He is called the ‘Godfather of cryptocurrency’. In 1990, when the general public had never heard of the Internet, David Chaum founded DigiCash: a company that could provide financial institutions with a system for secure and anonymous digital micro payments. It was no coincidence that DigiCash’s head office was in the Matrix building at the Amsterdam Science Park. Chaum had been working in Amsterdam at CWI since the second half of the 1980s, as head of the cryptography research group.
Groundbreaking dissertation
In 1982, Chaum had written a groundbreaking dissertation on how a blockchain-like technology could be developed to enable digital transactions without the need for an umbrella authority – such as a bank or credit card company. After he founded the International Association for Cryptologic Research in the same year, his star had risen rapidly. By the time he arrived in Amsterdam, Chaum was considered by peers to be one of the very best cryptography experts in the world.
Dictatorship or real democracy
Chaum was – and is – more than a very good mathematician and computer scientist. He was driven by the ideal that those in power should not have control over people’s digital lives. “The difference between a bad electronic cash system and well-developed digital cash will determine whether we will have a dictatorship or a real democracy,” is one of his better known statements.
He meant that, while coins and banknotes seem outdated, they have one unimaginably valuable feature: they enable transactions that remain completely anonymous. Electronic payments, on the other hand, can always be traced back to the parties involved. This can be advantageous for a tax department, for example, but it can actually harm society in a broader context. Chaum has committed his life to making transactions, even the smallest ones, completely untraceable by third parties.
Digicash and eCash
Chaum’s first attempt to put this into practice was the spin-off Digicash. He set up his business just around the corner of CWI, in the Matrix Innovation Center. Safe ‘smart cards’ would become first successful product marketed by Digicash.
In 1993, Chaum presented eCash, a technology for making payments securely and anonymously over the still adolescent internet. The product was praised worldwide as groundbreaking. Dutch ING bank was keen to invest in it, while Microsoft’s Bill Gates wanted to integrate the technology into Windows 95. Other large parties were also keenly interested.
Ahead of his time
In this early Internet age, however, developments followed each other at a breathtaking pace. In retrospect, it can be concluded that Chaum was far ahead of his time – too far. When e-commerce started to grow rapidly in the late 1990s, it was mainly the credit card companies that managed to make the most of it. A credit card was not the safest and most economical way to do business on the internet, but consumers already had one and were used to using it.
In the end, banks preferred to opt for more conservative solutions. Consumers were not at all concerned that all their online transactions were completely transparent. Chaum once sighed that this was the price of an Internet that was being embraced by the masses.
Electronic voting
Chaum’s interest was and is certainly broader than digital money. This is evident, among other things, from his many initiatives to make voting less susceptible to fraud. In 1981 he came up with a reliable method for electronic voting that kept the ballot secret. In 2010 he published (with others) a book on this issue titled Towards Trustworthy Elections.
Rise of bitcoin
The rise of bitcoin in de 2010s put a spotlight over Chaum’s ideas once again. This digital coin is largely based on the ideas that Chaum developed in the 1980s. Bitcoin and other cryptocurrencies are indeed anonymous and quite safe, but also have technical challenges. The most important hurdle is that bitcoin is very slow: it takes a long time for the blockchain system to approve a transaction. This makes the digital currency unsuitable for small payments in shops, for example.
It should come as no surprise that Chaum, who is still very active, has plunged into this complex matter. His new company, Elixxir, recently brought an early version online of a blockchain that exchanges messages without leaving traces on the internet in the form of metadata.
Payment for everyday shopping
Elixxir also serves as a platform for a digital currency to be launched soon: the praxxis. According to Chaum, praxxis has the potential to grow into the first truly digital cash system. A transaction – even the smallest – is made untraceable by dividing it into a number of different anonymous ‘tokens’ – comparable to digital dimes and quarters.
In addition, praxxis is fast. A bitcoin transaction requires that the entire blockchain is informed of the change. Praxxis, on the other hand, uses ‘fractional endorsement’. This means that the transaction can be approved without the entire system having to be involved. Chaum has calculated that praxxis is fast enough to serve as a means of payment for everyday shopping.
Fighting abuses within the digital revolution
In the 1990s, Chaum was too far ahead of the troops. The IT world turned out to be too busy with its own expansion to worry about the privacy aspects of global networks. Chaum was one of the very first to warn about its dark sides.
Chaum noted at a very early stage that a lack of digital privacy promotes a lack of democracy. In 2019 this insight is very relevant: a handful of companies exercise almost total control over all the information that individuals, companies, healthcare institutions and governments are keeping online. Data trade now influences election results. David Chaum has devoted his entire career to fighting abuses within the digital revolution. CWI lauds the fact that he is still very active in coming up with complex mathematical solutions for decentralized, secure communication protocols. It is therefore appropriate that CWI awards Chaum the Dijkstra Fellowship.
