Why David Chaum is a Bitcoin Legend

Greetings,

Rizzo, the Bitcoin Historian here, back this week to unravel the story of David Chaum, a man whose contributions to cryptography predate Bitcoin, and continue to influence the digital money landscape today.

You’ve probably heard of e-cash or DigiCash before, but the fascination isn’t complete without diving into David Chaum’s mission into creating digital, and importantly, private online money. 

Please don’t tell me you still haven’t moved your BTC off your exchange, or that you have it all in a single-seed hardware wallet. 

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The Origins of Digital Currency

David Chaum’s story starts not with Bitcoin, but with the conception of digital currency before the internet existed.

Born in 1955, he is credited with several inventions that turned out to be foundational to Bitcoin. One of those was published in 1982, where he introduced the concept of a blockchain, under the title: “Computer Systems Established, Maintained and Trusted By Mutually Suspicious Groups.”

This was a full seven years before the World Wide Web was birthed. 

Chaum’s most influential work, however, is his seminal 1983 piece on Blind Signatures.

Unlike the cypherpunks who sought decentralized, unregulated systems, Chaum envisioned a more centralized and commercial approach to digital money, and Blind Signatures were the cryptopgrahic innovation that laid the foundation for all e-cash systems of the 1990s. 

What blows my mind sometimes is how cypherpunks would always value technical acumen over the potential outcome of what was getting built. 

Why do I say that? Because even though Chaum’s solution was for centralized entities to make money off, he still managed to catch the eye of several key players in the community that would have Adam Back, Nick Szabo, Julian Assange, and other heroes of the modern era among the ranks. 

And that included none other than Hal Finney, the first Bitcoin user, and a canonical member of the early day internet. 

Finney, captivated by Chaum’s work on digital privacy, understood how his ideas and tools would be instrumental to all the attempts at creating a decentralized digital cash, all the way up to Bitcoin. 

“Here we are faced with the problems of loss of privacy, creeping computerization, massive databases, more databases — and Chaum offers a completely different direction to go in, one which puts power in the hands of individuals rather than governments and corporations,” Finney said back in 1992!

Despite Chaum’s apostasy. 

A Pioneer in Digital Transactions

Chaum’s reputation grew so much that another digital grandmaster, Tim Berners-Lee, would set his eyes on his mind.

Berners-Lee, the inventor of the World Wide Web, invited Chaum to deliver the keynote speech at the inaugural World Wide Web Conference. Need I say more?

During the event, Chaum demonstrated the first digitally native monetary transaction ever made online–a moment that emblazoned his name in the digital world forever. But his work always focused on something that most people think is impossible nowadays: privacy. 

Privacy, considered unattainable by pundits far and wide, was Chaum’s ultimate goal. More than once he warned of an internet where privacy would be greatly diminished by the blurred lines brought on by the hyper digitization of society. 

"If we don’t control our privacy, someone else will,” Chaum said, along with “"A society that values security over privacy will lose both." 

Watching the world embrace–although begrudgingly–surveillance capitalism, a part of me thinks Chaum, and the rest of us, failed. 

But before we go full doomsday, let’s see what Chaum was trying to do to stave off the specter of a 1984-style internet that pervades today. He founded DigiCash, a company devoted to the adoption of e-cash.

“As payments on the network mature, you’re going to be paying for all kinds of small things, more payments than one makes today,” Chaum told the New York Times in 1994. “Every article you read, every question you have, you’re going to have to pay for it.”

During its heyday, DigiCash partnered with major banks like Deutsche Bank and Credit Suisse, and it seemed ready to take on the world of finance. 

The Deals That Never Were

But Chaum’s most significant deal never saw the light. 

If you’re old enough, you’ll remember Netscape, one of the first internet browsers. Netscape, which later rebranded to Firefox, had a ‘money button’ designed to integrate with Chaum’s e-cash, but the project was never completed. 

Similarly, it is said that Bill Gates offered Chaum $100 million to integrate DigiCash into Windows 95, in what had the potential to be a world-changing fusion. But Chaum had other ideas in mind, and declined.

I sometimes wonder what Chaum did—or didn’t—see in Bill Gates and his offer. 

Unfortunately, DigiCash went bankrupt, after a lackluster effort by banks to push the technology forward. 

“It was hard to get enough merchants to accept it, so that you could get enough consumers to use it, or vice versa,” Chaum told Forbes in 1999, after DigiCash had finally filed for bankruptcy. “As the Web grew, the average level of sophistication of users dropped. It was hard to explain the importance of privacy to them.”

A Legacy That Endures

Despite DigiCash’s demise, Chaum’s ideas lived on. 

He inspired the greats of the digital currency movement, including B-money’s Wei Dai, Bitgold’s Nick Szabo, and Hashcash’s Adam Back, each proving to be instrumental in the birth of Bitcoin. 

Here he is on stage with Adam Back—who always said Chaum was a great inspiration—and Nick Szabo. A trident of top guns.

Even today, projects like Cashu are exploring how to use “Chaumian ecash protocols” as a Bitcoin Layer 2, showing that Chaum was onto something, and that privacy continues to matter today. 

You can head over to Bitcoin Magazine to learn more about how Chaum’s ideas and Bitcoin are colliding even today.

Until Monday,
Rizzo

P.S. Don’t dillydally. Go to Casa and sort out your custody. These are the things you don’t want to regret.