Meet The Godfather Of Cryptocurrency

Joe Weisenthal (0:11)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:16)

And I'm Tracy Alloway.

Joe Weisenthal (0:18)

So Tracy, Bitcoin has been surging again lately.

Tracy Alloway (0:23)

Yeah, I think as we record this, it's currently above 8,000, right?

Joe Weisenthal (0:28)

Yeah, it's been fluctuating a little bit, but obviously one of the things that happens that every time Bitcoin or other cryptocurrencies start to spike interest follows soon thereafter. It's one of these things where when it's down, suddenly people go quiet and stop talking about it and pretend they were never involved. And then when it's surging, everyone's like, oh yeah, I'm interested in that stuff. It's very much a great example of narrative following price.

Tracy Alloway (0:55)

Yes, indeed. I actually joked on Twitter earlier today that now we're gonna see all the people that scrubbed blockchain from their Twitter bios and LinkedIn profiles, they're all gonna start adding it back in.

But I think when it comes to the Bitcoin price, I know a lot of people watch it sort of purely out of entertainment value, but we've talked before on the show about the importance of the network effect and the idea that if you're actually going to get people using Bitcoin, you need to generate a buzz, right?

Joe Weisenthal (1:22)

Absolutely. So obviously the buzz is picking up. Bitcoin itself has been around for about a decade now, basically exactly 10 years more or less.

But what I think a lot of people don't know or they've never really thought about is for so long, many years prior to Bitcoin, decades really, people had been trying to work on the problem of digital money in some way or another, whether it's anonymous payments online or payments that didn't have some sort of centralized clearing house to facilitate them. Bitcoin isn't just a new thing, it's kind of the solution to a problem that people had been focused on for a while.

Tracy Alloway (2:06)

Right. So I think the notion or the exploration of digital currencies kind of started growing in tandem with the internet, right? And it was sort of a solution to a problem that the internet and new technology suddenly threw up. Didn't you read a book on this, by the way? Weren't you really excited about something?

Joe Weisenthal (2:25)

Yeah, there's a great book coming out this summer by Finn Brunton all about this.

But yeah, you're exactly right. I mean, obviously in the real world and the physical world, I can pay you in cash and no third party, no legal authority has to know about it. But very early on, people sort of intuited that as our economy became more digital, that that would be a problem that would need to be solved.

So today, I'm very excited because we are going to be talking to a guest who was at the forefront of this search for a solution to this problem. Truly, I think everyone in this space would agree, one of the godfathers of digital currency, a true pioneer, an inventor of digital currency long before Bitcoin ever came around, who could tell us all about this prehistory of cryptocurrency and where he sees the space now. So without further ado, I want to bring in David Chaum. He is the CEO and founder of Elixir, but very early on for decades, like I said, one of the godfathers of the space. Really appreciate you joining us.

David Chaum (3:32)

Hey, it's so great to be here with you both.

Joe Weisenthal (3:34)

Let's start, David, just tell us, how did you, when did you get interested for the first time in solving this problem, in seeing that as the world got more digital, there would need to be a way for transactions to be, at least in some sense, anonymous.

David Chaum (3:51)

Well, actually, 82, I published a paper about blind signatures, which was the eCash technology that I later deployed in the mid-90s.

Joe Weisenthal (4:04)

So eCash, it was not a cryptocurrency as we know it now. Why don't you explain, what was eCash?

David Chaum (4:13)

Well, actually, eCash is slightly different and in some sense slightly better than perhaps cryptocurrencies in that current cryptocurrencies are generally, think of them more like digital checks.

They move money from one wallet ID, one account, your account to someone else's account. Whereas with eCash, it was the first digital bearer instrument. It was a number that was worth money and one of the additional features of eCash was because it was a digital bearer instrument in the first such thing, it could have this special blind signature property which meant that when you withdrew one of these from your bank account, and your bank account was reduced in value, they gave you this signature, public key digital signature, it's a cryptographic operation, they performed on a number that you sent them, that signature was worth, let's say, one dollar that came out of your account. Well, you were able to transform that signature into a different, an unrelated form that was still clearly signed worth one dollar, but absolutely uncorrelatable to the number that you sent to your bank. So that meant that you had the money. There was no way that they could stop you from spending it, or even know where you would spend it, or if you had spent it.