Nothing about cryptocurrency’s massive bull run could have been predicted when Bitcoin’s white paper was unleashed, and even the most optimistic evangelist did not expect to see six-figure valuations for the flagship token of the blockchain.
The implications of all of this will vary considerably depending on an investor’s motivations for having cryptocurrencies in their wallet. Whilst undoubtedly good news that speaks to the value the tokens themselves have to investors, how it reached that point is something that has divided opinion.
The initial goal of Bitcoin was to serve as a banking system for the unbanked during and in the immediate aftermath of an unprecedented financial collapse, whilst its valuation peaks have come as a result of integration within that very same financial system that sparked the righteous anger which inspired Bitcoin.
Its mysterious creator, known as Satoshi Nakamoto, never explicitly explained the motivation behind its creation, although the reference to a bailout for banks in the United Kingdom embedded in the Genesis Block gives some suggestions.
However, one of the biggest influences for Bitcoin, innovating all but one of the features in the initial White Paper, was David Chaum, who published his earliest paper on the subject in 1982.
This part of Bitcoin’s influence is very well-known, but beyond predicting the blockchain, digital currencies and blind signatures, he also might have inadvertently been ahead of his time when it came to the role crypto would play in the financial sector.
Unfortunately, he was too far ahead of his time to avoid bankruptcy.
Cypherpunk 2020
David Chaum was the inventor of electronic money, pioneering the exceptionally forward-thinking eCash system in 1994 through his DigiCash private company, which gave him an opportunity to commercialise his work.
Even at that point, however, there was a conflict in motivations when it came to the ideals and the reality of his digital cash invention, and it is impossible to explore David Chaum, Satoshi Nakamoto and cryptocurrency without exploring the cypherpunk movement that inspired it.
The cypherpunk movement as an established ideological collective began in the late 1980s, inspired heavily by Mr Chaum’s work on a technical basis and by other similarly anarchic movements from an ethical standpoint.
As a general rule, there was a distinct distrust of larger institutions and the government amongst cypherpunks, partly due to concerns regarding censorship and privacy breaches, but mostly because until Bernstein v United States in 1996, cryptography tools were classified as a “munition”, and coders had to register as arms dealers to export them.
This was perhaps the motivation for David Chaum to opt to work with the banking system when DigiCash was developing their eCash system, and his system of electronic money was marketed and sold less as a fully fledged digital currency and more as a form of traveller’s cheque.
It was a way to make existing payment systems safer and metamorphosed in a similar way to PayPal a few years later.
Much of the underlying technical aspects of eCash are extremely similar to later cryptocurrency tokens but would serve as an additional financial product for banks rather than a parallel economy, with eCash trading in whichever currency was legal tender in the countries it operated.
This is, in the 2020s, what happened to cryptocurrency; rather than being a completely separate currency system, its high, fluctuating valuations make it far more effective for traditional financiers as a digital commodity to invest in as part of ETFs rather than buy and use as currency.
Whilst Mr Chaum’s motivations were unlikely to have matched those of modern crypto investors with respect to the integration of the blockchain into other parts of the financial market, he knew on some level that there would never be a truly decentralised financial system completely divorced from the banking sector.
The flipside of this is that he struggled tremendously to sell the utility and value of eCash to banks at the time, many of which failed to see the clear and evident benefits of secure digital cash in the brave new world of eCommerce.
A few offered to adopt it on a trial basis, including Deutsche Bank in Germany and The Mark Twain Bank in Missouri, generally charging merchants to use it and offering the infrastructure for free to customers.
The problem with this is that customers did not (and in some respects still do not) appreciate the importance of privacy, and the relatively technologically savvy cypherpunk and cyberpunk crowd that used the Internet prior to the Eternal September were too small a market to rely on.
Meanwhile, both merchants and the banking establishment see the privacy advantages as a negative, given the value of customer data in making purchasing decisions.
The Mark Twain Bank used it as a form of micropayment system, a type of online currency designed for payments which cost less than a dollar, but given that no micropayment system succeeded, DigiCash ultimately filed for bankruptcy in 1998.
However, despite this, the idea of cryptocurrency and the banking establishments being more interlinked would ultimately stick by the 2020s, and it is increasingly rare for hedge funds, pension funds and other portfolios to have Bitcoin and Ether as part of a diversified range of investments.