Every society has a strata of innovators and geniuses who do the heavy thinking for it. They tend to keep to themselves, speak in riddles, and produce cryptic writing that only makes sense a few generations later. At the very top of that hierarchy sits one person revered by the smartest of the smart, someone who can be rightly called a prophet. The crypto society has inventors and geniuses too, but few people know it has a prophet as well. This article will right that wrong and reveal to the world David Chaum crypto prophecies as they were written and as they have come to pass. In short, David Chaum foresaw that handy encryption would play a key role in the emergence of strong identities, currencies, and elections.
Not only did he provide pioneering academic contributions to the field of everyday cryptography, but his writings also had a lasting effect on the development of digital currencies through his creation of eCash. It was arguably David Chaum’s work that inspired Satoshi Nakamoto to write the Bitcoin whitepaper and create a cryptocurrency that cannot be regulated or controlled. But, he also inspired PlasBit to create a privacy-oriented financial system from the ground up.
Significance In the Crypto World
Born in 1955, David Chaum attained a Computer Science PhD from UC Berkeley. He is a prolific writer and inventor, holding 31 patents dealing with currency, privacy, and election integrity, such as:
- random sample elections
- scan-integrity election systems
- hidden-code voting and marking systems
- blind signature systems
In 1982, he inspired the creation of the International Association for Cryptologic Research (IACR), a non-profit that deals with cryptography theory and practical applications. IACR holds three annual conferences: Crypto (worldwide), Eurocrypt (for Europe), and Asiacrypt (for Asia). IACR also produces scientific papers, holds workshops, and as of 2015 organizes education on cryptography.
He also wrote several books, such as “Towards Trustworthy Elections” and “Smart Card 2000: The Future of IC Cards,” and appeared in publications that deal with cryptography. His most famous writing is his 1985 paper “Security Without Identification: Transaction Systems to Make Big Brother Obsolete.” It posits that a society with ubiquitous tracking and identification tends towards tyranny and the creation of a Big Brother system that knows everything and has a chilling effect on the people. Conversely, a society in which privacy and anonymity are supported by mathematically secure systems grants its citizens extraordinary freedoms to choose their habits, associate freely, and make diverse lifestyle choices without the risk of being ostracized or penalized for them.
Blockchain
In 1982, Chaum submitted his 135-page doctoral dissertation titled “Computer Systems Established, Maintained, and Trusted by Mutually Suspicious Groups,” in which he proposed creating computer systems for private and public use in which various parties can participate without trusting one another. If one party tried to tamper with the integrity of the data, the sealed portion of the system called “the vault,” would be destroyed, but the remaining parties could consent to reconstruct it, even if it’s a physical object. Networks of vaults could operate even if the communication between them was difficult or some parties were hostile.
This David Chaum crypto thesis was the first description of what we know as blockchain, a public accountability system that can exist in an adversarial environment without being destroyed as long as the majority of vault users continue reconstructing it. That echoes the blockchain’s indestructibility and its ability to be reconstructed from surviving copies. In the thesis conclusion, Chaum estimated that the vault system he proposed needs to be prototyped and refined before it can gain mass adoption and acceptance.
That’s exactly what creators of other types of blockchains have been doing in recent years, creating their own variants of the vault principle and providing incremental improvements so that the public can vote on them and reach a consensus on the best.
Secure Voting Systems
Democratic voting systems have some surprising wisdom behind them — individuals who might not be smart can make a pretty accurate collective guess, a principle called “wisdom of the crowd.” This has been demonstrated over and over again, such as in a 2015 NPR cow weight survey in which 17,000 people were shown a picture of a cow and asked, “How much do you think this cow weighs?” Their guesses ranged from 20 pounds to 3,500 pounds, but when summed up and averaged, their collective guess was 5% off the cow’s actual weight. When NPR repeated the survey with 600 cattle experts, their collective guess was 6% off the actual weight. The corollary of the survey is that, the more experts we ask on any given topic, the worse their collective guess; past a certain point, we might as well ask random laymen.
The wisdom of the crowd shows that voting is valuable and matters, but the problem is in the lack of security during the voting process because of the anonymity provided to voters. Initially established to protect voters from reprisal, unscrupulous parties have repeatedly exploited that anonymity to cheat at elections. They can buy votes, destroy, edit, or invalidate actual ballots, wrongly count the votes, and so on. Any investigation focusing on election fraud will find it impossible to prove anything because of the anonymity. That’s where David Chaum crypto election integrity patents come in.
Random Sample Elections Patent (US 2014/0172517 A1)
The collective guess would work just fine with a random sample, which is exactly what Chaum’s patent proposes. Because nobody knows whose votes will be counted until after they are cast, vote manipulation becomes impractical or downright impossible. The integrity of the votes is cryptographically secured, and the results are published online in a way that protects voter identities while providing transparency. In addition, Chaum proposes a system with fake ballots — anyone can request a ballot that looks legit but won’t be counted and sell it to election fraudsters. Earning some extra money while promoting election integrity and bankrupting election fraudsters; doesn’t that sound like an improvement on how we do elections? Finally, these random sample elections would cut election costs by at least 99%.
Scan-integrity Election Systems (US 8,162,215 B2)
Here, Chaum proposes a way to audit ballot processing by letting voters record which ballot was theirs without revealing their identity to anyone except the election authority. Each option on the ballot has a series of random symbols, and the ballot has a serial number that is encoded into it and is also on a slip of paper that can be torn off. After voting, the voter remembers or writes down the symbol sequence while tearing off and retaining the serial number, which can be entered into the election authority website to confirm the symbols were counted the way the voter chose them. If the symbols do not match, it means someone wrongly counted the ballot, and all the voter has to do is present the torn-off piece of paper; if the tears match, that’s the voter’s ballot.
Hidden-code Voting and Marking Systems (US 8,123,114 B2)
If cryptography is so powerful, why not add it to ballots? This patent proposes ballots that use cryptography so that voters can validate that their vote was cast correctly. Each ballot has a serial number, with cryptographic codes next to each candidate written in invisible ink. To vote, a voter marks the box next to the chosen option with a special pen, which reveals the cryptographic code. The voter records or remembers the serial number and the code and can later check both on the election authority website.
A special box on the ballot also asks the voter, “How many votes on this ballot?” and the voter marks it as well, revealing another code that acts as a checksum and prevents adding votes during ballot processing. If voters suspect election fraud, they can publish their own codes, and the election authority should be able to provide cryptographic proof made during ballot creation to prove them otherwise. If not, the election is probably fraudulent. That puts the burden on the government to prove election integrity rather than demanding citizen investigators to gather evidence on a shoestring budget and prove foul play when it’s shielded by anonymity.
eCash
Chaum has been working on an anonymous, cryptographically secure payment method since 1982, when he published his “Blind Signatures for Untraceable Payments” paper. In it, Chaum reveals that digital transactions leave a lot of lingering data, from which third parties can learn a lot about a payer by knowing amounts, times, and recipients of money. Knowing that a payer contributed to a religious or political organization can reveal religious affiliation or political leanings. On the other hand, anonymous payment methods, most notably cash, can be stolen or used by criminals on the black market.
The eCash paper proposes three distinct features as valid solutions to the above problems:
- Anonymity of transaction details
- The ability to prove payments or identity when needed
- Control of funds owned by criminals
All three features are based on an idea Chaum calls “blind signatures,” which means two parties can have a secure communication in which one party provides the contents and the other provides the signature without knowing the contents of the communication. Chaum explains it as a ballot being sent in a special envelope that allows the election authority to sign the ballot without opening the envelope or seeing the vote on it.
In banking, blind signatures would allow a bank to sign any transaction in a way that guarantees its value but doesn’t reveal the payee. The best way to describe it is that there are nested special envelopes that the bank can sign without knowing the contents and send to the payer while debiting the payer’s account. When the payee wants to claim the transaction, the bank sees its signature and the envelope but still doesn’t know the contents and can’t know which payer it was. Payers who suspect fraud can prove their identity by providing the contents of the envelope. The bank could then refuse to settle the stolen transaction.
Chaum does recognize a weakness in the eCash system and advises waiting for a little bit before sending the transaction to prevent the bank from figuring out which payer sent which transaction to the payee.
eCash 2.0
Chaum expanded on all his eCash ideas in the imaginatively named “eCash 2.0: Inalienably private and quantum-resistant to counterfeiting” paper. In it, he proposed a type of currency that is controlled by the issuer even after distribution and that cannot be counterfeited even with the use of quantum computing. The 2022 paper was written with the assistance of Thomas Moser from the Swiss National Bank and imagined a VISA-like payment method that is scalable and convenient while using blind signatures for privacy.
Each user can deanonymize transactions sent from his or her account, while the issuer (the bank) can prevent hoarding by spending amounts that haven’t been spent. In combination, users and the issuing bank can thwart criminals who might want to hoard money through theft, blackmail, or extortion. eCash 2.0 could also leverage the encryption hardware provided by smartphones in combination with non-chip smart cards for offline purchases.
Chaum specifically mentions KYC and AML, two sets of banking regulations that have been a source of headaches for citizens and banks alike. KYC (Know Your Customer) is a legal obligation for banks and financial services providers to gather and keep personal information of users, which in the case of Payoneer involves demanding potential users take a selfie with a piece of paper with the current date written on it.
AML (Anti Money-Laundering) refers to vague rules that banks have to abide by to figure out if the money is coming from a legitimate source; in Australia, that might mean seizing any transaction or a combination of transactions equaling $14.88. eCash 2.0 would let banks monitor and limit the amount withdrawn from the system and kept in an account, presumably dispensing with KYC and AML completely, save for customer identification during account opening.
Pseudonyms and Quantum Security
When a user wants to open a bank account, he or she visits the bank and creates a long phrase that is similar to a crypto wallet seed phrase. When the bank wants to verify the customer’s identity, the bank employee asks several questions in the vein of, “Which letter is in position #6 in the 11th phrase?” If the customer provides all the correct answers, the identity is confirmed without revealing any personal information.
As for resistance to counterfeiting facilitated by quantum computers, Chaum suggests using a quantum-secure hash message that could be verified by the bank with each withdrawal. I got the impression this feature is a placebo that gives citizens and banks the peace of mind that the coin is safe and prevents panic rather than an actual safety feature against quantum hacking.
Central Bank Digital Currencies (CBDCs)
The eCash 2.0 paper uses the phrase CBDC quite a bit; that is not a coincidence. Central banks have been toying with the idea of issuing national cryptocurrencies that would be as convenient as cash while dispensing with the regulatory burden. They want a system that they can use as a foundation for the quantum banking leap. What Chaum proposes in the eCash 2.0 paper is exactly that, with the caveat that banks should ask the people what they want and provide them with a product that works to the people’s benefit while making the banks’ work easier than with traditional currencies.
In an interview given to CoinTelegraph in January 2023, Chaum explains the motivation for eCash 2.0 and the involvement of the Swiss National Bank. In short, banks saw the original eCash design as too risky and wanted something much more robust and user-friendly, hence the long phrase system. Chaum suggests the long phrase system could also be used to establish multiple pseudonyms and identities that do not contain personal information. For example, a student could create a long phrase when attending college and use it when asked to verify that he or she holds a degree.
It was only Thomas Moser from the Swiss National Bank board who recognized the potential of eCash and asked Chaum to develop eCash 2.0. As of 2023, eCash 2.0 is also being set up as the foundation for several related projects, such as the xx network.
Privacy in the Digital Age
The core tenet of Chaum’s work is privacy for parties to a financial transaction, in particular payer and payee untraceability. As described in Chaum’s 1989 text “Privacy Protected Payments: Unconditional Payer and/or Payee Untraceability,” the bookkeeper (the bank) keeps track of transaction details that enable transaction tracing without explicit payer or payee consent. Chaum’s proposed solution is to create a system in which the payer, the payee, or both are untraceable unless they consent to being traced and identified.
Chaum again uses the concept of blind signatures to establish a currency that works like bearer bonds, meaning banknotes that don’t have any details of their prior owners. The bank can provide different blind signatures, each worth a different denomination. A payer that wants to send an $80 transaction asks the payee for an encrypted message and sends three copies of it to the bank to sign for $50, $20, and $10. When sent to the payee, he or she can redeem one or multiple notes. It’s important to note that in this system only the payee can redeem the notes, and that the bank doesn’t know who the payee is.
XX Network
David Chaum crypto presentation at the 2022 Consensus reveals his motivation for creating the xx network. He spoke about the internet as we know it (Web 2.0), saying that 70% of the people were concerned about lack of privacy and lack of control over their data, while 80% were concerned about social fragmentation, invoking the principle of “wisdom of the crowd.” To encourage people to care about and move to a blockchain-based internet (Web 3.0), they need to have holistic solutions and safeguards for their privacy. More importantly, they need to regain faith in democracy and have the peace of mind that their citizen activism or mere posting on social networks won’t get them in trouble.
Citizens who report on government corruption are easily exposed, censored on social media, harassed, and cut off from financial sources. Chaum proposed pseudonyms and credential mechanisms as two elements crucial for ensuring total privacy that doesn’t allow anyone to “paint a big, red target” on their backs. If you look into why Bitcoin was created, you will find Satoshi’s writings echo Chaum’s words.
Consequently, Chaum proposes his xx network as a social media platform that is similar to Meta but superior in three major areas:
- secure and private messaging
- secure and private payment
- anonymous and secure interactions with institutions
The xx network is future-oriented and quantum-resistant, providing users with a messaging app that routes messages between nodes, shredding the metadata so that nobody can track who is talking to whom. Other apps, such as ride-hailing or payment apps, would be a part of the xx network as well, with Chaum describing the whole ecosystem as “WeChat with privacy.”
The platform hosting the xx network is called Elixxir and provides any cryptocurrency using any wallet with total privacy, alongside private search, private gaming, and private social media. There is a voting component too.
So far, crypto exchanges have been slow to adopt Chaum’s ideas. That is, all except one crypto exchange.
Chaum’s Influence on PlasBit
From what I’ve seen working with PlasBit so far, it is the only crypto exchange that advocates for financial freedom in accordance with the privacy and democracy principles set forth by Davim Chaum. PlasBit has consistently shown that it cares about forwarding digital human rights that we all need to feel free to express ourselves. At PlasBit, I found a place where I can do the work that matters and write about things I care about. It’s not about the money; it’s about fighting for things that matter and forging long-term relationships with those who think alike.
PlasBit’s and my work are based on the writings of crypto geniuses, inventors, and one prophet, David Chaum. He saw what would come to pass well over 40 years in advance; it’s just that he lacked the words to properly describe it. I am honored and humbled to be given the chance to explain his writing using my words, so I apologize if I made a gross mischaracterization. I eagerly await to see how David Chaum’s election integrity ideas get put into practice and, if you’ve read this far, I hope you’re feeling the same and that we all get to see democracy rejuvenated and the new society in which we will all take part.
