Cryptoeconomics is the fusion of two social science disciplines as old as civilization itself: Economics and cryptography.
I’m going to assume that most readers are familiar with the fundamentals of economics. If you understand that the price of tea in China determines how many cups of chai you can drink daily on your current income, then you have a basic understanding of economics. If you don’t drink tea, you may relate to the price of petroleum in the Middle East and how it affects the price of gasoline in your home state. You know how many miles per gallon your vehicle gets on your commute to work every day and budget for that expense.
Cryptography is a little more complicated. I’ll start with a little history.
A Short History of Cryptography
Primitive cryptography involved writing symbols on cave walls. Eventually, writing moved from cave walls to clay tablets. Of course, not all writing needed to be secure. If Jeanette wanted to convey to Ned what they were having for dinner that night, she simply drew a picture. If the neighbors figured out they were having Macedonian meatballs, who cared? But if Ned, a battalion commander in the Mesopotamian Army, wanted to draw up battle plans on an upcoming invasion, he wouldn’t want that communication to fall into the hands of the enemy. Therefore, a secret code was devised.
Down through history, civilizations have used secret codes to secure sensitive communications.
During World War II, the U.S. and British used computers. The Germans and Japanese had their own ways of securing messages with computers, and both the Allies and Axis attempted to break the codes of the enemy using computing systems.
After World War II, cryptography grew more complex and mathematical. In the early 1970s, as the ARPANET began to grow and internet protocols developed, there arose a need to secure communications on the systems the government used on its wide area network. The U.S. published its first data encryption standard to the Federal Register in 1975. One year later, a new development in cryptography occurred when two Stanford researchers developed a public-private key cryptography technique. Just like that, asymmetric cryptography was born.
Cryptography is a very important part of cryptoeconomics because if digital currencies aren’t secure, then they essentially have no value.
How Bitcoin Opened the Floodgates of Cryptography
In the 1990s, a radical group of computer nerds called cypherpunks made it their mission to use cryptography to promote computing privacy and security.
The father of the cypherpunks is a man named David Chaum, who made the first attempt at creating a digital cash system.
In 1992, three brainiacs began meeting at a small company in California. John Gilmore, a computer scientist who later founded the Electronic Frontier Foundation, Tim May, employed by Intel and founder of a crypto-anarchist group that advocated for internet privacy and wrote extensively about libertarian ideas, and Eric Hughes, chief administrator of the cypherpunks mailing list, were the founding members of the cypherpunks.
Within two years, the cypherpunk mailing list had 700 subscribers. By 1997, there were 2,000 subscribers.
The cypherpunks had robust discussions regarding public policy as it relates to privacy, anonymity, security, and related topics. They also were known for radical activism. When the U.S. government called a popular encryption program “munitions export without a license,” its creator published the program’s source code as a hardback book and sold copies of it in order to circumvent a law that defined munitions as a cryptosystem with a key larger than 40 bits. If the source code was in print, Phillip Zimmerman could then claim First Amendment rights. To this day, he hasn’t been charged with any crimes. His book is listed as out of print on Amazon.
Adam Back, the creator of a protocol adopted for bitcoin, wrote three lines of code as an act of civil disobedience and suggested people use it as an email signature.
Another cypherpunk created a web page with an open call for anyone to become an international arms trafficker. Visitors could fill out a form that would send an email with Back’s code from a U.S. server to Anguilla.
Cypherpunk members filed lawsuits against the U.S. government claiming some action was unconstitutional, and won.
Members of the cypherpunk community included such notable public figures as WikiLeaks founder Julian Assange; Adam Back; author Jim Bell; BitTorrent creator Bram Cohen; Hal Finney, recipient of the first bitcoin; author Sean Hastings; law professor Peter Junger; publisher Jude Milhon; author Bruce Schneier; smart contracts creator and bit gold inventor Nick Szabo; Zcash founder Zooko Wilcox-O’Hearn; and Marc Andreessen, co-founder of Netscape and venture capitalist.
At least three of these people (Chaum, Back, and Szabo) made significant contributions to the development of technology that Satoshi Nakamoto adopted for bitcoin’s development. Finney was one of the first people to get excited about bitcoin. Back, Chaum, and Szabo have all gone on to found or get involved with other cryptocurrency developments.
Cryptography, a science that began with U.S. national security in mind, has entered the private sector and is being used to fight government censorship, violations to individual privacy, and personal security. More people are studying and developing cryptographic systems today than ever before.
DISCLAIMER
I am not a financial advisor, nor do I give financial advice. The above information should not be considered financial advice but is for informational purposes only. Neither I nor Cryptowriter are responsible for financial losses incurred as a result of acting on this information. Please consult a financial advisor before making any financial decisions.
This post is published for Cryptowriter in association with Voice.
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