MARCH 1
The Search for Digital Money
The Problem Money Had to Solve
The Signal
The internet could copy almost anything. Money needed something it could not copy.
The Reading
Yesterday you were asked whether you would choose the monetary system you were born into however for a long time there was a problem. For most of the internet age, there was no clear alternative.
Computers transformed information. A photograph could cross the world in seconds. So could a letter, a song or a document. But money was different. Send someone a digital photograph and they receive a copy while you keep yours. That is how digital information works.
Now imagine the photograph is a $10 note. If you send it to me but still possess an identical $10, you could spend the same money again. Copy it repeatedly and scarcity disappears. Digital money needed a way to stop the same unit being spent twice. This became known as the double-spending problem.
In 1982, computer scientist David Chaum published work on blind signatures for untraceable electronic payments. His ideas helped establish foundations for private digital cash, but digital money still needed protection against being spent more than once. Then, in 1999, economist Milton Friedman looked at the growing internet and identified what was still missing: “a reliable e-cash.”
The internet could move information without asking permission from a post office. Yet moving money still required trusted institutions keeping the records and deciding which balances were valid. That left an extraordinary puzzle. Could money gain the speed of the internet while retaining the scarcity that money requires?
Could two strangers exchange digital value without allowing either person to copy and spend it again? For years, cryptographers kept searching.
The choice of which money to use was extremely limited until the double spend problem was finally solved.
First Principles
Digital information can be copied almost perfectly.
Money requires scarcity, so the same unit cannot be spent repeatedly.
Creating digital cash meant solving problems that ordinary digital files do not face.
Today’s Challenge
Send someone a photograph from your phone. Now look at your own phone. You still have it.
Imagine that photograph was your money. What would stop you sending the same $10 to ten different people?
If no bank stood in the middle, who could decide which payment was real?
Tomorrow’s Signal
The Cypherpunk Dream