At first, cryptography was only used by military, secret services and intelligence agencies as a protection from the leak of classified information. Most of the people believe that an autonomous digital currency that is not connected to any government or other intermediary such as a bank is appealing because of the anonymity and liberty. Transfer of money across geographic regions both domestic and international can be performed easily and quickly without worrying about government regulations. A pioneer of cryptography in USA is considered Horst Fietsel with its publication of the Digital Encryption Standard (DES) on March 17, 1975 in the Federal Register. Fitsel, in that time IBM researcher, working on a project codenamed Project Lucifer, filed a patent application for a 48-bit block cipher cryptographic system (also known as the Lucifer cipher). The project was commissioned by Lloyds Bank for encrypting ATM transactions.
In 1972, the National Bureau of Standards (NBS) identified the need for an encryption standard for encrypting unclassified but sensitive government documents. May 1973, solicited proposal for such a system. The NBS then chose, with the approval of the National Security Agency (NSA), a modified IBM’s algorithm. The project was commissioned by Lloyds Bank for encrypting ATM transactions. The original algorithm was strengthened to a 56-bit block cipher. The publication of DES lead to many discussions and debates in the community and society. Some felt that the original 56-bit block cipher was altered by IBM at NSA’s behest to provide that NSA a backdoor into the cryptographic system. There were also questions raised regarding the security of 56-bit cipher. However, DES became very popular and was soon adopted internationally as the encryption standard.
Cypherpunk, a movement that “formally” emerged in the early 1990s also contributed in cryptocurrency creation. The cypherpunk movement is an movement whose participants seek to engineer social and political change and subvert the status-quo by enhancing security and privacy through cryptographic techniques. The founders of the cypherpunk group were Eric Hughes, a UC Berkeley mathematician, Timothy C. May, a former chief scientist at Intel, and John Gilmore, one of the early employees at SunMicrosystems and founder of Cygnus Support as well as the Electronic Frontier Foundation. All three were wealthy, and shared a strong libertarian streak. The group started with a meeting in 1992 in the Bay area of San Francisco and started the cypherpunk mailing 36 list in 1992. Within two years, the mailing list garnered over 600 subscribers.
Another major contributor to creation of cryptocurrency is David Chaum, a cryptologist who got his doctoral degree from the University of California Berkeley. As a doctoral student in the 1980s, Chaum explored several concepts and developed several methods focusing on anonymous communication and anonymous financial transactions. In 1981 Chaum published the article “Untraceable Electronic Mail, Return Addresses, and Digital Pseudonyms” which described a method, using public key cryptography, to hide the identity of a participant in an email communication, as well as the contents themselves. He explained one of its uses in elections where an examiner could verify that all the votes have been correctly counted without revealing the identity of the voters. A huge contribution of Chaum in this field is creation of a digital currency based on cryptography that he called E-Cash, and in 1990 founded a company called DigiCash, an electronic money corporation.
The world’s first electronic cash payment took place in May 1, 1994. However, most attempts at creating a workable cryptocurrency have failed to gain consumer acceptance, until bitcoin was introduced in January 2009 when Satoshi Nakamoto who is believed to use this name as a pseudonym mined the first block of bitcoins, known as the genesis block, gaining a reward of 50 bitcoins.
