Nick Szabo: Bitcoin Secures Itself And Doesn't Ask For Permission

Szabo explained the history of philosophical and technical work by the cypherpunks that led up to the invention of Bitcoin at the Bitcoin 2022 conference.

Computer scientist and cryptographer Nick Szabo spoke on the Bitcoin 2022 conference’s main stage today to shed light on the history preceding the invention of Bitcoin. Unbeknownst to many, Bitcoin represents the culmination of decades of research on cryptography, freedom and privacy.

“Bitcoin can operate seamlessly… as well as bank the unbanked [because of] the fact that Bitcoin secures itself and you don’t need to ask permission,” Szabo said.

Cryptography was the necessary key to unlock the ability for Bitcoin to secure itself, and the need to remove permission from the monetary equation ultimately rest in taking power away from the government and into people’s hands, which ties back to the ideals of freedom, free markets, privacy and even Austrian economics.

Much of the work in cryptography before the 1970s was primarily practiced in secret by military or spy agencies. That changed in the 1980s as Dr. David Chaum started writing about and publishing papers on anonymous digital cash and pseudonymous reputation systems.

A whole movement spun out of Chaum’s work led by those who became known as the cypherpunks, pioneers in the field of applied cryptography who used technology as a means to protect people’s privacy in the digital era, especially when related to money.

“Cypherpunks wanted to free cryptography from government control and bring it to the masses,” Szabo said, adding that they stood for private, non-governmental, non-politicized money.

Thinking ahead of their time, the cypherpunks began researching and developing technologies that would protect people’s privacy as the status-quo forms of communication and money transfer moved from the physical to the digital world.

Nick Szabo was one of those cypherpunks, and was arguably the one who dove deeper into the quest for a digital form of cash.

Szabo’s quest culminated in Bit Gold, a digital money proposal that leveraged proof of work, a cryptographic trick utilized in Dr. Adam Back’s anti-spam currency Hashcash. However, Bit Gold wasn’t an optimal solution.

“Satoshi, with Bitcoin, came up with a much better solution” than Bit Gold, Szabo said.

Bit Gold did serve as an inspiration for Satoshi Nakamoto, however. In fact, Nakamoto published the Bitcoin white paper to the cypherpunk mailing list in the same year — but after — Szabo posted his Bit Gold proposal there.

Another notable cypherpunk was Hal Finney, the main author of PGP 2.0 and creator of reusable proof of work (RPoW), who received the first Bitcoin transaction from Nakamoto.

Finney’s RPoW also leveraged Back’s Hashcash, however his proposal “never really took off,” Szabo said.

Ultimately, Bitcoin was able to elegantly employ the work of the cypherpunks to create a monetary network that secures itself, doesn’t ask for permission, can bank the unbanked and has lived strong for years. Moreover, Bitcoin leveraged that technical work to enable the philosophical ideals put forth by the cypherpunks.

Bitcoin 2022 is part of the Bitcoin Event Series hosted by BTC Inc, the parent company of Bitcoin Magazine.