Cryptocurrencies and Control
Long before all your friends relentlessly tried to convince you that they are in fact the next Warren Buffett of Blockchain, and before the phrase ‘Elon is taking it to the moon’ became a common colloquialism outside of Reddit, the Crypto space was as a very different place, with radically different ideas. In this piece I’ll be giving some historical context to the birth of Cryptocurrencies and discussing how they later became the financial behemoth with the questionable intentions that we know today.
Dawn of The Cypherpunks
In the 1980s and 90s, the closest thing you had to a group of rebellious computer hackers was the Cypherpunks. Three computer scientists launched a mailing list in 1992 to discuss cryptography, mathematics, politics, and philosophy. Like most fringe political groups, the Cypherpunks saw the internet as the next battleground in human freedom, believing that when the governments of the world understood the capabilities of the internet, they would act swiftly to monitor and control it.
The Cypherpunks believed that the only way to truly keep the NSA’s prying eyes out of everyone’s business was to have a complete digital currency. Essentially they understood that the Internet itself was already borderless and international, How does this relate? Ask for expansion on this and hoped that creating an internet-native currency for the world’s population could liberate the population of the world, regardless of nationality, race or socioeconomic background. In their eyes, having a currency based solely on digital transactions would help level the playing field.
David Chaum & DigiCash
Considered by many as the founding father of the Cypherpunks, David Chaum was a prolific academic researcher who invented many cryptographic protocols, including group signatures, mix networks and blind signatures. Long before the notorious Satoshi Nakamoto had even dreamed of making bitcoin, Chaum was spearheading the crypto movement with the first serious attempt at creating truly privately controlled digital money.
Digicash, despite its altruistic nature, didn’t take off. Chaum struggled to create a completely decentralised service and it ultimately lost out on gaining users against the stiff competition of credit cards and less private online payment systems like PayPal. Chaum and his Cypherpunk counterparts quickly realised that if their anarchistic ideals and benevolent intentions were to be successful, they would need to reach beyond any centralised system.
“The root problem with conventional currency is all the trust that’s required to make it work” – Satoshi Nakamoto
It’s no secret that the global digital banking system has long been due for an overhaul. After the 2008 stock market crash, it was primed and ready for a financial revolution. Among the corporate catastrophes and indebted homeowners, a man or group (his exact form is unknown) by the name of Satoshi Nakamoto published a book titled ‘A Peer To Peer Electronic Cash System’. Nakamoto then began to email Cypherpunks with the hope that they’d help him create his idea for a new system he called Blockchain. Unlike Digicash, Nakamoto’s blockchain was a computer network that truly was peer to peer, without any interference from prying government eyes.
The Blockchain is an accounting system that records all transactions on a public ledger. Instead of the US dollar, that particular currency would be exchanged in a digital currency called Bitcoin. The blockchain itself is a hive mind like system that doesn’t exist in the physical world, much like cloud computing, that is at heart a user regulated system that no government has the ability to shut down or control. As long as there are miners out there running the Blockchain, Bitcoin will continue to exist.
However, Nakamoto struggled to get the Cypherpunks onside. Mostly in their early fifties, they ignored the blockchain visionary on grounds of his ideas being too radical and too difficult to implement. The Cypherpunks weren’t kids anymore. They’d already tried and failed to make their own digital and the far-reaching science fiction like notions Nakamoto preached fell on deaf ears.
All but one computer programmer would turn their back on Nakamoto’s vision. Hal Finney, a California native, caught wind of Bitcoin and its hubristic vision for the future and offered to work on the project for free. On January 1st 2009, Bitcoin was first launched. Despite Finney and Nakamoto never meeting in real life, the project gained real world traction and a host of other programmers eagerly signed up to aid the two digital libertarians on their quest.
It’s important to keep in mind that the very idea of bitcoin was only popular with anarchistic circles and libertarian thinkers who had the shared goal of living their lives free from government control. This small gang of blockchain renegades were incredibly passionate about their philosophy and saw Nakamoto as a hero.
The Silk Road
Of course, once word spread that bitcoin was a way to transfer money privately it didn’t take long for criminal syndicates to adopt it. Once Nakamoto saw his initially humanist vision being used for criminal gain he cut off all ties to the remaining blockchain originals. Since then his public bitcoin wallet has remained untouched, despite its riches. Even in 2017, when the price of a single bitcoin ballooned $20,000, Nakamoto didn’t touch a single penny.
Nakamoto’s vision for the financial landscape was vastly different to what it is today. The supposed Japanese native saw his blockchain revolution as a way to restructure society and truly change the course of human history. Yet, given that Bitcoin was quickly embraced by various criminal organisations, it didn’t take long for Nakamoto’s house of virtuous cards to fall.
After Bitcoin’s fall from grace, cyptoprohers saw an opportunity to invest and rethink the parameters of blockchain. The introduction of Ripple and Vitalik Buterin’s lovechild Ethereum brought about new players and opportunities for everyday investors, alll holding the hope of catching the next crypto-gold rush left behind by Bitcoin. Interestingly, Ethereum is slightly different to predecessors. It’s transactions are much cheaper and money transfers much faster than Bitcoin, while the platform allows people to build business upon its database. This is what’s known as an ICO, however the large majority of these cryptocurrency businesses were, and still to some extent are, total scams.
The Birth of CBDCs
The rise in fraudulent crypto start-ups during the late 2000s put government agencies on high alert. This bureaucratic panic was caused by huge numbers of naive people around the world dumping large sums of money into these blockchains, hoping to profit off the next Bitcoin boom. Long story short, the free ideals promoted by the Cypherpunks are quickly being eroded by the attempts to centralise cryptocurrencies.
Early this year China announced that it is working on implementing its very own state owned cryptocurrency. China already has a large amount of its payment assets completely digitised; for example, Weechat has its own one-size-fits-all approach to currency transaction and communication. Interestingly, and perhaps more worryingly, the digital Yuan completely neglects one of Bitcoin’s major draws: total user autonomy. The notorious all-seeing Chinese eye views decentralised free flowing cash as a threat to it’s control. The digital Yuan will be able to track any and all transactions coming in and out of its country’s borders, essentially allowing Beijing to experiment through targeted monetary policies on specific economic classes, regions or other groups.
Similarly, the digital dollar has recently gained a lot of traction within the US Senate, with the US Treasury Secretary Janet Yellen signalling that Joe Biden’s administration supports state sponsored cryptocurrency research. Still in its infancy, the digital dollar will act in a similar way to the digital Yuan, in that it’s controlled by a central bank and promoted under the disguise of ‘protecting consumer interests’.
What Does This All Mean?
Whoever Satoshi Nakamoto is or was, he wouldn’t be pleased to see the state of cryptocurrencies today. His perhaps overly ambitious, yet truly altruistic vision for humanity seems to have fallen short and been engulfed by governments across the world. It’s a shame that both his and the Cypherpunks’ philosophy seems more akin to a Star Trek movie than anything actually possible in real life. And as we move closer to a cashless society, and the centralisation of blockchain technology continues, it’s important to keep in mind that it was initially supposed to be a little different – a little more human.