What is cryptography? Who are the cypherpunks?

Cryptography as a technique for protecting text arose alongside writing: methods of secret writing were known in the ancient civilisations of India, Mesopotamia and Egypt.

In its first period (roughly from the third millennium BC to the ninth century AD) monoalphabetic ciphers predominated. Their key principle is substitution: replacing the alphabet of the original text with another alphabet by swapping letters for other symbols or letters.

Monoalphabetic ciphers were known in Judea, Sparta, ancient Greece and ancient Rome.

In the second period (from the ninth century in the Middle East and from the fifteenth century in Europe to the early twentieth century) polyalphabetic ciphers spread widely. These are sets of monoalphabetic ciphers used to encrypt each successive character of the plaintext according to a defined rule.

In the third period—from the early to the mid-twentieth century—polyalphabetic ciphers remained in use. In parallel, radio communications emerged and developed. They enabled instant transmission of large volumes of information but were not secure. Reliable encryption became a pressing issue during the first world war and even more so in the second, as small transmitters and receivers became widespread, allowing belligerents to intercept enemy traffic easily. Leading powers adopted electromechanical cipher machines and competed in codebreaking. Thanks to these forces, cryptography, long the preserve of spies, mathematicians and diplomats, began to take shape as an organised discipline.

The fourth period—from the mid- to late 1970s—was marked by a shift to mathematical cryptography. By then, mathematical statistics, probability theory, number theory and general algebra had matured, and the foundations of cybernetics and algorithm theory had been laid.

A key milestone in this transition was the publication of American mathematician and cryptanalyst Claude Shannon’s “Communication Theory of Secrecy Systems”. It presented, for the first time, an approach to cryptography as a mathematical science. Shannon formulated its theoretical underpinnings and introduced concepts with which students now begin their study of the field.

After the second world war, the British and US governments created agencies for electronic surveillance and information security: Britain’s Government Communications Headquarters and America’s National Security Agency.

In the early 1970s, GCHQ employee James Ellis proposed the concept of public-key cryptography. In such a system, a public key transmitted over an unsecured, observable channel is used to encrypt messages and verify digital signatures. His colleague, British mathematician Clifford Cocks, developed the mathematical basis for the model.

Neither GCHQ nor the NSA adopted public-key cryptography at the time because the requisite technology was lacking. A computer communications network (the internet) was needed, and such systems were not yet developed in the 1970s.

In the 1980s computer scientists—and in the 1990s, with the spread of the internet, ordinary users—faced the problem of protecting data in an open environment.

Meanwhile, small groups of hackers, mathematicians and cryptographers began working to realise public-key cryptography in practice. Among them was American cryptographer David Chaum, PhD, sometimes called the godfather of the cypherpunks.

As early as 1982, Chaum presented the method of the blind digital signature—a model of public-key cryptography. It enabled the creation of a database of people who could remain anonymous while guaranteeing the accuracy of the information they provided about themselves. Chaum dreamed of digital voting that could be verified without revealing the voter’s identity, but above all of digital cash.

Chaum’s ideas inspired a group of cryptographers, hackers and activists. They became known as the cypherpunks—members of a movement advocating computer technologies as a means to destroy state power and centralised systems of control.

One of the movement’s ideologues was American cryptographer and former Intel principal scientist Timothy May. In 1987 May met American economist, entrepreneur and futurist Phil Salin, founder of American Information Exchange (AMiX), an online marketplace for trading data.

May disliked the idea of an electronic platform where people could sell each other (across borders and with low fees) trivial information. He dreamed of a global system enabling anonymous bilateral exchange of any information, resembling a corporate information system.

He later finalised the concept as BlackNet, which required a non-governmental digital currency and the ability to make untraceable payments in it. In 1985 he read David Chaum’s paper “Security without Identification: Transaction Systems to Make Big Brother Obsolete”. In it, Chaum described a system that uses cryptographic methods to hide a buyer’s identity. Exposure to this idea led May to study public-key cryptographic protection.

He soon concluded that such cryptography, coupled with networked computing, could “destroy social power structures”.

In September 1988 May wrote “The Crypto Anarchist Manifesto”, modelled on Karl Marx’s “The Communist Manifesto”: “A spectre is haunting the modern world, the spectre of crypto anarchy.” According to the manifesto, information technologies will allow people to govern their lives without governments, using cryptography, digital currencies and other decentralised tools.

In 1992 May, Electronic Frontier Foundation co-founder John Gilmore, and Eric Hughes, a mathematician at the University of California, Berkeley, invited 20 close friends to an informal meeting. They discussed the most pressing cryptography and programming issues of the day. Such meetings became regular and sparked a movement. An email mailing list was created to bring in others who shared the founders’ interests and values. The list soon had hundreds of subscribers: they tested ciphers, exchanged ideas and debated new developments. Correspondence used the latest encryption methods of the time, such as PGP. Participants discussed politics, philosophy, computer science, cryptography and mathematics.

In 1993 Eric Hughes published “A Cypherpunk’s Manifesto”, which set out the movement’s core tenets:

“Privacy is necessary for an open society in the digital age. […] Privacy in an open society requires the use of cryptography. […] We, the cypherpunks, are called to create anonymous systems. We defend our privacy with cryptography, anonymous remailers, digital signatures and electronic money. […] Cryptography will inevitably spread worldwide, and with it the systems of anonymous transactions that it makes possible.”

The importance of privacy, anonymous transactions and cryptographic protection—all these ideas were later implemented, in various forms and to varying degrees, in cryptocurrencies.

By 1997 the mailing list had around 2,000 subscribers and 30 messages a day. In 1995 WikiLeaks founder Julian Assange posted his first message to “Cypherpunks”. In 2016 he published a book about the movement titled “Cypherpunks: Freedom and the Future of the Internet”.

The term “cypherpunks” was first used by hacker and programmer Jude Milhon to describe a group of crypto-anarchists. Cypherpunk and crypto-anarchism are not identical but are kindred currents, sharing essentially the same values. Crypto-anarchism (crypto-anarchy) is a variety of anarchism in which anonymisation technologies, digital pseudonyms and cryptographically protected digital money are used to free people from state control—surveillance, censorship and taxation.

In 1989 David Chaum founded DigiCash in Amsterdam. It specialised in digital money and payment systems; its flagship was the eCash digital money system with the unit CyberBucks. eCash used Chaum’s blind digital-signature technology. Although some banks even tested the system and Microsoft reportedly discussed integrating eCash into Windows 95, the venture did not find commercial success.

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

A year later, computer engineer Wei Dai published a proposal for another digital payment system, called b-money. He outlined two concepts. The first envisaged a protocol in which every participant maintains a copy of the database recording how many funds each user controls. The second modified this by having the ledger’s copies held not by every participant but by servers. It introduced two roles: regular users and servers (nodes). Honesty was incentivised by deposits into a special account used for rewards or penalties if misbehaviour was proven.

It was the first concept that the creator of Bitcoin, Satoshi Nakamoto, later adopted; the second proved closest to what is now known as Proof-of-Stake.

In 2004 cypherpunk Hal Finney, building on Adam Back’s Hashcash, created Reusable Proof of Work (RPoW). The idea was to create unique cryptographic tokens that, like unspent outputs in Bitcoin, could be used only once. The drawback was that validation and double-spend protection still relied on a central server.

In 2005 cryptographer Nick Szabo, who in the 1990s developed the concept of smart contracts, announced Bit Gold—a digital collectible and store of value. Bit Gold drew on Hal Finney’s RPoW proposal but, instead of one-time coins, envisaged coins with varying value calculated from the computational work required to create them.

In October 2008 Satoshi Nakamoto sent the white paper “Bitcoin: A Peer-to-Peer Electronic Cash System” to the mailing list. Its content shows the influence of cypherpunks and crypto-anarchists. The Bitcoin white paper cites Adam Back and Wei Dai. According to Nakamoto, Bitcoin “represents a realization of Wei Dai’s b-money proposal… and Nick Szabo’s Bit Gold proposal”. In turn, Wei Dai’s manifesto, in which he proposes b-money, opens: “I admire Tim May’s crypto-anarchism.” After publishing the paper, Nakamoto carried on, and on 3 January 2009 mined the genesis block.

Bitcoin’s arrival ushered in a wave of technological refinements and innovations built on a working system—extensions and modifications that cypherpunks embraced with gusto.

Contemporary cypherpunks include cryptographer and smart-contract pioneer Nick Szabo, BitTorrent developer Bram Cohen, Tor browser creator Jacob Appelbaum, and WikiLeaks founder Julian Assange, who in 2016 published a book about the movement titled “Cypherpunks: Freedom and the Future of the Internet”, as well as many other developers and hackers.

Today, many processes on the internet bear the imprint of cypherpunk activity. Torrents, VPNs and digital signatures were either created directly by cypherpunks or built using their ideas and tools.

In 1993, in “A Cypherpunk’s Manifesto”, Eric Hughes wrote:

“Cypherpunks write code. We know that someone must continue to write code to protect information, and since we see no other way to protect our data, we keep doing it […] Our code is available to anyone on earth. We are not overly concerned that some people dislike what we do. We know that our programs cannot be destroyed, and that the growing network can no longer be stopped.”

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