David Chaum: The Forefather of Cryptocurrencies and the Cypherpunk Movement (#304)

Transcript

This is Epicenter, episode 304 with guest David Chaum. This episode of Epicenter is brought to you by Vaultoro, the gold hedging platform for the crypto community. Trade gold to Bitcoin instantly and securely starting at just 1 mg. Go to vaultoro.gold/epicenter to get early access to their V2 platform and to start trading.

And by Trail of Bits. Don't leave your project's security audit to just any firm. Trust a team with decades of experience at the forefront of blockchain security research. Go to trailofbits.com to learn more. Hi, welcome to Epicenter. My name is Sebastian Couture. And my name is Friederike Ernst. Or maybe today, Freddy. I'm I think I'm going to start calling you Freddy from now on. Please don't. Freddy Ernst. How are you doing?

I'm fine. We just had a fantastic interview with David Chaum, who is who truly is the godfather of cryptography and uh What did you think, Sebastian? I was so excited to listen to you. I mean, we we emailed him, Brian and I, years ago, before I think before Maher was even a guest on the podcast. Uh just just to have him on, like cuz he's he's freaking David Chaum, you know? And so, it never happened and now now that he's working on this on this new thing, Elixir, I guess maybe he felt that it was more appropriate. Uh but uh yeah, we spent like an hour talking to him about, you know, his his history and his early days at Berkeley,

uh Digicash, uh all that stuff. And I think he's just such an insightful person and has a lot of really great ideas and you know, about personal privacy and and data sovereignty. And And also is kind of optimistic about where things are heading, which I'm totally not, but it's good to have optimistic people in the space. This was actually what struck me most or what maybe surprised me most. So, basically, he's been in this field for such a long time and he thinks it's all going to end well. And to me, that that is a great consolation.

Yeah, I hope he's right. Me too. We initially wanted to also talk more about Elixir, but since the project it's still evolving, like but there's still white papers that need to be written and sort of thing and the project hasn't launched yet, we thought that it'd be better to have him back on in some time whenever they're ready to talk more about about that specifically so we would go in a bit more technical aspects of that project. So, this conversation is mostly just picking David's brain and so it was really terrific and so I I really hope that you all will like it.

Before we go to the interview, I do want to talk a little bit about Tel Aviv Blockchain Week. As this really is coming out, I am probably heading on a plane to go to Tel Aviv. I'll be at Scaling Bitcoin and also Ethereal and StarkWare Sessions. We've partnered with StarkWare Sessions. It's on the 16th on Monday and you can get 20% off the regular ticket price by using the code epicenter. And if you want to register, there's still tickets available. It's epicenter.rocks/starkware. I'm also speaking on a panel on the evening of September 11th. It is entitled The Era of New Rising Chains and Assets.

It's hosted by ZenGo and will be moderated by their CEO, Ouriel Ohayon. The panel will be Zaki Manian of Tendermint and Mason Borda of TokenSoft and myself. So, if uh interested in listening to us talk about new rising chains and assets, please register for that. You can register at zengo.rocks/meetup. So, with that, here's our interview with David Chaum. We're here with David Chaum. David Chaum needs no introduction in this space because he really has pioneered and set the stones that are the foundation for a lot of the things that we're building in

the blockchain space. And I mean, personally for me, it's a real pleasure and a real honor to to have you on just because I'm I'm so concerned by my own privacy and a lot of these concepts are concepts that, you know, date back to when you were initially working on them and researching them and writing the papers uh that that put all this stuff in motion. So, thank you for joining us today. It's a it's a real pleasure. Well, thank you, Sebastian. And it's it's great to be here, really. I appreciate and thanks for the kind words.

Let's start with the beginning. Tell us about your background, uh your time at Berkeley studying computer systems there and you know, what was it like back then to be working on these technologies? Well it You're taking me taking me back, but uh you know, this was Berkeley, of course, so it was a very exciting progressive place, and my office mates and uh colleagues there were people that, you know, created a lot of famous stuff in the computer science field, you know, I was working in that kind of department, and then like Bill Joy, Eric Smith, and all these people were, you know, people I talked to all the time there and and everything. Dave

Patterson with the risk architecture, and a lot of uh key things were happening then as well as in cryptography. Those were really exciting times for all the real basic research and so we had all kinds of people coming through constantly visiting and talking about their research in in cryptography and and so forth. So it was but there was also a kind of um backdrop of most of the graduate students were being recruited to work for the kind of military-industrial complex but there were a lot of posters up

saying don't do this. So there were a lot of ethical issues in the air. I mean this was Berkeley uh you know, '77 to like '80 and um '82. It was uh it was a you know, it was quite a quite a mix of interesting things going on. So there were there were some people that were going to work for kind of the government or you know, maybe in industry and then there were others that were kind of opposed to that. What were they doing?

Were they most mostly working on research or did they have their own ideas about what they wanted to build? I guess you you fell in that second category. Yes, well I believe that my work was as far as I know probably unique in taking advantage of the opportunity to do unconstrained research in order to find a way to use the technology to really advance dramatically the the causes of public interest.

So you got a PhD from from Berkeley with a thesis entitled computer systems established, maintained, and trusted by mutually suspicious groups which to anyone who's uh familiar with cryptocurrency sounds very modern. Um and if you if you actually look into this, the thesis puts forward um a system that bears a lot of the hallmarks of Bitcoin. So, basically, you have the cryptographic uh signatures, you have the uh peer-to-peer system. You don't have the proof of work, but everything else kind of is there already. So, what actually made you interested in these specific systems?

This is the most fundamental problem in security of information technology generally, right? How can you make a computation that can be trusted by a group of people who don't trust each other. And more specifically, each, say, participant should have a a privacy-protected channel with the computation the it's based on a published and a mutually agreed algorithm that the computation is supposed to perform, but all of the state and data in the computation is hidden from everyone.

But, when the computation speaks publicly or over the secure channels to the individual participants, everyone can be certain that what it is saying is correct. And this is a problem that I recognized early on as being kind of the fundamental issue. You could think of it as the sort of Church-Turing theorem for or conjecture for information security. Because if you can solve that problem, then you, I believe, can solve any information security problem with that mechanism.

Now, that's an unproven conjecture, but it's just like, you know, saying that a Turing machine can do any computation. You can't really prove that, but it's a conjecture that uh seems to have have held up, so that's why I I was interested in it, and I proposed a way to solve it in my dissertation. Now, it's a little bit ironic, I guess, that my concern about digital sovereignty and all made me not sign the copyright of my dissertation over to something called dissertation abstracts. That would like like most theses, they'd be online and you people could find them over

you could you could order copies. So, I kept the copyright and everything for mine. So, it just basically lived in library in a paper form. There were three copies in three different you know, parts of the of the Berkeley library system, but it was never digitized. And so, it pretty much escaped notice. Although, you know how library books in the old days when there were physical books, you go to library then they would put a little stamp in a with a date and a little on a little sticker that was kind of on the inside cover of the book or something. So, you can go back and look at these copies and see that there were instances of when they were checked out

and because of the lengths of time that people had them, you can make inferences about the type of library status they had. So, Library metadata is a very dangerous uh yeah. Cuz you could go you could go back now and you actually look at the library records and find out exactly who read those papers. And basically just like figure out exactly who the finite number of people who read that paper. Pretty much. Right. But so, at least from these little stamps you can see that it was checked out occasionally, but sometimes people kept it for like a whole year and there are only certain people that are allowed to check out books for a whole year. So, that's it. There was there was a down pretty much. But any event, yeah,

so actually, there was a recent paper that is mentioned on my Wikipedia page, the Wikipedia page about me, I guess one should say, that is by Professor Alan Sherman and others that goes through and I think it provides the best kind of taxonomy and explanation of all the different variants that we've seen in the blockchain space and it sort of organizes those and it highlights my contribution and basically, as you said, pretty much this pretty much the only thing that I didn't anticipate in that work was the

proof of work, but you know, there are a lot of other types of consensus mechanisms, as you know, and there's a point I'd like to make about that, which is I think worth trying to keep in mind and that is that back in those days, let's say in 8, 1980, the idea of burning up tons of computing time in order to for a consensus algorithm was like beyond reasonable. And it wasn't until, I believe, 12 years later or so, about '94, that the idea of burning up time to, you know, to have sort of a winners who could

be the the next block producers and so on or the whole idea of using proof of work for anything was proposed by actually one of my co-authors, Moni Naor, and and I I remember very clearly sitting in the auditorium there where I believe Cynthia Dwork, the other co-author, presented the paper and I I remember actually where I was sitting and, you know, just thinking about this and wow, that's they proposed it in the context of a way to defeat or impede spam email at the time.

Was that a precursor to hash cash? You could say that, but what what I'm trying to point out is that the technique was already pretty well known. It's just that you had to kind of wait till there was enough computing power and bandwidth and everything out there that any of this kind of stuff would make sense. So, to say that someone in '82 didn't fully invent blockchain just cuz that that one type of consensus algorithm wasn't included, I don't think that's reasonable.

Oh, no, no. And it was very much not meant as a criticism in that sense. I I was marveling at your foresight that, you know, basically you No, okay. Yeah. I mean, I should maybe say it that way. I think maybe differently Put differently, what's really interesting to observe is that there there has been a kind of inflection point that occurred in the last decade or so where we had enough computing power, it was cheap enough, and the connectivity everything was there that we could have these unpermissioned chains and and and use proof of work, say, to control the consensus.

And that just wasn't technically feasible prior to that. And so, so, in my mind, a whole new idea it was that we really had to wait till there was enough computing power out there and everything to to do this. And that's the thing that made the world different, in my opinion. If you're holding a significant portion of your net worth in crypto, you're probably waiting for your portfolio to moon at any time. But, holding crypto doesn't mean you should be irresponsible in the face of volatility risk. That's where Vaultoro comes in. Vaultoro is the leading gold hedging solution for the crypto community. And as a stable asset trusted for millennia, gold is the perfect long-term hedging solution. And at Epicenter, we've been using Vaultoro since

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trading in Dash, Litecoin, Ether, and Silver, go to vaultoro.gold/epicenter. That's v a u l t o r o dot gold/epicenter. We'd like to thank Vaultoro for their support of the podcast. I want to come back maybe to some some earlier times. When you were at Berkeley and you were working on these things and people were getting arrested for printing the RSA algorithm and trying to get it across the border and this. Were you Were you Were you gravitating around those people? Like, did you know Mark Miller and like what he was up to and like all the other cypher cypherpunks and Yes, of course. And in some sense, I think the way that it's told is that I

was the inspiration but behind the whole cypherpunk thing. However, you know, I wasn't really 100% on board with, let's say, the tactics that were kind of enlivening the movement, right? And so, you know, I wasn't a big fan of like automatic weapons and explosives and all this other stuff. I was more like, you know, maybe we could just get the pow trick the powers that be into using stuff that would protect our privacy and we'd be a lot better off cuz like going to war against them didn't make a lot of sense to me.

Uh I mean it it was a real lot of fun to you know to be in a in a movement thinking that you could actually I don't know do stuff like that but uh I didn't think that was uh that realistic. It didn't prove to be that realistic. So I was really trying to affect the change and not just have fun doing so. So that's different. Do you have similar views about the way you know people working in the blockchain space now and so you and you were recently at Web3 Summit like all all these all these young people now that are building these privacy technologies and and sort of trying to I guess in in some way fight the system?

Do you feel similarly about their approach to trying to build permissionless technologies that can't be circumvented by governments etc.? Well that's that's a pretty deep question. And I'd like to say that you know I've been trying to make the world a better place for my whole career. And very often I see a number of different avenues and approaches that you know my peers and colleagues uh take and there's a a multi-factor evaluation that you have to make about each one. I mean it so is it an approach Okay yes it's in the in a positive direction but is it an approach that can

go the full distance that's needed? What are the obstacles to that? Are those fundamental or are those things that will just improve over time and over what time frame you expect that they will improve? So you have to kind of try to pick your best bet and sort of ride that out. If you're really serious about affecting change. If you're just trying to be happy with that you're doing something that isn't a a thing or that's in a good direction, that's a different consideration. So, I guess I'm I try to be I've tried to put some real thought into finding ways to actually do things that could really make a substantial difference and uh

that makes me appreciate all the people that are working, but it doesn't mean that I wouldn't try to redirect their efforts if I thought that could work. Does that make sense? Yeah, that makes sense. It's like a pity to have to say so, I would say, but it this is you know, I'm pretty serious about all this and I you know, I tend to try to figure out what I think the best thing to do is and the primary consideration is not about me personally.

I get that. So, the impact that you've made on cryptography is is really hard to overstate. So, you you just just for the benefit of our listeners, so you invented blind signatures, um undeniable signatures, group signatures, you invented mixes, you introduced the first predecessor to secret sharing, um and you jump-started the field of zero-knowledge proofs and probably many other things that I have neglected to uh list now. Tying into what you said just earlier, which one of these do you think um is going to become the most important to society and why?

Well, let me answer an easier question first. While I'm thinking about that, the most fundamental work is you didn't mention, which is the multi-party computation work. And so, in that work there's a series of of papers, so you could say that zero-knowledge, which I was like on par with the there's sort of two competing groups, the MIT group and my group, so we kind of had all three results at more or less the same time and actually we we ended up winning the best paper awards and you know, the papers invited to the journals and stuff like that, but you know, you could you could prove things to the world that's like zero knowledge or minimum disclosure with the two models that that I proposed where the MIT people only had the zero knowledge model. Then the

computationally based multi-party computation work and then there's the honest majority work. So, those are two different full multi-party computation with uh models and then the the final thing that tied it all together was this my work and they didn't do which is the the spy master relation problem you can see it on my website tron.com. So, this has the best of both worlds. If you have unlimited computing power, then you still have to have a majority and of of participants in order to defeat this criticism. So, this is um uh the robust fundamental stuff, but I'm really hoping that the two things that I'm focused on now can

dramatically change the world and I think it's become very clear that this stuff is really needed and one is to and you can see like on the Electroneum home landing page the the video up there of I've explained a little more in detail, but basically the sort of messaging integrated with payments with dApps or mini apps in in the same name space has proven to be the killer app for consumers. You can see that by WeChat and what Facebook's tried to do and the other major uh platforms in smaller markets. So, this is like an indisputable fact. That's and it makes perfect sense. That's what people

want. So, if we can provide that, which is what my current company's dedicated to in an unpermissioned manner that shreds the metadata in real time and has a very secure payment system that is comparable to the non-secured to the other systems in terms of performance, user interface, and so forth, and where we have a an easy-to-build-to DApp platform, then I think that is one of the two key things that's needed because that's If you don't have a protected space where people can communicate with certainty that they're not being observed among

their like friends and family, and to obtain information about what's going on in the world, and to support the collection and distillation of information financially, if you don't have those protected spheres, you don't you cannot have meaningful democracy, and that's becoming, you know, unfortunately, quite abundantly clear these days. We could come back to that, but the other thing, which I think is really fundamental, and I'm very excited about However, it it's taken a little bit of a backseat right now because so much going on with the messaging and the payments the payments stuff that we're working on, but the new type of of voting that I've proposed, and that is we've run

binding elections with, which is called sample voting, is something that looks extremely promising to me because it allows direct democracy to scale with both the size and the complexity of society. And it's quite applicable for governance of of our blockchain, and I think that will really demonstrate it and it will really shine there, but if you ask me what I think's the might be the most im- important contributions, I think those those two, and and they're interrelated right now.

I'd like to ask you about something you you mentioned a a few times already and that's about metadata. Why do you feel that metadata is so critical to the privacy and sovereignty of of individuals? And cuz a lot of times people talk about their their privacy and I think they consider they think about you know the message like I don't want people to be able to read my message, but I don't think people really consider the importance of metadata. How How would you effectively communicate that to someone that beyond the message that the all of the extra inferences that we can make about the metadata are as equally weaponizable, I guess.

Well, what I'd like to say is that back in the '80s and so forth, privacy was like kind of a free standing issue. And I think in the last year or so, the public has come to recognize the significance of metadata as far as it's enabling the manipulation of public opinion and allowing for the sort of taking control of nation-states in the democratic portions of the world.

And this, you know, is just a a fundamental and sort of irreversible phenomena. Whereas if you look at the sort of non-democratic portions of the world, you see that the same manipulation of of media, social networks, and so on is is underway at diffusing any real hope of kind of a rise of public sentiment. Just look at the way China has manipulated mainland opinion related to the recent events in Hong Kong. It's I was just reading about it. It's quite quite stunning. And then that's sort of the carrot side and then the stick side is, you know, there are people that are disappeared and they're, you know, their access to their their

bank accounts are disconnected and so forth based on the surveillance of of WeChat and and so forth. So, it's like this type of ferreting out who can be manipulated around which issues and and manipulating the apparent will of the public online is something that's so powerful for almost all of the populations on the planet. It's, like I said, I think it's a profound and sort of irreversible danger, especially given the progress in artificial intelligence and sort of the immense amount of data that's already been kind of vacuumed up.

This is fascinating and I we will definitely get back to this in a little bit. Just before we do, and it's completely fine if you don't want to, but uh would you mind disclosing how you protect your privacy online at the moment? It just because most of us, I mean, most of us use Google and almost all of us at some point or other used to use Facebook. And I mean, Facebook's not such a thing anymore, but I mean, I I know very few people who can actually live without Google and you know, other big tech giants. And it's very difficult to protect yourself, right? And your privacy and your data.

Like Linus Torvalds, I have not been a user of social media. And there's a few things that come out, but it's not really for me, actually. But in any event, now that the Elixir platform is starting to become available, I really have no excuse not to use something that actually does uh protect privacy and shred the metadata and so forth. So, I'm going to start start to to become a user. That's That's about as much as I'd like to say about my own personal activities.

Okay. So, so you I mean, you don't use Facebook or any social media, anything like that, I I presume. Do you use uh services like Google, um like Gmail, this sort of thing, or do you have some sort of, you know, personal opsec process that you've developed to protect your privacy but still have the ability to communicate, you know, effectively with people? Like I said, I'm not a user of social media, but I will start using Elixir, and I try to make the best use of my personal energy to make the most effective change globally, and sometimes that means making compromises in terms

of my own personal protection, where I better put the energy into try to come up with things that really can address the the key issues and trying to find a way to get them out that seems attractive to to the widest possible audience. I get that. I mean, we all all have to make compromises at some point. I mean, like so personally, in the last year or so, I've pretty much stopped using any Google services for anything personal. Like I have my own mail server in my house. I've set all that up. I've I I I use Signal with my family. But but it takes a lot of time, right? And I've invested maybe hundreds of hours in in in in getting all this opsec set up and

everything. And having products that appeal to the masses, where you don't need to like know how to use Linux, for example, or you know, any any more complex than just installing an app is highly desirable. So, in that context, something like Elixir, which we'll we'll get to in a few minutes, I think fulfills that need, where it's a simple app that you install on your phone, like WhatsApp or anything like that, and people can use it just as they're used to using any any sort of messaging app. One of the things that I found challenging was getting friends and family to use the systems that I was using and that I thought would protect my

privacy. So, for example, I got my family and most of my friends that I talked to regularly with to use Signal. And Signal is sort of like an encrypted end-to-end encryption open-source version of WhatsApp where there's still metadata, you know, presumably, but not under the Facebook umbrella, I guess. And so, the challenge was getting people to use that. With something like Elixir and some of the maybe the steps you've taken, how have you effectively communicated that with you know, your friends and colleagues for them to start using this those systems where you're not, you know, using Facebook or WhatsApp or any any of these other things that normal people use, I would say. Like, you know, people that are not so concerned about the privacy like like we are.

Well, the history of social media, even though at any moment in time it looks like the most the dominant systems are never going to be displaced, the history proves that every few years there's a mass migration to the next best thing. And this has happened, you know, more than a half dozen times. And I believe that now the public has become quite disenchanted with the tech powers that be. They feel betrayed by the fact that they their data has been misused without their without their permission, of course, and with such devastating consequences for like faith in in democracy and so on.

And so, there is a huge opportunity at this moment which is to create an unpermissioned social media system which is a messaging which is all the new users are basically just in messaging integrated with payments like WeChat and the rest as I've said with that supports daps in the same name space that is that shreds metadata in real time and that is free to users, the consumers, to ordinary people, and that has the capacity to scale to address a full-out global use. So, such a technology,

which we are building and and starting to roll out, has the ability to destroy what amounts to essentially a trillion dollars worth of market cap of these companies that have been exploiting the public secretly and creating this huge danger to society and to sort of give a away for free to the public what it is they really want, which is these abilities to to transact without being spied on. And there's interestingly no way that these major players can compete with such a thing because they are not unpermissioned, they are companies, and so they cannot shred the data apparently

because governments seem to want to be able to force them to give it to them. So, and their business model's based on it. So, we have this ability to dramatically change the whole landscape by creating an unpermissioned chain which offers this these kind of capabilities to the public for free. So, I think that with the thought leaders and people like yourselves and and your listeners on this podcast and so forth, this can provide the sort of initial critical mass that will then, because of the network effect, lead to a mass migration. And that can be a tremendously helpful thing for the

future of of of the free world. Yeah, and these things, after they've crossed the saturation point, they permeate society way faster than one would would have ever thought, right? I mean, basically, you get these major consensus narrative shifts um where beforehand everyone had like one opinion and then everyone just kind of shifts more or less at the same time and you get like you get this mass migration to a new thing. And I I think you may be completely right in that we may be seeing that soon because people are being sensitized about what Facebook and the Facebooks of the world are doing. Uh there recently a movie on Netflix came out, a documentary called The Great Hack. Have you seen it?

Yes. Yeah, so basically, if you, dear listeners, haven't uh seen it yet, um it's totally worth a watch. It's about uh Facebook and uh how Cambridge Analytica used metadata to influence voting behavior. It's very scary. So, it's very dystopian. And and I would just like to point out that if you were to just look into it a bit, you'd see that Cambridge Analytica, by its own admission, has been active in most of the large democracies around the globe. And there are dozens of other companies which seem to be apparently pursuing similar business models and similar approach. So, it's not something that's going to go away. It's only quite

surprising to me that it even became, you know, known to the to the general public. It's quite a sea change that we're witnessing. Yeah. I want to go into your solution for this problem a little bit later on in the show. But, let's talk about your first company first. Um so, your first company was DigiCash. Can you tell us when when you got the idea for DigiCash and uh how it actually worked? Sure. Well, in 1982, I published a little paper on blind signature-based payments. And then in the the mid-90s, I was one of running a research group, one of the top research groups in the world on cryptography.

And the Dutch government and it was in Amsterdam in the Netherlands and the Dutch government came to us and said we want to do a road toll system here in the Netherlands, but we don't want the government to be able to know where everyone is driving and so we're wondering is it possible to have like a smart card based automatic road toll collection system, you know, with the radio transponder just like you we see around the world today, but where the identity of the vehicles is not disclosed, but the payments are are made and the the pricing varies during the day. And I said, "Well, that's funny you

should ask, you know, I actually invented something in 1982 that could do that." And they said, "Oh, well, really? Well, I mean, would it be fast enough, you know, like at 100 km an hour the radio connection only exists for about a meter of road travel?" So, that's not a lot of time to complete a payment. And I said, "Oh, yeah, I think we could do it." And they said, "Oh, really?" Well, I said, "Yeah, well, tell you what, if if we can do it in 2 weeks, will you give us a contract to build it?"

We could prove to you that we could do it in 2 weeks and they said, "Sure." So, I got a bunch of students and we like wired up this house and it was a crash project and in about 10 days actually built a little hardware gizmo that used the same kind of microcontroller as it is smart card a 6805 and uh we demonstrated that we could make these blind signature payments in a special way at that kind of speed. And so, they gave us the contract and so, we had to build it and so, I hired the students and uh we started building it and uh was uh done on like the same campus as my research group, but it was in a in

a separate facility, and eventually, as the web started to emerge, I I moved over to actually uh run the company. So, from there, this was kind of the inception uh of DigiCash, and so DigiCash was used to manage this toll payment system. Well, they never built the road toll systems. Actually, but that wasn't wasn't because our part didn't work. We partnered with a company called Amtech, and we demonstrated it and and everything, but the government I guess got cold feet that it's really interesting, but I think you can get a lot of insight and perspective from their big fear was that if they built this, that people would in mass ignore

it, and like just not pay, and even though they would have photographs of all the cars and stuff, there'd be such a mass opposition to it that it would erode the power of government. It would it would be a extreme embarrassment to them. So, that was I think why they decided not to do it in the end because I mean, the Dutch Dutch don't like to pay for anything. Let's put it that way. So, how was DigiCash put to use then? Well, in 1994, I gave one of two keynotes, and it was the first keynote at the World Wide Web Conference. It was the first World Wide Web Conference in Geneva, and what I did in this in those days it was, you know,

the we used the web browser to make the slide presentations, right? And this was projected by those days it was a huge projector and I made the first e-cash payment from and it was from their Geneva to Amsterdam, and launched this idea that a number could be worth money, a so-called digital bearer instrument, and launched our the DigiCash company really, and this was picked up by all kinds of media around the world. Within a couple days, there was a lot of interest in the idea that a number could be worth money, a digital bearer instrument.

And so, we were very much in the spotlight and we kind of started with the first thing, which was uh called the CyberBucks. And this is like a a digital currency as currently under stand stood, but differs in a few ways. So, one commonality is that it had a limited amount of the currency that was going to ever be issued. So, that was a uh interesting and good innovation. The another thing was that, you know, of course, all the the the transactions conducted online.

It differs technically from current blockchain, which has, you know, arguably zero privacy, right? Whereas, DigiCash used the blind signature concept you mentioned earlier, so that has a really nice, special kind of privacy, which is something else called one-way privacy or payer anonymity, which is essentially that only the person who forms the digital coin initially at random, which would be the the user, can recognize it later.

So, it's hidden by a blinding process when it's receives the validating signature by the issuer, so that when the use user receives it back, they can unblind it and spend it, and everyone can see that it's really signed, and then they just have to check check for the double spending, but that digital coin is unlinkable to the withdrawal process where it was originally signed. So, what it amounts to is that as the payer, you can always irrefutably prove who received the money from you, but they cannot find out who you are.

And that, it turns out, is the kind of an ideal kind of privacy because at the time of what's called the Bank for International Settlements, BIS, the central banks of the bank proclaimed that criminal use of payments could be divided three types: extortion, black markets, and bribery. And if you think about it, such a one-way privacy is makes the the money unsuitable for any criminal use because, you know, what kidnapper would accept payment by check or, you know, what politician would accept a bribe by, you know, wire transfer or, you know, in a black market, it's always sort of follow the money up the hierarchy. So, it was quite unique. And so, what this means is that each coin has a

one of a fixed set of denominations. Unlike current blockchain, where there is in in effect a digital check system, where each transfer has a potentially unique amount which links it horizontally from account to account, from wallet ID to wallet ID. With with Digicash, each one cent or two cent, four cent, eight cent, we use a binary denomination scheme just is a little bit more efficient, but each each such denomination has its own type of signature and it's own sort of free-standing digital bearer instrument.

It's kind of like a containerized, discretized version of money that prevents the or reduces, let's say, the horizontal traceability from from, let's say, from account to account to account. So, that because of the standardization of and it's sort of breaking the the payments up in into, just like paper money and coins today, metal coins. So, another uh of of the of the DigiCash uh uh technology. Let's talk about security. You know, dApps are pretty unique because, unlike other types of software, they can hold astronomical amounts of value. That's why getting systems audited, creating robust security processes, and fostering a culture of security in your

organization is so important. And to do this, you should only trust experts with real security expertise. There are a lot of security firms in the blockchain space, but few have the experience and track record of And they've been in business since 2012, long before things like the DAO hack were even imaginable. Trail of Bits works with your team to audit every aspect of your project. And smart contract code is just the beginning. They'll help you implement best practices around things like DevOps, key storage, and user-facing applications. And once your software has been rigorously tested and reviewed by Trail of Bits, they'll provide the tools you need to make sure that your code remains safe over every new commit. They can even put a software security expert at your team's disposal, who'll give you advice and answer your questions when you need

them. It's like having your own security engineer on staff. But don't take my word for it. Go to their publications repo on GitHub to read their papers, presentations, and security reviews. It's no wonder teams like Parity, Status, New Cypher, and organizations like Facebook and DARPA trust Trail of Bits for their security audits. To learn more, go to trailofbits.com, and if you decide to reach out, make sure you let them know you heard about them on Epicenter. We'd like to thank Trail of Bits for their support. So, who are the users of DigiCash? Were there sort of classes of people that you you could kind of say were using this? Was it mostly for online purchases, or were there certain use cases that you were starting to kind of pick up on when when when it started getting traction?

Well, so those initial payments were part of the cyberbucks. And you could call it today an airdrop. So, basically, we said "We're only going to issue this amount, and we will give it away for free, but our condition on that was that you have to to create a shop, an online web-based shop that accepts CyberBucks for something, and then we would give you like 100 CyberBucks." And that's how we rolled it out. And if you go to charm.com, you can see the sort of the eCash Museum. You can see all the press releases and so on. You can actually see the icons of a lot of the shops that uh were up uh issuing selling things for for eCash and that

participated in the CyberBucks, let's say, launch of of eCash. But, then we also subsequently licensed banks around the world to issue eCash in their national currency at the time, as well as for internal use. So, like, the Morris Securities they used internally, but we had issuers in most uh most continents. So, we had Australian dollars, we had US dollars, we had In those days, it was pre-euro, so this we had the Deutschmark. And then a number of other licensees in in Scandinavia and so forth. So, actually, Deutsche Bank in those days was like the

biggest bank in in Europe, indisputably, and they were our like toughest customer. They had a data center that was in an old bunker underground, and they wanted every kind of industrial audit, backup, you know, roll up in every kind of protection and and everything. And so, we had to build all that stuff for them, and they they deployed it. And there were shops that accepted payments by eCash Deutschmarks. And so, they were very enthusiastic about it. And so, they were like moving forward and and as were, you know, So there was a lot of interest in the in this technology and the in the product from a lot of perspectives, but you

know, the web was growing very, very rapidly in those days and I don't know if you recall, but people were reluctant to make payments using their credit cards because, you know, but e-commerce was projected as as, you know, something that was was going to happen and so it was just uh it was very difficult to deploy. It was somewhat of a labor of love to install an eCash client in your computer in those days and keep it up to date and and so forth. So it was uh the interesting times. I remember back in in my mid-teens in the late '90s wanting to buy some uh I wanted I wanted to order like an SSH server or something and the only way to do it was to pay online. And of

course, I didn't have a credit card as a teenager, so I I I asked my mom if I could use hers and she's like, "I'm not putting my credit card number online. Are you crazy?" So what she ended up doing is she got an extra credit card with like a a $500 limit just so that I could buy stuff online. And uh you know, so you having something like like DigiCash back then would have been very useful. Uh or or something like obviously like Bitcoin or something like that also. But so so DigiCash was backed by by actual reserves, right? Like there was US dollars or Deutsche Bank or something in a bank account representing these uh individual coins, correct?

a handful of banks around the world which issued eCash and what that technically meant was that if you had an account at their bank, then you could withdraw money from your account into eCash just like you could visit an ATM machine and withdraw it into paper money. So you could load up your eCash wallet from your bank account and then you could spend that money, but it was in the form of these binary denominated digital bearer instruments that all of our payments were privacy protected in that way is it with one signature then you you could spend it at any of the shops that would were online who accept it. So It strikes me that this is kind of

similar to you know a lot of some of the the asset back stable coins that we see in the space now and in some way put setting aside all the privacy issues etc. But in some way it is a little bit similar to what Facebook has proposed in Libra and that cryptocurrency would would would you not say so? Well, the way I frame it is that we issued a free standing digital currency cyberbox and we had a way to get it accepted a lot of merchants and we gave it away so we were trying to create our own currency with a bounded cap and in parallel with that

we allowed others to issue their own versions of it and we helped them do that and those others all turned out to be banks or I think they were also like the more of a research organization and I think that Sweden post licensed it so there were people that wanted to use it beyond other than banks but we try to make it available to anyone who wanted to use it but in those days we had a help them do it and so we wanted this stuff to be come like the digital currency but there was such a rapid growth and hesitation and then lurch

forward of growth and it was not anywhere near as convenient as like credit cards once that became a viable option so So as a matter of private person if if I accept your e-cash what's my route to redeeming it for fiat? Can I do that with any bank or just my bank? Or how does it work? Back in the in the DigiCash days, there were banks that accepted eCash in different currencies and would were willing to convert them like exchanges. There was a bank called Mercury Bank in the US. They issued US dollars, but they would also accept other currencies and convert. So, the only way that you could get, let's

say, into or out of fiat was through a bank account that was denominated in that fiat currency and that was was provided by a bank that was actually part of the eCash system. And so, basically, the banks within the eCash system, they then settled amongst themselves? I think it was a little simpler than that, but more or less, yeah. I mean, they they had just like if you don't understand how national banking works, I mean, they had accounts at corresponding banks and so on.

Okay. I see. Um and what was the business model of eCash? You mean you meant the the business model of the company, DigiCash? Yeah, exactly. So, basically, how was DigiCash meant to make money? Well, DigiCash did make money and I mean, we did the CyberBucks thing for free. And we hoped to really foster the creation of a an alternative currency based on a, you know, pretty idealistic vision for that. But, we also licensed banks and other organizations, as I mentioned. And and for that, you know, they paid us for the right to do it and paid us to help them. And we

had a I think a sound and sustainable business model. But, then as the web really started to take off, we decide I decided that this technology was too important to not be given a chance to really rise with the tide. So, we took in a substantial investment, and I think the strings attached to that in the end didn't really have the same interest in making the world a better place. So, that was a decision I made to because you know, it was put very clearly internally, you know, we could have just kept on keeping on in a modest way, and

that would have been much safer for us, and that would have been fine. And like you you know, you mentioned business model in your question, but I decided that we should really just go for try to make the world a better place, and try to rise with the the tide. So, we took in fair amount of money under terms that assumed that those people who put the money in really had the same concern about changing the world as us, but in the end, that didn't prove to be the case. Let's get back to uh this topic that has been following us through this conversation, which is Elixir.

Uh so, it's your current project. Uh so, can you give us a high-level overview of what is Elixir, and what's the goal here? Like what what are you trying to to achieve with this new project? Elixir aims to be a free to consumers messaging and payments platform that is second to none in terms of privacy because it's unique in its ability to shred the metadata, to provide the kind of transaction speeds that people are accustomed to, and has the capability to scale to the the bandwidth that's needed for mass adoption, and that also allows for the integration of dApps and in that

way positions itself as a a full alternative to the WeChat or a a Facebook with Libra or some of these other offerings and and I believe a very attractive alternative. And with the network effects, we can expect like perhaps a very rapid transition. That sounds super exciting and we we are doing an episode especially on Elixir in the near future. So like an entire hour dedicated to this topic.

It seems to me that maybe we're at some sort of turning point. I mean basically the the past couple of years or the past couple of decades have been, you know, an arms race between people who are interested in surveillance and surveilling people, nation states and other actors. And people who are developing ways to preserve your privacy. Would you agree with this and what do you think that the possible outcomes are here? So what's what's the possibility space that you anticipate? Well, I wouldn't characterize the past couple of decades as an arms race between governments and let's say

good intention developers, but rather unfortunately, it's a pity to have to say so, but I think that there've been a lot of kind of honeypots set up that lured good intention people into using systems that were a little bit hard to use, but actually simply revealed them as people who were concerned about their privacy. And if you look at things like the Arab Spring so-called or other kinds of movements, you it's always really surprising how easily all the leaders are identified and eventually arrested and or whatever, disappeared. And it's

recently was revealed that China also has the what Snowden told us the US government has sort of the full take, the the ability to surveil the entire network. And what that means, of course, is that Tor is simply a transparent to both of these major power groups. And, you know, similarly, a lot of other good intention things turned out not to really be adequate solutions. So, you know, I think that we're we're in a at a really great point because all that good work and intention and so on has resulted in a a culture of

and understanding of a lot of these issues at a technical level and by developers and so on, a real interest to see this happen. So, we've got a lot of momentum. And now, with the ability to do unpermissioned chains and with some of the technology bricks that I've been working on to try to, you know, speed up some of this stuff and so forth. Like we have a thousand x speed up in in mixing with elixir, right, which is needed for chat. With the parallel realization by the public, in effect, this is the whole game. If you cannot have a protected sphere, then you've lost control over governance. And that may be something that's very difficult to recover. So, I

think it's that we're we're at a you know, really exciting point in this in this in this process. I'm glad you're optimistic about this because my my views on this stuff has have become slightly tainted over the last couple of years and I've become more pessimistic about it. I feel that these platforms have gained so much power and they've gained power for a couple of reasons, but one of the reasons that they become powerful is because well, obviously they connect people, right? Like people want that connection. But I I think that they also exploit very primitive aspects of what makes us human. So I

believe there's you know, quite a few studies out there that talk about kind of like how Facebook and Instagram and like the the the like culture affects like neuro receptors in our brains and like how they accurately hit our our pleasure receptors etc. And it's almost like an exploit, right? It's almost like these platforms are exploiting our brains like some some malware. And I I think for platforms that try to you know, do the right thing and and not like use people's data to exploit their privacy and their voting habits and like you know, get them to buy stuff. All these people that are on the other side doing the like the right thing, I think that they maybe also need to try to approach this with that same malware approach, but like the white hat version

of that, right? Like what's the white hat version of like the Facebook like button that or like the Instagram like button that just gets you coming back all the time, but but doesn't you know, exploit you as a user. And I think that the space of like good intention people haven't yet figured out what the white hat version of that is. And and I I really hope that people like you and the folks working on on Elixir and other products like it, you know, get to figure that out and and get to create that that massive network effect that topples Facebook and like makes it the next MySpace. You know what I mean?

But in principle, there's not a reason why you shouldn't be able to build that. Yes, that's right. That's what we what I proved back in the in late '80s. What the multi-party computation results prove is that if there's any way to create a white hat incentivization a reward scheme that doesn't inherently exploit data, then cryptography can allow for it to be realized securely and transparently.

Do you feel that DAO's have a place in this in the governance of these protocols? Well, I think that yes, it's it's essential that there is a kind of democratic structure that controls this infrastructure and that's as I mentioned earlier is one of the two key ingredients. I think you need protected spheres and you need a kind of democracy that scales with complexity and size of of the system. Those two ingredients together that can solve it.

I think those are nice last words. Maybe this is a good point to end this episode. It was a great pleasure to have you on. We talked about this before the episode. We'll have you on again very soon when you're ready to talk about Elixir, your platform and blockchain that runs on it at Praxis. Great. Yeah, well, this was really a blast and interesting and I appreciate, you know, your good questions and interesting your and your thoughts and look forward to continuing the conversation. Thank you very much.

Thanks so much, David. It's been a real pleasure. Thank you for joining us on this week's episode. We release new episodes every week. You can find and subscribe to the show on iTunes, Spotify, YouTube, SoundCloud, or wherever you listen to podcasts. And if you have a Google Home or Alexa device, you can tell it to listen to the latest episode of the Epicenter podcast. Go to epicenter.tv/subscribe for a full list of places where you can watch and listen. And while you there, be sure to sign up for the newsletter so you get new episodes in your inbox as they're released. If you want to interact with us, guest, or other podcast listeners, you can follow us on Twitter. And please leave us a review on iTunes. It helps people find the show, and we're always happy to read them.

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