The Wild, Baffling, and Sometimes Terrifying History of Crypto-Anarchy
09.14.2018

If you’re new to cryptocurrencies and blockchain, you may be wondering why certain larger-than-life characters are closely associated with it. Take Cody Wilson. What does this 3D-printed-firearms fanatic have to do with bitcoin? Why is he cheered on by some of the most passionate advocates for this new era of money?

Wilson is the modern embodiment of crypto-anarchy, a political and philosophical belief system that developed in the Bay Area during the 1990s, propagated by self-described “cypherpunks.” These ultra-independents shared a belief that crypto—which until recently meant just the power to encrypt and decrypt communications—combined with decentralized computing networks, could bring about a new era of personal freedom, safeguarding free speech and privacy protections against incursions by governments and corporations.

For some cypherpunks, this heady mashup of the First and Fourth Amendments was shot through with a zeal for the Second. In The Cyphernomicon, a sort of crypto-anarchic Federalist Papers in FAQ form, Timothy May, the movement’s patron saint wrote that crypto, like guns, offered the individual “preemptive protection.” Borrowing the rhetoric of the National Rifle Association, he said that “if crypto is outlawed, only outlaws will have crypto.”

For the cypherpunks, any online exchange amounted to a transaction—an exchange of ideas, goods, or services—and transactions, like information, wanted to be free. Crypto equaled autonomy.

The gun advocacy was folded into a larger libertarian free-market streak among many cypherpunks. “There seems little doubt that total economic deregulation is a good thing,” wrote Eric Hughes, May’s original coconspirator. “I haven’t seen any nation harmed so far by having too free an economy.” For the cypherpunks, any online exchange amounted to a transaction—an exchange of ideas, goods, or services—and transactions, like information, wanted to be free. Crypto equaled autonomy. Ultimately, that had to mean the ability to exchange cryptocurrency, even if that term had not yet been invented. “We are defending our privacy with cryptography, with anonymous mail-forwarding systems, with digital signatures, and with electronic money,” Hughes wrote.

Crypto helped them formulate and implement the first three. That last one was a tough nut to crack. “Digital money in its various forms is probably the weakest link at this point,” May concluded, two years into the cypherpunk revolution. “Most of the other pieces are operational, at least in basic forms, but digital cash is (understandably) harder to deploy.”

Understandable because true cryptocurrency would be one that engendered trust among those who exchanged it, without the established structures—banks, treasuries—that compromised anonymity. This is why bitcoin represented the apotheosis of the techno-anarchic dream. A fuller picture of crypto-anarchy’s origins—and the ways its ethos continues to permeate our culture—begins with a problem.

The Prehistory
Let’s say I want to get a message to you through the postal service, guaranteeing that only you will see it. By definition, the mail is an insecure channel. Even if I could somehow use an indestructible lock to secure the message in an impenetrable box, that still leaves the problem of getting you the key to open it, which means we’re right back at the insecure-channel problem.

As Thomas Rid documents in his excellent “cybernetic history,” Rise of the Machines, as early as the 1940s intelligence agencies explored the idea of the message’s intended receiver somehow participating in the encryption process. In 1973, Clifford Cocks, a British mathematician, had an ingenious idea. The intended receiver could choose two gargantuan prime numbers and multiply them together to produce an insanely large number. This becomes the receiver’s public key. Put it up on a billboard, a Times Square Jumbotron, paint it on a banner towed by an airplane—it doesn’t matter who else sees it. That’s because although multiplying two huge primes is computationally rather simple, reversing the process—determining the two primes that produced it—is almost impossibly difficult.

Only you know those two numbers. This is your private key. I encrypt my message using your public key. You decrypt it using your private key.

Enter RSA
The concept was simple, but it took a few years for anyone to build a workable model. In 1977, three M.I.T. professors—Ron Rivest, Adi Shamir, and Leonard Adelman—released a public-key encryption program called RSA (named after their initials). Although they inaugurated the crypto era, their primary motivation was apolitical. They realized that electronic mail was on the horizon, requiring tools that could ensure a message transmitted online remained private, and that its origin could be authenticated.

The U.S. government took a dimmer view of RSA, especially when an article in Scientific American (read by future budding cypherpunks) spread the word. The National Security Agency immediately understood that RSA could greatly restrict its ability to intercept communications. The NSA moved to have RSA classified as a munition under federal arms trafficking laws, requiring special permission to distribute it.

Digital Cash
As early as 1978, while still a UC Berkeley undergrad, David Chaum was working on creating a blind digital signature method, a public-key encryption idea that presaged the rise of blockchain. It was a way to create a database of people that could retain their anonymity while ensuring that what they said about themselves was true. Chaum was thinking of digital voting—a vote could be authenticated without revealing the voter’s choice—and especially digital cash. In the mid-1980s, Chaum invented a way for customers to pay someone while preserving their anonymity and ensuring the funds were real. Unlike today’s cryptocurrency, Chaum’s method wasn’t fully decentralized—a bank was still required to solve the double-spending problem. But the word was out. “So powerful were Chaum’s ideas,” Rid writes, that it launched a movement dedicated to the belief that “crypto was en route to making the state obsolete.”

The Manifesto
Timothy May decided the time was right. In a mere 500 words, his 1988 Crypto Anarchist Manifesto, cheekily modeled on Marx’s Communist Manifesto, laid the groundwork. Crypto would “alter completely the nature of government regulation, the ability to tax and control economic interactions, the ability to keep information secret.” It would “create a liquid market for any and all material which can be put into words and pictures.” Just as the invention of barbed wire “made possible the fencing-off of vast ranches and farms, thus altering forever the concepts of land property rights in the frontier West, so too will the seemingly minor discovery of an arcane branch of mathematics come to be the wire clippers which dismantle the barbed wire around intellectual property. Arise, you have nothing to lose but your barbed-wire fences.”

Public-key Encryption Finally Goes Public
For a few years, May’s was a manifesto in search of a movement. A big step forward was the release in 1991 of PGP (“pretty good privacy”), a freeware public-key encryption modeled on RSA. Its designer, Phil Zimmerman, came under scrutiny from the NSA, but the secret was out. May would credit PGP for “having single-handedly spread public-key methods around the world.”

The Cypherpunks
By 1992, May was a rich man at 40, retired from his job at Intel and living on his Santa Cruz ranch. He became friends with Eric Hughes, a former UC Berkeley math student 10 years his junior. Both had been thrilled by RSA article in Scientific American 15 years earlier. Soon they organized a group of 16 fellow-travelers who met at a Palo Alto office space on Saturdays to discuss the philosophical and technological underpinnings of crypto-anarchy. One of the regulars, Mondo 2000 editor Jude Milhon, proclaimed them “cypherpunks.” The meetings evolved into an email list, and within a year crypto-anarchy cells had sprung up across the country, and around the world.

Clipping the Clipper Chip
In 1993, the government took an important step to halt the revolution. The Clinton Administration proposed a telecommunications encryption standard that included a new type of processor—dubbed the “Clipper Chip”—that would include a backdoor decryption key accessible by law enforcement and intelligence agencies. Matt Blaze, a member of the cypherpunk mailing list working for AT&T, determined that the Clipper’s key could be subverted. The government soon killed the plan.

The Assassination List
Jim Bell—like May, a former Intel engineer—exemplified the political radicalism of a certain strain of cypherpunk. In 1995, Bell devised a scheme for a crypto-enabled assassination list that sounds like something from a Philip K. Dick novel. Via an elaborate use of public and private keys that kept all communication anonymous, Bell proposed a public list of government employees marked for death, along with updated totals of money to be paid to enterprising killers (federal officials were automatically suspect because they were paid with taxes). People could also win money by correctly predicting the date of the killing. With its anonymity, extreme decentralizing, and micro-payments that were like owning shares in an execution, Bell’s idea anticipated many of today’s more creative blockchain applications (minus the extra-judicial killing). The plan, which emerged the same year as the Oklahoma City bombing, was never put into practice (thankfully).

The Sealand Experiment
It was supposed to be a crypto-anarchist paradise and playground: the Republic of Sealand, a 550-square-meter “island” (really, an abandoned World War II aircraft platform) in the North Sea. In 1999, Ryan Lackey, a 20-year-old crypto anarchist concerned with protecting privacy on the internet, acquired the offshore property to use as a base of operations of HavenCo, a safe space for data unencumbered by the laws of any country. Lackey ran an remailer from Sealand (a site for forwarding email anonymously), but nothing much else came of the plan. In 2001, Lackey jumped platform to take a job at Google.

Freenet
Back in 1993, the cypherpunk list received an anonymous email heralding the formation of BlackNet, a clearinghouse for “buying, selling, trading, and otherwise dealing with *information* in all its many forms.” The idea was that BlackNet, untraceable and tied to no physical location, would take submissions via extensive remailers (assuring the sender’s anonymity), encrypted with the intended recipient’s public key. May soon announced that BlackNet was his brainchild, meant as something between a prank and a proof-of-concept (“an exercise in guerrilla ontology”). It didn’t actually exist—although the letter’s stated disdain for patent laws, export regulations, and national security considerations made BlackNet seem like crypto-anarchy’s inevitable next step.

Seven years later, Ian Clarke, a 23-year-old Irish computer programmer, created Freenet, which he called “a near perfect form of anarchy…a well-planned decentralized system.” Like BlackNet, Freenet promised the unlimited and untraceable peer-to-peer transfer of information, without any need for a central repository. This being the dawn of file-sharing, Clarke viewed Freenet as a kind of anti-Napster. “The owners of Napster could be bribed into selling it to the music industry,” he told me at the time. “To make Freenet immune to that, I designed it so that it doesn’t depend on any one person or computer. I don’t control it. If someone put a gun to my head and said, ‘Shut down the system,’ I’d be unable to do it. If someone hacked into my head and said, ‘Shut down the system,’ I’d be unable to do it.”

The Law
Throughout the ‘90s, there was evidence that crypto cut both ways—that however much the NSA, in the eyes of the cypherpunks, overreached by trying to restrict it, crypto really did enable organized criminal activity. Ramsey Yousef, one of the planners of the 1994 bombing of the World Trade Center, used a computer with encrypted files. The Aum Shinrikyo cult in Japan, which killed 12 people and sickened six thousand by releasing sarin gas into the Tokyo subways system, used RSA to encrypt plans for future attacks.

But the cypherpunks were raising an important question about the limits of expression. Their work led to a series of cases heard in the late ‘90s, as the U.S. legal system wrestled with the question of whether computer code was protected by the First Amendment. The most important case involved Daniel Bernstein, a UC Berkeley grad student who developed an encryption method, and then contacted the State Department to inquire whether it would be considered a form of munitions. When the answer came down that it was, Bernstein sued. In 1999, an appellate court ruled in Bernstein’s favor. The decision made clear that even if cryptographic source code was unintelligible to most people, it amounted to a form of expression used by scientists, computer experts, and mathematicians.

Wikileaks
Julian Assange, a regular on the cypherpunk mailing list as early as 1995, is the crypto-anarchist whose actions have had the largest world-historical effects. “The universe believes in encryption,” he wrote in the introduction to the book Cypherpunks: Freedom and the Future of the Internet in 2012. “It is easier to encrypt information than it is to decrypt it. We saw we could use this strange property to create the laws of a new world…. To fortify our space behind a cryptographic veil. To create new lands barred to those who control physical reality, because to follow us into them would require infinite resources. And in this manner to declare independence.” (Not to mention put your thumb on the scale of a presidential election, but that’s another story.)

Silk Road
To what degree Satoshi Nakamoto, whoever she or he is, subscribes to the tenets of crypto-anarchism remains an open question, a subject of debate among historians. What’s undeniable is that bitcoin added a crucial missing link in the crypto-anarchic worldview—and if something like Silk Road wasn’t the intended outcome, it was probably an inevitable one. A marketplace that enables frictionless (anonymous, untraceable) transactions was always going to be the end-game of crypto anarchism. “The state is the primary source of violence, oppression, theft and all forms of coercion,” a Silk Road rep (presumably Ross Ulbricht) told the journalist Adrian Chen in 2011. “Stop funding the state with your tax dollars and direct your productive energies into the black market.” Farewell to barbed-wire fences.

Apple
Another way to look at the evolution of crypto-anarchy is to see its current state as fostering an equilibrium. Consider the fallout from the mass shooting in San Bernardino, California, in December 2015. The FBI obtained an iPhone that belonged to one of the suspects, and obtained a court order to force Apple to override the phone’s encryption so that agents could look inside it. When Apple refused, the FBI complained that the standard encryption on these phones was undermining their ability to do their job. The agency ultimately got around Apple’s intransigence by enlisting unnamed outside help to crack the phone.

What does this tell us? The cypherpunks were always distrustful of both corporate and state control. In the battle over the San Bernardino iPhone, one of the world’s largest corporations demonstrated at least a nominal willingness to link cryptographic integrity to consumer protections. At the same time, the FBI, a symbol of the nation-state’s sweeping power, decided to back off and just hack this phone themselves.

If you can’t beat crypto-anarchy, you might as well join it.