Cypherpunks, extropians and anarchists — meet the radical characters behind cryptocurrencies
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While cryptocurrencies have been in the spotlight for years now, much less is known about their origins — including the Californian-based anarchists and futurists of the 1970s and 80s who wrestled with this once-radical idea of how to make digital cash.
A host of digital, decentralised alternatives to money have made quite a splash since Bitcoin burst onto the scene only a decade or so ago, but their origins can be traced to a relatively small group of people interested in computers and privacy, who were wanting something like electronic money — only less traceable.
Finn Brunton, an assistant professor in technology and author of a book on the history of cryptocurrencies, says their beginnings were quite remarkable.
"This is a story where a number of key people involved have had themselves cryogenically frozen, and their heads are in this vat in Arizona, waiting to be resurrected," he said.
"That, I think, begins to give a flavour of how strange this particular journey got."
The group of technologists, concerned about the potential for surveillance that came with emerging electronic money systems, began searching for alternatives.
Enter the cypherpunks and crypto-anarchists
Key player David Chaum, whose "Digicash" idea enabled people to pay each other anonymously online, enjoyed momentary attention in the 1980s.
But as Mr Brunton explains, there was a whole "remarkable roster of characters".
"Many of them had backgrounds in counterculture, the anti-war movement, and they could see how this would create a terrible temptation for groups and organisations in power," Mr Brunton says.
For example, there were the cypherpunks — a "loose mix of people", he says, who wanted the ordinary citizen to have access to cryptographic technology so they could protect their individual privacy.
In their ranks were extreme libertarian elements, like crypto-anarchist Timothy May, whose aim was something resembling the end of government itself.
"[His] long-term vision for digital cash was that it would play an instrumental role in creating untaxable, off-the-books economies, and underwriting informational black markets," he says.
"[This] would gradually erode the abilities of governments to function in any way and lead to some form of relatively vaguely defined militant libertarian utopia."
Many of the people who were involved in the cypherpunk movement were also part of an "extraordinary subculture" called the extropians — and their vision for technologies resembled science fiction.
The extropians believed that a currency free from government would help to create an ultra-free market that would create some sort of Utopia.
To this end, extropians are sometimes cryogenically frozen after death, expecting one day to be revived.
Digital currency could act as a store of value no matter what changed in the decades or centuries before their revivification.
Year Y2K and the GFC
Eventually, significant events became the catalyst for these radical ideas around digital cash to take off, Mr Brunton says.
"We begin to see the population of the internet grow, we start to see that there is not simply these kinds of early-stage visionaries, but actually whole populations," Mr Brunton says.
"People who are operating across the barriers of financial exchange, who are operating across national jurisdictions and who need ... to transact money."
Then there was Y2K — the global fear that everything was going to stop as the world entered the year 2000.
"Y2K [brought] the realisation that many of the mechanisms that now have more and more financial activity taking place on them — the platforms, the infrastructure — are actually quite brittle," Mr Brunton says.
"People were beginning to realise that they needed to start thinking about what the alternatives to these mechanisms might look like."
And then early in October 2008, the onset of the global financial crisis thrust the existing financial set-up towards breaking point.
As economic confidence plummeted, financial players began stashing their money somewhere safe from the ruinous market, running from banks and financial institutions.
The power of Bitcoin
Against this chaotic backdrop, with the prospect of multiple banks collapsing, came the pseudonymous Satoshi Nakamoto and his paper about Bitcoin.
"I've been working on a new electronic cash system that's fully peer to peer, with no trusted third party," read the first line of the paper, which became Bitcoin's founding document.
Since 2008, Bitcoin has gone through enormous price variations, and been joined by other cryptocurrencies.
Major companies like Microsoft have agreed to accept blockchain, the technology behind cryptocurrency such as Bitcoin, as legitimate tender — and some governments have investigated the technology.
More recently, Facebook has announced plans to launch a cryptocurrency called Libra in 2020 as it expands beyond social networking and into e-commerce systems.
But despite these inroads, cryptocurrencies are not guaranteed by any bank or government, are highly speculative and are linked to money laundering.
According to Mr Brunton, the development of cryptocurrency is being held back by its libertarian roots "and all of the baggage that brings with it".
However, based on his analysis of the history, Mr Brunton predicts cryptocurrency technology may still be set to change some areas of finance.
He predicts that remittance payments, smaller-scale forms of payment and micro-transactions over the internet could all be handled via cryptocurrency.
And while he says libertarianism is not on his radar, Mr Brunton believes there is a potential for cryptocurrency to protect our transactions in a way the current system is unable to do.
"That's an area of real social value that I think these technologies could produce, and I hope we see more cryptocurrencies being developed in that space," he says.
Topics:
money-and-monetary-policy,
business-economics-and-finance,
computers-and-technology,
internet-technology,
science-and-technology,
history,
community-and-society,
united-states
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