David Chaum on the CIA, Bitcoin and Elon Musk

He is a crypto veteran and is considered the pioneer of e-money. Many approaches to cryptocurrencies today are based on his work. In an interview, the inventor of eCash explains why he is working on a decentralized social media alternative to Twitter, what fascinates him about Bitcoin and how the secret services use the Tor browser and monitor other actors.

BTC-ECHO: How much of your crypto research is reflected in Bitcoin?

David Chaum: I already described the most important modern aspects of a blockchain in my thesis at the University of California, Berkeley in 1982. What really fascinated me about Bitcoin was the proof consensus mechanism of work, which was new to me or not taken into account in my work. However, proof of work does not only exist since Bitcoin. At one of my cryptography conferences that I initiated, Cynthia Dwork and Moni Naor presented the proof-of-work mechanism in Santa Barbara long before Bitcoin was born.

You founded DigiCash in 1990, which later became eCash. At this point, can you already imagine that crypto-based digital currencies will exist at some point?

When we were working on eCash at that time, computers were barely able to implement our ideas. It took countless computers to complete a single encryption in minutes. Plus, software upgrades were anything but easy. However, as early as the 1970s, I recognized that lack of privacy and control over one’s own keys would become the central problem in a computerized world. Due to the ever-increasing loss of privacy, it was important to me that companies be empowered to give back or protect their consumers’ privacy.

The way you say it, I can hear that more than ever we have a conflict between state control and decentralized privacy. Has the situation really deteriorated in recent years?

Oh yes, definitely! In my opinion, the two biggest issues of our time are climate change and social fragmentation, which is strongly linked to our social media. These lead to censorship and a division in our society.

You are specifically addressing the platform economy and companies like Meta. You develop a blockchain-based alternative to social media yourself with Speakeasy.tech. It should be completely decentralized and censorship resistant. Why do you think this will fix the issues you mentioned?

It is a solution to give people back fearless communication without having to fear that the state or a big company will surprise and exert censorship. Because we don’t operate any servers at Speakeasy, all data streams run through blockchain nodes and are protected by a cryptographic mix, there’s no uncertainty about your own privacy.

Existing messengers like Telegram cannot protect your privacy. It is not difficult to find your IP address, even if the content of the message is encrypted. Especially since it is not just about the content of your messages, but above all about the data flows, who communicates with whom. This is the daily work of secret services like the CIA or the BND.

Can you explain this in more detail, for example how the secret service works?

Secret language and code words can create quite a bit of confusion when monitored by an intelligence agency. The information can then quickly be misinterpreted. This is why traffic analysis is so important, i.e. who is talking to whom. She does not lie.

The CIA did this in 1973 when it overthrew the government of Chile by installing dictator Pinochet. Under pressure from the US Congress, the documents on this subject are already publicly available in libraries, which is why one can understand exactly how the CIA proceeded. Namely, they secretly installed malware on government phones. This malware’s job was simply to figure out where the call was going, or where it was answered from – and send a full report to Washington every night. It was a traffic analysis, so Washington always knew who was on the phone and when. This allowed for a “surgical” strike to topple Allende.

In 2022, however, things have changed and there are new encryption methods.

Today, states primarily use the Tor browser. I had already developed the technological basis of mixing in 1979. If the adversary is distributed worldwide, that does not help either. Second, Tor offers no real protection. It becomes more difficult when the opponent is in a specific place in the world.

The developers of Tor even wanted to sell me their software, which I refused. All they did was make mixing harder or easier because they now have random message timing, random message length, and only three skips. It’s junk.

Shortly after, they called me back and told me that they had found a sponsor for Tor. It was the CIA. I don’t want to name specific names at this point, but everyone can see that the State Department pays at least 50% for the Tor service year after year.

They did this because it allows them to browse the internet without other people knowing what they are doing and because it has become a honeypot for anyone who wants to protect their privacy. They sell it all through Tor. This makes it much easier to launch attacks.

But then the US government is simply vulnerable?

But they do not suffer the same attacks as individuals or other users because they are the only ones who can spy on all communication links on the planet. If you can do this, you can see exactly who is using Tor and what they are doing. So it’s asymmetrical. At least, that was the case. I think it is now known that China has similar capabilities.

After the foray into the world of intelligence, let’s return to the subject of social media. How do you want to succeed against big companies and impose alternative offers on social networks?

It’s getting easier and easier, especially with Twitter in mind [lacht].

Not a fan of Elon Musk?

Well, so far everything looks like a mess. Twitter founder Jack Dorsey once publicly told Elon Musk that Twitter really needed to be decentralized because it was the future. However, this requires modifying the basic network infrastructure. It needs a fundamentally different system from the way we build it. You shouldn’t overestimate the best dogs, they can go away faster than you think, as the past has shown. Think of AOL or Myspace, for example. Next time I come to Berlin, we might ask ourselves, “Wasn’t there something called Twitter? [lacht].

In this context, it is always about the role of our digital identity and how we can protect it. How do you imagine the concept of digital identity?

Basically, it can be a sentence or an alphanumeric sequence that a person remembers. With this same sentence, they can access their digital identity and control all the interactions that depend on it. We need to move away from the fact that this form of identity verification is controlled by Google, Meta and Co. Digital identity with its own private keys, which also enables inalienable privacy with eCash 2.0, is a new individualistic approach that we free from digital slavery. The discussion or basis of our social communication is thus fundamentally changed and the state is also limited in its power.

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