Satoshi Files: David Chaum
Crypto Basics

Satoshi Files: David Chaum

Created 5mo ago, last updated 5mo ago

Known as the "godfather of cryptocurrency," American cryptographer David Chaum has significantly impacted the fields of digital security and privacy.

Satoshi Files: David Chaum

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American cryptographer David Chaum has significantly impacted the fields of digital security and privacy, and was the creator of Ecash — the first attempt at building a working digital currency.

Source: Yahoo Finance

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Early Life

Born in 1955 in New York City, Chaum has spent his entire career making new cryptographic algorithms that protect sensitive data in the digital age. He is now recognized as the "godfather of cryptocurrency" as well as the "father of online anonymity."

Chaum has an outstanding academic record and has authored a significant number of important publications throughout the course of his career. He attended UC Berkeley alongside Bill Joy, the founder of Sun Microsystems, and Eric Schmidt, the former CEO of Google from 2001 to 2011.

When Chaum published a paper titled "Untraceable Electronic Mail, Return Addresses, and Digital Pseudonyms," he established the groundwork for the whole topic of anonymous communications.

The paper proposed ‘mix networks’ that batch and deliver encrypted messages to their receivers as well as to a server, where they are then reordered and obscured such that only the server can determine who sent which message. The messages are decrypted at their destination after being passed to further servers and re-obfuscated there. These mix networks are today considered the conceptual ancestors of modern anonymous browsing tools like Tor. Chaum himself has since suggested that every router should be made into a node on a network like Tor.
"Computer Systems Established, Maintained, and Trusted by Mutually Suspicious Groups," Chaum's doctoral thesis, was published in 1982. Its central ideas came to him while he was relaxing in a hot tub. In it, he proposed nearly every element of the blockchain protocol Satoshi Nakamoto outlined in the Bitcoin whitepaper, only twenty-six years earlier. The one component that wasn't included was proof-of-work (PoW), which enables nodes on a decentralized network like Bitcoin to come to consensus without the use of a middleman. PoW was not created until 1993, and it wasn't theorized and coined until 1999 — 17 years after Chaum's paper.
A year later, in 1983, Chaum published “Blind signatures for untraceable payments, which formally established the concept of ‘blind signatures,’ which he himself introduced in his 1982 paper (Computer Systems…). Blind signatures are a sort of digital signature where the content is hidden (or blinded) before it is signed. They were a significant advancement in the field of cryptography, especially for cryptocurrencies because they enable anonymous transactions.

These three papers, in addition to Chaum’s other work on cryptography, have been described as the technical roots of cryptography’s most influential and pioneering movement: the Cypherpunks.


The Cypherpunks are a group of cryptography experts who study how privacy and encryption tools are used, especially in light of how they can lead to big changes in social, political, or economic life around the world. The group’s members include Satoshi Nakamoto, the creator of Bitcoin; Hal Finney, the inventor of reusable proof-of-work (RPoW); and Adam Back, the creator of the Hashcash function that Hal Finney and Satoshi both used in their respective inventions. But were it not for David Chaum’s efforts and influence, the Cypherpunks might not have existed at all.

While Chaum was a student at Berkeley, US government organizations like the NSA grew more antagonistic and skeptical of citizens conducting cryptography research. According to Chaum, they were attempting to halt all cryptographic development. He also claimed that top NSA officials had threatened to have whole groups of civilian cryptographers arrested.

To combat this growing hostility, Chaum established the International Association for Cryptologic Research (IACR), which hosts cryptography conferences all over the world, and publishes the Journal of Cryptography. “Set cryptography free” was Chaum’s only request of the IACR.
Chaum lectured at the New York University Graduate School of Business Administration and afterwards at the University of California, Santa Barbara after earning his PhD from Berkeley. As interest in his theories began to grow, Chaum made the decision to put theory into action by creating Ecash, the forerunner to Bitcoin.

Creating Ecash

Ecash, which Chaum built through the DigiCash corporation, was the first attempt to build a working digital currency. This is how it worked: users would download the Ecash software, which would store their money digitally by having a bank cryptographically sign it. They could then spend it online or at participating shops and restaurants without opening a bank account or needing a credit card. Payments were free for individuals, just like with some credit cards, but there was a tiny cost for businesses.

Chaum was one of two keynote presenters at the first World Wide Web conference in Geneva while serving as CEO of DigiCash. Tim Berners-Lee, the creator of the World Wide Web, was the other speaker. While speaking live in front of the crowd, Chaum carried out the first-ever Ecash transaction.

Despite having a promising beginning, Ecash didn't become the overnight sensation that many had envisioned. Only one American bank, the Mark Twain Bank in St. Louis, adopted it, and only 5,000 people registered to use it during its original three-year trial. Ecash did, however, grow in popularity in Europe, where cash was still widely used. Early in 1998, a few other banks, including Credit Suisse in Switzerland and Deutsche Bank in Germany, partnered with Ecash. But it wasn’t enough: DigiCash closed its doors at the end of the year.

Several theories seek to explain why DigiCash failed. Two cryptographers who participated on the project, Nick Szabo and Zooko Wilcox O'Hearn, hypothesized that Ecash's major issue was centralization. Most of the big banks lacked faith in DigiCash, a single company that oversees the complete operation of a digital currency. Instead, a decentralized network was needed so users could send virtual currency directly to one another. A network like Bitcoin, for instance.

Xx Network

Fast forward, Chaum was shocked and appalled by the Snowden revelations about the NSA’s mass surveillance scheme in 2013. He doesn’t believe that mainstream communication apps that promise ‘end-to-end encryption,’ like WhatsApp, will give people more privacy or protection from the government. “It's criminal. It's exploitative of the public in the worst way,” he said, “because the real value in the information is the traffic data…the sender's social graph and its relation to the timing of events.” According to Chaum, it could be used politically, as demonstrated by the Facebook and Cambridge Analytica scandals.

In order to provide individuals with a means of communication hidden from the NSA's prying eyes, he made the decision to create a totally private, secure, and decentralized messaging and payment network. Chaum's network was able to encrypt messages' content and conceal the identity of the sender by enhancing the mixing technologies that he helped create in the early 1980s. This heightened privacy was accomplished by removing any metadata that would have shown who sent what to whom.

The platform, called the xx network, is now in use, and works similarly to Tor, whose underlying technology was largely based on Chaum’s work, but with some considerable improvements.

According to Chaum, the xx network needed to work faster than networks like Tor, which can't give users enough speed to safely contact several people at once. The xx network accomplished this by using smaller groups of nodes to achieve "a uniform mixing" of messages, thereby blending all users’ messages together. In around two and a half seconds, each message travels via five randomly selected nodes, disguising which message belongs to whom. For a bad actor to be able to read a message, it would require five totally random nodes to cooperate, which would be highly unlikely.

Chaum was thrilled when the network launched in January 2022. He said:
“Privacy in messaging and payments, and the like, is so fundamental to democracy. It’s now time to choose, as this is the key differentiator between future civilizations.”

The Evidence That David Chaum Could Be Satoshi Nakamoto

#1 He Has the Right Technical Skills and Academic Background

Not only does David Chaum have a degree and a doctorate in computer science, but he’s also contributed countless papers to the cryptography and computer science fields. Of all the people who could be Satoshi, David Chaum is probably the most academically qualified.

#2 He Was a Cypherpunk

Chaum was one of the earliest Cypherpunks, and a large part of the group’s work and discoveries were based on Chaum’s ideas.

#3 He Invented Ecash, the Forerunner to Bitcoin

There are a few different contenders for “the Bitcoin before Bitcoin,” but Chaum’s Ecash was undeniably the first global attempt at building a working digital currency. While it didn’t succeed, it provided a foundation on which all future cryptocurrencies were built.

#4 He Almost Invented Blockchain

Blockchain technology is integral to Bitcoin, and Chaum is often credited with the invention despite not quite finishing the idea.

He almost perfectly described blockchain in his thesis “Computer Systems Established, Maintained, and Trusted by Mutually Suspicious Groups.” The only element Chaum missed was proof-of-work, which wasn’t invented until seventeen years after he published the paper.

The Evidence That David Chaum Likely Isn’t Satoshi Nakamoto

#1 A Lack of Direct Evidence

Almost all the evidence suggesting that David Chaum secretly invented Bitcoin is circumstantial. Yes, he’s qualified and experienced, but there’s no direct link between him and Bitcoin.

#2 He Took Credit for Building a Digital Currency Before

Chaum developed Ecash out in the open, for the whole world to see. Would he suddenly revert to operating under a pseudonym to invent Bitcoin? If so, why?

So, do you think David Chaum created Bitcoin?

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