Sometimes it’s useful to have a little context. With reference points our minds tend to rest a little easier and sanely in this age of Creative Destruction. Understanding the origins of Cryptobloque (my term for all things blockchain and crypto) can help clarify why things are the way they are and where we are going, or could be going.
For all you who hated your history classes and told your parents you’ll never need it or use it, well, stand corrected - there can be significant value in knowing your history.
Cyphers have been used throughout history to communicate secretly and transfer information. Particularly for governments, royal families, nation states and principalities, this has been standard practice for hundreds of years.
The urgency for more sophisticated means of secret communication accelerated in the late 19th century with the European powers competing for vast colonial empires. Countless small scale colonial conflicts, larger global conflicts and numerous Continental European wars kept the ruling class busy with their strategic interests.
This competition came to a crescendo in World War I in which cryptographic endeavors were being developed as a reliable means of secure communication for government’s armed forces, intelligence agencies and diplomatic missions.
As World War II approached cyphers were in a rapid mathematical evolution and modern cryptography was being born.
I remember as a teenage kid reading some of my Dad's history books about the great effort of the Allies to crack the code of Nazi Germany’s Enigma machine. This was an invaluable advantage the Allies eventually gained and further increased once they were able to break the code of the Axis ally, Imperial Japan.
By the late 1970s, out of the garage, came the personal computer and the Pandora’s box was opened. Not long after, this gave way to the Cypherpunk movement. This movement from the late 1980s and 1990s took the cryptologic space into the age of information technology.
The world of finance and banking have historically been early adopters of innovation and on the cutting edge of new means to carry out their control. Early access to information and knowledge to navigate future trends, has served this sector well in shaping and securing the outcome of the money sector.
This time is a little different. The dawn of the internet increased the interest of the Cypherpunk community to solve problems that would allow electronic cash and payments. Many solutions came and went but all needed high levels of encrytion for security; you may remember eCash, Cyberbucks, Cybercash, Digicash, Mondex. Paypal was the only survivor because it pivoted back to the standard protocols used in the banking space. Hence, no difference, back to square one.
Satoshi Nakamoto could be a man or woman. Or a group of people, albeit small, say a handful of developers in a team of maybe 5 or 6 individuals. It doesn’t matter. What does matter is this punk, Satoshi, put together the computer code that allows for the Blockchain and bitcoin.
In the quest to solve for a true electronic currency, Satoshi came up with something brilliant, yet so simple. Decentralize the authority or make it non-existent so no one person or entity can control the currency or manipulate it, like a central bank.
Trustless peers is the verbiage used to describe the lack of need for trust in this system whereby all transactions are realized on a public ledger distributed across computers worldwide connected via the internet. When you make a financial transaction on the blockchain, your computer is a peer (or node) in the distributed ledger.
I don't think it is an understatement to say governments are struggling with how to navigate the new frontier. Cryptography has advanced so far and fast, they are challenged at being able to crack codes and keep up with the pace of change. Banks and Central Banks too are being forced to adapt and make fast decisions, more quickly than they are used to, prompted by an emerging monolithe that morphs daily.
The new reality is, cryptography is laced into our everyday lives, just look at your iphone or android. Free societies have many questions to answer regarding privacy, public safety, security within the context of freedoms and fundamental rights. One certainty is, with the decentralized nature of the blockchain, all bets are off as to anyone being able to control, manipulate or end this revolution.
The Age of Cryptobloque has arrived. Happy trading.