect people's privacy in the digital age.
These weren't hackers in basements with aluminum hats. These were highly intelligent people from universities and tech companies who had recognized a fundamental problem that is still relevant today.
The two manifestos
The cypherpunks wrote down their convictions in two manifestos that are still absolutely worth reading today.
Timothy C. May wrote the "Crypto Anarchist Manifesto" (https://nakamotoinstitute.org/library/crypto-anarchist-manifesto/). In it, he described a future in which cryptography enables people to trade and communicate with each other anonymously - free from state surveillance. At a time when the internet was still in its infancy, May virtually predicted what we are experiencing today: digital communication, digital commerce and the fight for privacy.
In 1993, Eric Hughes followed with "A Cypherpunk's Manifesto" (https://nakamotoinstitute.org/library/cypherpunk-manifesto/). In it, Hughes formulated the core conviction of the movement, which can be summarized as follows: "Privacy is not a luxury, but a fundamental right. And cryptography is the tool to enforce this right in the digital world."
And then the cypherpunks' most famous sentence: "Cypherpunks write code."
Don't talk, don't protest - write code. And that's exactly what they did.
The Crypto Wars - the encryption war
The cypherpunks not only had to develop software - they also had to defend it against their own government.
In the US, strong encryption was officially considered a weapon in the 1990s. The US government had placed encryption software under the same export restrictions as missiles and tanks. Strong cryptography was not allowed to be exported abroad because the government feared that hostile states and criminals could use it to hide their communications from the NSA.
This led to one of the most absurd conflicts in tech history:
Phil Zimmermann and PGP
In 1991, programmer Phil Zimmermann developed encryption software called PGP - "Pretty Good Privacy". PGP made it possible for the first time for normal people to encrypt their emails in such a way that nobody could read them - not even the NSA. Zimmermann published PGP free of charge on the Internet. However, this meant that the software was also available outside the USA.
The result? The US government initiated three years of criminal proceedings against Zimmermann - for the illegal export of weapons. Zimmermann had not exported a missile, but mathematics.
The Cypherpunks reacted in their own way:
Zimmermann printed the complete PGP source code in a book and published it. This is because books are considered protected expression of opinion in the USA and are not subject to Exportbeschränkungen🤷♂️.
Code on a floppy disk? -> weapon!
The same code in a book? -> Freedom of expression!
The Clipper Chip - the NSA's back door
At the same time, the NSA tried to build a backdoor into every encryption system with the so-called "Clipper Chip" - a special chip that was to be built into telephones and computers. The communication would have been encrypted, but the government would have had a duplicate key to read everything at any time.
The resistance to this was enormous. Cypherpunks, civil rights organizations, tech companies - everyone was against it. And then came the final blow: in 1994, cryptographer Matt Blaze discovered a fundamental security flaw in the Clipper Chip and published it (https://www.mattblaze.org/papers/eesproto.pdf). The project was politically and technically finished.
The cypherpunks won
The final victory came in the court case "Bernstein v. United States" (https://en.wikipedia.org/wiki/Bernstein_v._United_States). In 1999, a US appeals court ruled that source code falls under the protection of freedom of speech. As a result, the export restrictions on encryption were massively relaxed.
And now comes the point that puts it all into perspective: without the victory of the cypherpunks in the Crypto Wars, there would be no secure online banking, no encrypted messengers, no HTTPS in browsers - and no Bitcoin either. The cypherpunks fought for the cryptographic foundations on which our entire digital infrastructure is built.
The failed attempts - digital money before Bitcoin
The cypherpunks knew right from the start that privacy is also crucial when it comes to money. That's why there were several attempts to create digital cash from the 1980s onwards. Every single one of them failed - but each one contributed a piece of the puzzle that Satoshi Nakamoto was later able to put together.
David Chaum - DigiCash/eCash (1982-1998)
David Chaum was the pioneer. As early as 1982, he published the concept of "blind signatures" - a cryptographic method with which digital payments can be made anonymously. In 1989, he founded the company DigiCash and launched the "eCash" system on the market with a number of banks in the mid-1990s. It was the first real digital cash.
But DigiCash had a fundamental problem: it was centralized. DigiCash was the central server through which all transactions were processed. When the company filed for bankruptcy in 1998, the attempt had finally failed.
Lesson learned: Centralization is a single point of failure.
Adam Back - Hashcash (1997)
In 1997 Adam Back developed a system called "Hashcash" (http://www.hashcash.org/papers/). Originally it was not intended as money, but as spam protection for e-mails.
The idea: in order to send an e-mail, the computer first has to solve a small arithmetic problem - a "proof of work". No problem for a single e-mail, but for a spammer who wants to send millions of e-mails, it becomes priceless.
Sound familiar? Exactly - that's the basic principle that Bitcoin uses for mining today.
Wei Dai - b-money (1998)
In the same year, Wei Dai published his proposal for "b-money" (http://www.weidai.com/bmoney.txt) - a concept for decentralized digital money in which money is generated by proof of work and transferred via a network with cryptographic signatures. You might think that sounds a bit like Bitcoin, right?
b-money was never implemented - it remained a theoretical concept. But it was so influential that it is the very first reference in the Bitcoin whitepaper. Satoshi even wrote Wei Dai an email explaining that Adam Back had brought his work to his attention. He wrote: "I was very interested to read your b-money page. I am preparing a paper that expands your ideas into a complete, working system." (https://gwern.net/doc/bitcoin/2008-nakamoto)
Nick Szabo - Bit Gold (1998-2005)
Nick Szabo - a computer scientist and cryptographer who also invented the concept of "smart contracts" - developed the idea of "Bit Gold" back in 1998 and first described the concept in full in 2005 (https://nakamotoinstitute.org/library/bit-gold/). Of all its predecessors, Bit Gold came closest to Bitcoin. Szabo's idea: digital units of value are generated through proof of work, provided with a time stamp and linked together in a kind of chain. At its core, this is exactly what Bitcoin does.
However, Bit Gold had an unresolved problem: it could not solve the so-called double-spending problem without a trusted third party. Furthermore, it was never implemented as a functioning system.
Hal Finney - RPOW (2004)
Hal Finney was a longtime member of the Cypherpunk mailing list and in 2004 built the first system that made proof-of-work tokens reusable: RPOW - "Reusable Proofs of Work" (https://nakamotoinstitute.org/finney/rpow/index.html). This made it possible to actually send hashcash-like tokens back and forth as a kind of digital money.
However, RPOW was dependent on a central server, which made it vulnerable to attack. But Finney had proven that the concept basically worked.
And here we come full circle: Hal Finney was not only a cypherpunk and RPOW inventor - he was also the recipient of the very first Bitcoin transaction. On January 12, 2009, Satoshi Nakamoto sent 10 BTC to Hal Finney in block 170. Shortly before this, Finney had sent the now legendary tweet: "Running bitcoin" (halfin auf X: „Running bitcoin“ / X). He was the first person besides Satoshi to run the Bitcoin software.
Satoshi puts the pieces of the puzzle together
On October 31, 2008, a still unknown person or group under the pseudonym "Satoshi Nakamoto" published the Bitcoin whitepaper on the cryptography mailing list (https://www.metzdowd.com/pipermail/cryptography/2008-October/014810.html).
The whitepaper itself (https://bitcoin.org/bitcoin.pdf) directly quotes the work of the Cypherpunks: b-money as reference no. 1 and Hashcash as reference no. 6. Satoshi took the pieces of the puzzle that had been developed over two decades by the Cypherpunks and put them together to form a functioning system:
- From David Chaum: The idea of cryptographically secured digital cash
- From Adam Back: Proof of Work as a security mechanism (Hashcash)
- By Wei Dai: The concept of a decentralized money system with proof of work (b-money)
- By Nick Szabo: The chaining of proof-of-work blocks and digital scarcity (Bit Gold)
- By Hal Finney: The practical implementation of reusable proof-of-work tokens (RPOW)
What Satoshi was the only one to accomplish: Solving the double-spending problem without a central authority - by combining Proof of Work, the blockchain and Difficulty Adjustment in a decentralized peer-to-peer network. This was the missing ingredient that had caused all previous projects to fail.
Why this is more important today than ever
The ideals of the cypherpunks - privacy, financial self-determination and freedom from centralized control - are more relevant today than ever. Governments around the world are working on central bank digital currencies (CBDCs) that could potentially make every single penny you spend traceable at a central location. The surveillance of digital communication is constantly increasing. And under the pretext of combating criminal activities, there are always new regulatory initiatives such as the EU's chat control.
Bitcoin is the cypherpunks' answer to precisely these developments. It is digital cash - without centralized control, without surveillance, without the possibility of simply freezing or devaluing it at the touch of a button. Bitcoin is not just a technology or an investment. It is the realization of a vision that people have been fighting for over two decades.
Conclusion / TL;DR
Bitcoin is the result of a 20+ year journey, driven by a group of brilliant minds who realized that privacy and financial sovereignty in the digital age could only be protected by cryptography.
From the Cypherpunks' manifestos to the encryption war with the US government, the failed but groundbreaking attempts of DigiCash, Hashcash, b-money, Bit Gold and RPOW - to Satoshi's brilliant synthesis of all these ideas in the Bitcoin Whitepaper. Each chapter of this story was necessary for Bitcoin to emerge.
I hope you enjoyed this article and were able to take something new away with you! As always, feel free to ask questions in the comments👇
Thought I'd take your minds off all the price action over the last few days😘
Have a nice Wochenende✌️🧡
Edit: If you have problems with the links... they are sometimes called at the end with the bracket or the dot that comes after it. If necessary, simply remove it from the top of the URL. GetQuin doesn't want it the way I want it😅
