David Canellis

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It took nearly seven centuries for a cryptography breakthrough to sunset the Caesar cipher that was big in the first century BC.



Caesar ciphers simply shifted letters up or down in the alphabet by a fixed number of positions. Starting in the year 800, Arab polymath <a href="https://historyofinformation.com/detail.php?id=3162">al-Kindi</a> began working on what&#8217;s known as frequency analysis — a type of systematic pattern recognition that would result in reverse-engineering shift cipher encryption, like the Caesar.



By the 16th-century Renaissance, solving Caesar ciphers was so easy that they were considered children’s puzzles.



So it was until two cryptographers, Italian Giovan Battista Bellaso and French Blaise de Vigenère, discovered and popularized the so-called <a href="https://www.britannica.com/topic/Vigenere-cipher">Vigenère cipher</a>, which incorporated multiple cipher alphabets derived from a single keyword.



The Vigenère cipher was a revolution in information privacy. The poly-alphabetic method was believed unbreakable and even named the “indecipherable cipher.”&nbsp;



Three hundred years would pass before, in the mid-19th century, two others independently cracked the system.&nbsp;



Charles Babbage, a revered grandfather of computer science, and military man Friedrich Kasiski, unknown to each other, had separately rendered Vigenères entirely obsolete, even before the arrival of computers.



So, that makes for a 700-year gap between Caesar and al-Kindi, and a 300-year gap between Bellaso-Vigenère and Babbage-Kasiski.



<h2 class="wp-block-heading">A cypherpunk breakthrough</h2>



On this exact day in 1976 — 49 years ago and more than a century after Babbage and Kasiski cracked Vigenère — a pair of American academics presented their own revolution: the concept of public key cryptography, which today underpins Bitcoin and most modern communication technologies.



Building off the novel work of computer scientist Ralph Merkle, the duo of Richard Diffie and Martin Hellman had devised a way to achieve what was, once again, considered theoretically impossible: enabling secure communication without a secret key shared between the two parties.



The method was outlined in their <a href="https://ee.stanford.edu/~hellman/publications/24.pdf#:~:text=Manuscript%20received%20June%203%2C1976,1975%20and%20the%20IEEE%20International">paper</a>, New Directions in Cryptography, which WIRED would later describe as “a cypherpunk sacred text.”



“We stand today on the brink of a revolution in cryptography,” Diffie and Hellman wrote. “The development of cheap digital hardware has freed it from the design limitations of mechanical computing and brought the cost of high grade cryptographic devices down to where they can be used in such commercial applications as remote cash dispensers and computer terminals.”



“&#8230; At the same time, theoretical developments in information theory and computer science show promise of providing provably secure cryptosystems, changing this ancient art into a science.”



Diffie-Hellman’s paper would be adapted into RSA encryption within two years, itself a touchy cornerstone of the <a href="https://blockworks.co/news/cypherpunk-movement-history-wired-1993">Crypto Wars</a> that directly followed.&nbsp;



Amazingly, <a href="https://www.wired.com/1999/04/crypto/">as WIRED documented</a>, another cryptographer, British intelligence officer James Ellis, had proposed a public-key system years before the Diffie-Hellman paper. But Ellis’ work was never permitted to see the light of day, a factoid that makes the conclusion of Diffie and Hellman’s foundational work so much more poignant:&nbsp;



“We hope this will inspire others to work in this fascinating area in which participation has been discouraged in the recent past by a nearly total government monopoly.”&nbsp;



And while specific or weak forms of public-key encryption have been broken over the years, it remains unbroken at a theoretical level.



Now, (almost) half a century on from cryptography’s last great breakthrough, all eyes are on the arrival of practical quantum computing — whenever that may be.



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Bitcoin

Public-key birthday: ‘Cypherpunk sacred text’ turns 49 today

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Why did nobody build Bitcoin before Satoshi?



Cryptographers had toyed with the idea of decentralized digital currencies since the late ‘90s. It took two whole decades more for someone to figure out how to actually do it at scale.



Perhaps some technical limitation at the node level held it back, like low memory or disk bandwidth. Or maybe it was that the slow pace of dial-up wasn’t exactly conducive to internet-based distributed computing before the dot-com boom.



Gwern, the pseudonymous internet brainiac, wondered as much in a 2011 blog — a post which immediately summoned legendary bit wizard Nick Szabo to respond.



<h2 class="wp-block-heading">On This Day – Szabo defends Bitcoin</h2>



In their May 27, 2011 essay, “<a href="https://gwern.net/bitcoin-is-worse-is-better">Bitcoin is Worse is Better</a>,” Gwern suggests that Bitcoin “involves no major intellectual breakthroughs.”



Bitcoin was mostly a collection of prerequisite technologies, ranging from the hash tree from 1979 to Adam Back’s Hashcash and Wei Dai’s B-money, until finally Szabo’s bit gold in the early 2000s.



The next day — 14 years ago today — Szabo <a href="https://unenumerated.blogspot.com/2011/05/bitcoin-what-took-ye-so-long.html">replied</a>. “Bitcoin, what took ye so long? So asks gwern in a spectacular display of hindsight.”



Szabo had only really publicly commented on Bitcoin twice before, at least by my count.&nbsp;



<a href="https://unenumerated.blogspot.com/2009/05/liar-resistant-government.html">Both</a> <a href="https://unenumerated.blogspot.com/2011/01/tech-roundup-012211.html">instances</a> involved comparisons to bit gold, and he went so far in January 2011 as to say that Bitcoin was “an implementation of the bit gold idea.” Which in many ways is, of course, true.



In 1998, Szabo proposed a concept for a decentralized digital currency, bit gold, which is widely regarded as Bitcoin’s closest ancestor. Bit gold has many of Bitcoin’s hallmark features, including proof-of-work mining and time-stamped blocks.



Bit gold was never formally implemented into a working public prototype, leading many in the early years to wonder whether Szabo was actually Satoshi Nakamoto himself. (Nick has denied creating Bitcoin on multiple occasions.)



“The short answer about why it took so long is that the bit gold/Bitcoin ideas were nowhere remotely close to being as obvious gwern suggests,” Szabo wrote. “They required a very substantial amount of unconventional thought, not just about the security technologies gwern lists (and I&#8217;m afraid the list misses one of the biggest ones, Byzantine-resilient peer-to-peer replication), but about how to choose and put together these protocols and why.



“Bitcoin is not a list of cryptographic features, it&#8217;s a very complex system of interacting mathematics and protocols in pursuit of what was a very unpopular goal.”



The whole post is worth the read, especially after going over Gwern’s entire original post beforehand (Gwern even shows up in the comments, replying to Szabo’s criticism. Szabo’s <a href="https://unenumerated.blogspot.com/">blog</a> is also worth revisiting, although he hasn’t posted since March 2018.



Most interestingly, Szabo mentions a private mailing list he’d founded in the late ‘90s, “libtech,” where he and Wei Dai both detailed their ideas for bit gold and b-money. Szabo later <a href="https://thedailyeconomy.org/article/the-mating-of-economic-ideas-and-bitcoin/">stated</a> that Hal Finney, free banking authority Larry White, and economist George Selgin were also on the list.



Anyone who knows if an archive of those emails still exists, hit me up.



<h2 class="wp-block-heading">Did You Know?</h2>



Wei Dai’s b-money proposal is the first citation in the Bitcoin white paper. And while he may not be Satoshi, Wei did mine bitcoin in early 2011, when it traded for less than a dollar.&nbsp;



“&#8230; My understanding is that the creator of Bitcoin, who goes by the name Satoshi Nakamoto, didn&#8217;t even read my article [<a href="http://www.weidai.com/bmoney.txt">proposing b-money</a>] before reinventing the idea himself,” Wei <a href="https://www.lesswrong.com/posts/ijr8rsyvJci2edxot/making-money-with-bitcoin?commentId=hbEu9ue9eymNzaF2J">wrote</a> on LessWrong, a forum for discussions about rationality, philosophy and so on.&nbsp;



“He learned about it afterward and credited me in his paper. So my connection with the project is quite limited.”



Wei continued: “BTW, thanks to the discussion you started, I bought a Radeon 5870 and started mining myself, since it looks likely that I can at least break even on the cost of the card. (Of course I heard about Bitcoin earlier, but in my version of the idea, nobody can make large profits by mining/minting, so I didn&#8217;t look into the possibility.)”



The 50 BTC earned by mining just one block in 2011 would now be worth more than $54 million.



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Cypherpunks

Why Bitcoin may not have been possible in the ’90s

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Money is speech.



Those three words are arguably the most succinct way to express the importance of Bitcoin.&nbsp;



To the idealist, Bitcoin is an obvious frontier in the war for personal freedoms. It embodies the freedom to transact in the same way that art and newspapers represent freedoms of expression and speech.



Today’s Supply Shock episode features legendary Cypherpunk Phil Zimmermann, the creator of Pretty Good Privacy (PGP) who fought tirelessly for our freedom of digital privacy during the 1990s. Check out one of our <a href="https://blockworks.co/news/cypherpunk-movement-history-wired-1993">previous retrospectives</a> for a primer on Zimmermann.



Who better to ask, considering his long-term collaboration with Bitcoin pioneer <a href="https://bitcoinhistorynl.beehiiv.com/p/user-1?utm_source=bitcoinhistorynl.beehiiv.com&amp;utm_medium=newsletter&amp;utm_campaign=user-1">Hal Finney</a>: If PGP was the frontline for the first Crypto War, is Bitcoin the battleground for Crypto War II?



<h2 class="wp-block-heading">From The Pod</h2>



Phil Zimmermann formally hired Hal Finney in 1996, almost a decade and a half before Bitcoin — back when “crypto” only really meant “cryptography.”&nbsp;



Hal had spent years developing PGP with Zimmermann officially as a <a href="https://web.archive.org/web/20170915204932/https://www.nytimes.com/2014/08/31/business/hal-finney-cryptographer-and-bitcoin-pioneer-dies-at-58.html?ref=obituaries">volunteer</a>, partly because PGP was not yet a company, and partly to avoid drawing the ire of the US government that had rained down on Zimmermann.



Zimmermann told Supply Shock host Pete Rizzo that he knew Hal was exploring proof-of-work projects, and said he himself found Bitcoin technically intriguing. However, he was working on other things at the time, which kept him from becoming wrapped up in early Bitcoin development in the same way Hal was.



“For the first time, you actually had a feasible electronic money scheme that was decentralized,” he said. “I mean, we&#8217;ve had electronic money for a long time just by banks…I think [Bitcoin] was a very creative breakthrough in the development of digital money.”



More recently, Zimmermann has been a headline feature of the Bitcoin conference circuit, appearing on stage last October <a href="https://www.youtube.com/watch?v=7Axo2CGwY00">alongside</a> Adam Back at the Plan B Forum in Lugano, Switzerland.



Bitcoin events have shown Zimmermann the positives of Bitcoin, particularly for those living under autocracies, as is the case across Latin America.



“The dictator executes his control over the population in a variety of ways. Some of them are violent, but sometimes he just takes their money,” he said. “Singapore has a high standard of living, high salaries and high percentage of home ownership. Everybody gets a pension when they work and the government there has control of that pension. If you criticize the government, you might lose your pension.”



“And so, if you live in an autocracy, it would be useful to have some of your assets in bitcoin so that it&#8217;s out of reach of the autocrat. I met a lot of people in Argentina at the Bitcoin conference there that had stories to tell about the places where they had used Bitcoin to protect some of their assets.”



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Still, Zimmermann’s relationship with Bitcoin is complicated, in many of the same ways that his connection with his own creation, PGP, was conflicted. Zimmermann lamented that he knew for a fact that PGP was in Al-Qaeda training manuals, for instance, but at the same time, the technology was a force for good elsewhere in the world.



“In the 90s, when we were engaging in the debate about strong cryptography and especially PGP…Some advocates for strong cryptography were denying that criminals use PGP — they were denying that terrorists were using PGP.&#8221;



He continued: “[PGP was also] used in lots of environments where there was great danger to people who lived in wartime conditions. I got letters from people who lived in places where people were being killed by oppressive governments or war, and PGP was saving lives. So these technologies quite often have mixed effects on society, and that includes Bitcoin. I would like to see more examples of Bitcoin being used for good.”



Check out the full episode of Supply Shock on <a href="https://www.youtube.com/watch?v=MpCGYFXn5cI">YouTube</a>, <a href="https://podcasts.apple.com/us/podcast/pgp-creator-bitcoin-is-not-the-revolution-you-think/id1558223079?i=1000708295114">Apple Podcasts</a> and <a href="https://open.spotify.com/episode/5rFyKjI5rwurM3Vf1UXffH">Spotify</a>.



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