Thursday, May 9, 2024

Crypto Pioneers - part one

User avatar of Dominik Nawracaj

Dominik Nawracaj

7 min read·19 Reads
Crypto Pioneers - part one

Cryptocurrencies genesis

I’ve always been told that there are rules that you never shouldn't ask about: never ask a woman about her age, a man about his salary, or, let me think, a crypto trader how much has lost.
Fortunately, considering Bitcoin and other cryptos, we can try to find out how old they are and how it all began.

Well, it seems that cryptos are older than most of us thought they were; as far as I managed to find out, they began in the early 80’s of the XXth century.
One of the most important figures in digital currency is a man called David Lee Chaum.
This American computer scientistcryptographer, and inventor is known as a pioneer in cryptography and privacy-preserving technologies. His scientific thesis, "Computer Systems Established, Maintained, and Trusted by Mutually Suspicious Groups" (1982), is the first known proposal for a blockchain protocol.
David can be easily considered a cryptocurrency godfather as well. He is known for developing an electronic cash application to preserve a user's anonymity and for inventing many cryptographic protocols like the blind signaturemix networks, and the Dining cryptographers protocol. His 1981 paper, "Untraceable Electronic Mail, Return Addresses, and Digital Pseudonyms", laid the groundwork for the field of anonymous communications research. and in 1995, his company DigiCash, created:

eCash (established in 1983)— a form of electronic cash. Its conception was based on a token currency that could be transferred between individuals safely and privately. Due to the similarities of modern-day cryptocurrencies, it can be considered Crytpos’ prototype.
Chaum developed a so-called "blinding formula" to be used to encrypt information passed between individuals. "Blinded Cash" could be safely transferred between individuals, bearing a signature of authenticity and the ability to be modified without traceability.

Although DigiCash went bankrupt in 1998, the ideas the company put forward and some of its formulas and encryption tools played an important role in developing later digital currencies.
It's common to find internet references to an attempt in the Netherlands to create crypto in the 1990s; however, this was apparently a smart card preloaded with digital money rather than a cryptographically designed currency.
Fortunately, Dr. Chaum is still very keen on cryptography and blockchain issues, and on his web page, we can find a lot of information about quite interesting projects.

The idea of anonymous digital cash has found quite a few followers, more or less successful, such as E-Goldas in 1996 (by Dr. Douglas Jackson and Barry Downey), Bit Gold (by Nick Szabo), or B-money.
E-Gold was a private digital currency that facilitated the transfer of gold between members of their website instantly, and similar to modern cryptocurrencies, the transactions were completely irreversible…
And, unfortunately, like in many current cases, E-Gold became a tool for money launderers and others seeking anonymity in their illegal activities.
Despite the company's CEO statement, “E-gold operates legally and does not condone persons attempting to use e-gold for criminal activity. E-gold has a long history of cooperation with law enforcement agencies in the US and worldwide, providing data and investigative assistance in response to lawful requests,” , the U.S. authorities began an investigation against the company.
As a result of an investigation, the court stated that: “a business can clearly engage in money transmission without limiting its transactions to cash or currency and would commit a crime if it did so without being licensed” and ruled against e-gold. What's more, the inventors of e-gold were found guilty on similar charges, including conspiracy and money laundering.
Due to these consequences, nowadays, although e-gold still technically remains in business, it is no longer accepting new accounts or transfers of e-gold from user to user.

Other examples of early crypto prototypes and their creators (which are also very interesting) will be described in the next article.
It seems that cryptocurrencies has started much earlier than we thought, and now they are more popular and useful.

Have a good day!

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