The Wolf Of All Streets - This Guy Invented Digital Currency Way Before Satoshi | David Chaum, xx network

Episode Date: September 1, 2022

David Chaum, the legendary founder of DigiCash and eCash, a cryptocurrency that predates Bitcoin, stops by to talk about his concerns about Big Tech, privacy, and the future of democracy. David, widely known as the “Godfather of Cryptocurrency and Online Privacy”, talks about his fully-encrypted messenger application, the xx messenger, the xx network, and unveils the vision for his privacy-first ecosystem, Elixxir. This is a can’t-miss episode for anyone interested in the history, application, and future of cryptography. JOIN THE FREE WOLF DEN NEWSLETTER 📩 https://www.getrevue.co/profile/TheWolfDen EPISODE LINKS David’s Twitter: https://twitter.com/chaumdotcom xx Messanger: https://elixxir.io/ Production & Marketing Team: https://penname.co/ FOLLOW SCOTT MELKER • Twitter: https://twitter.com/scottmelker • Facebook: https://www.facebook.com/wolfofallstreets • Web: https://www.thewolfofallstreets.io • Spotify: https://spoti.fi/30N5FDe • Apple Podcasts: https://apple.co/3FASB2c Show Notes: 00:00 Intro 00:15 David Chaum Intro 00:37 How to Become a Cryptographer 02:13 How Cryptography Works 05:35 Inventing Digital Currency 07:50 Privacy 10:24 3 Pillars of Privacy 16:16 xx Messanger 20:20 Elixxir Privacy Platform 26:00 Big Tech Business Model 27:25 Thanks for Watching

Satoshi Nakamoto is often credited for the first iteration of private digital money, but actually it was invented long before by David Chum he was one of the first cryptographers ever to consider privacy and the digitization of money and he's still to this day working extremely hard to guarantee that individuals have privacy in their transactions so I think the most important question is how does someone become a cryptographer I find I'm doing still doing some really really groundbreaking new stuff that i'm super excited about and uh so it's you know it was you've been doing it for a

long time kind of hard for other people to really have that kind of intuition and and to catch up with you uh but that's not to say that you know that i excel in like a lot of there's a lot of very technical work you could do in a lot of different directions, you know, but I'm more on the kind of conceptual, like coming up with new applications, new ways to use cryptography and stuff like that, and some breakthrough new kinds of cryptography. I've been doing that. So, yeah, you know, it's like when you're a band

and you have the, you know the famous singles from years ago, and they always want you to play those, and you're like, no, we've got new material. So I've got some really great new stuff, and I'm super excited about it. You know, when you're in the academic field from a very early stage, there's the assumption by young people in the new entrance that somehow you just pick the low-hanging fruit and it was really easy and you're kind of a lightweight. Could be. That troubles me. So I strive to prove that I can do some really cool new stuff.

I would think of it as the opposite. Obviously, the technological challenges and obstacles were much larger in the 1980s, 1990s than they are in 2022. Well, that's certainly true. I would think it would be the opposite perception. Yeah. Yeah, well, it's, you know, it's... Sure, there's very powerful tools and stuff out and understanding of the basics is – you know, the way it's taught and so on is evolved. So it all seems a lot simpler and easier.

There's a lot of stuff that you can draw on that's already programmed and out there. But the sort of just coming into it. See, cryptography was just a secret codes, keeping confidential the messages as they were sent from one military base to another. That was it. To come into a world like that and say, hey, maybe we could use this for electronic money with privacy or voting, you know, and ultimately what I call multi-party computation.

So that's a thing that I developed. So this community here, people don't really recognize that yet as such a fundamental thing. But you've heard of Turing machines? So the idea of a multi-party computation, it's like the Turing machine of security. In other words, the Turing thesis showed that any computation could be done by a Turing machine. That was the big thing. They're all equivalent in that sense. So what we showed was that any computation for security, any security problem can be solved

by a, by these multi-party computation, by cryptography. So any security problem that makes sense that's digital can be solved. So in other words, if, you know, say a bunch of little kids trust like the grandparent, they'll sit on his knee and tell him the secrets and he'll tell him, you know, only the right things and always truth, then there's no real security issue with information in that context, if that makes sense. So everyone has a secure channel with a mutually trusted device

that only does the right thing and can keep the secrets confidential. So what we showed back in the mid-'80s was that you could simulate such a mutually trusted computation to any number of participants without having any physical trusted mechanism. So just by having your own computer and using cryptography, you could create a simulated multi-party computation, simulated computer that would be executing only the agreed software and would never leak any secrets. And, okay, so we fully characterized it, like, you know, exactly what assumptions you need and all this. And for that, I got this 30-year best theoretical computer science award earlier this year. And it's kind of a big deal because it's the first time they ever gave it.

And it was given by all the program chairmen for all the stock conferences, which is like the big deal theoretical computer science conference. So kind of neat. Yeah. And it's incredible honor. And being in the crypto industry, obviously, everybody sort of points back to Bitcoin as the fundamental birth event. But it's not. You created digital cash, e-cash, 20, 30 years before that. So there had to be something compelling you to understand the importance of private money and digital money. So what was it at that early time that was sort of your aha moment that caused you to head in that direction? Well, you know, this late 70s and I was at Berkeley as a graduate student, and I for, you know, the future of civilization, really.

And that it wasn't going to be easy for people to keep control over their own information and that it was going to be a kind of a struggle. And, you know, sometimes, you know, there have to be some serious abuses before. And I wrote about this. You can read it. It's very prophetic, and I decided, you know, it's funny. You know, Berkeley, in those days of the graduate students, I mean, I had a private office. I actually shared an office with Eric Schmidt, but we looked out of the cabinet. We had one of the best offices, just the two of us,

but most of the graduates were in these, like, big of the cabinet, we have the best offices, but just the two of us. But most of the questions were these like big cubicle areas and there were like these posters. And one of them was, you know, because most of, a lot of the funding was from DARPA. It said, you know, Defense Advanced Resource Project Agency,

a mission-oriented agency, you know. And so there was a lot of, there were other posters saying, don't work for the man, you know, do this, you know because it was you know a lot of it was it was 70s yeah yeah but uh you know so i looked at those darvin posters i thought you know i'm going to be a mission oriented agency my mission is to you know empower people to protect their own information that's for the future of humanity. And for the last 40 years, that's what I've been doing. And we've gotten farther away from that mission with time

because of, obviously, big tech, government surveillance, all those things. I think it's very easy to argue that our privacy is more at risk now than ever before. Yeah, it's absolutely true. But I prophesied that the pendulum would kind of swing like that. Once it got really outrageous, people would try to claw it back, and it would be a bit of a struggle. But you're absolutely right. I believe we are really at a critical inflection point,

at a critical juncture in the history of civilization. You can say, oh, everyone always thinks that over you know but but check this out at you know devos does a survey of the participants every year uh what do they think the top 10 existential dangers for the world are you know and this year is none of the the 10 that have been on there for decades, basically moving around a little bit, one top place, a new entrant, came out of nowhere. It's called social fragmentation. 80% of people chose it as the first, the biggest danger. Just out of nowhere. I mean, I think that, that's significant. And public opinion surveys showed, you know, a serious

survey, 2,500, 1,500 people in the last couple of years, you know, in the last year, they show that 70% of people think that the problem with internet, you know, web 2, we can call it, but whatever you want to call it, web, is the lack of privacy and the top three internet, you know, web too, we can call it, but whatever you want to call it, web, is the lack of privacy and the top three things, you know, lack of control over information about yourselves. And, you know, when something is that broadly felt, I think, you know, it's expressing the wisdom of the crowd. That is a powerful indication that people are aware of the Cambridge Analytica, the Snowden stuff, all that stuff. It's just they have nowhere to go. There's no real way to vote with their feet on those issues.

But Web3 maybe is going to provide them a way to move somewhere that does respect their privacy. And actually, you know, I could talk about this all day. Please do. You make my job much easier. It's pretty comfortable here. So you see, for democracy, there are really three key privacy aspects. And in fact, you always have to consider all three aspects. Because if you just solve one of these problems, people feel all uninhibited, and they can be actually surveilled pretty effectively using weaknesses in the others.

So you really have to provide a comprehensive solution to communication, privacy. And that's not just the confidentiality of message content, right? It's also who you talk to and when, the so-called traffic analysis data or metadata. Then there's payments. So, you know, who you pay and who pays you, that could unravel everything in many cases. And for democracy, of course, it's important that you can, like, subscribe to certain news sources. A journalist can actually get paid, or you could actually be a journalist and get paid. And the third area is type of privacy is related to information about your interactions with, like, organizations and institutions. So all the information they collect about you based on your identity.

That's quite problematic. You know, as you know, the media is full of scandal after scandal about how many tens of millions of records were stolen and lost. And you can only imagine how much. Even by our credit agencies, right? Yeah, by the government. It's just like the classification screening agency. Every government agency. But you can only imagine how much other stuff is leaked out that you haven't heard about.

Because what's done with that data, once it's leaked out, you know, it's brokered and sold. And who knows where it all is and what's done with it. I mean, that's a huge problem. And so the only way to address that kind of thing is to use what I've called a credential mechanism. So this is the third thing I propose. It also, in the Scientific American article you can read on my website, atron.com, it's a way to basically turn the databases that organizations have about you inside out.

So you have the data, but they've signed it, so they give you a thing saying, okay, you pay your insurance, you paid for this, you graduated from this, you got these degrees, you have this, achieve these things, and you have these digital signatures on your credentials, let's say, and then when someone

wants to know something about you, they ask you, and if you want to answer it, you can prove the answer is correct, which is better than what we have today. Without sharing anything. Yeah, without sharing you can prove the answer is correct just better than we have today right without sharing anything yeah without sharing anything except that the answer is correct so like okay I am a at least 18 I am allowed to drive in this state and drink whatever and you know zero knowledge proof it is a new zero knowledge proof yeah so this is something I you know I

worked on back in the day you know had minimum disclosure and zero knowledge. Those are dual models, and I proposed the more general result at the same time that other people proposed the zero knowledge model, but there's a minimum disclosure. Anyway, so it's like you could do a zero knowledge proof, this way we understand it today, of credentials that you receive from organizations. But there's a little more to it because they have to all be linked to your identity. And then there's this new issue, which we're going to be, you'll hear a lot more about, called inalienable identity. There's not much public about it at this moment, but that's something I've come up with that basically means that you can always prove that it was that you have full access to all of your credential information, even if someone takes all your keys, either by force or, you know, accidentally orbery, or whatever. So people are always responsible for all their own credentials. And that's inalienable privacy.

Because otherwise you can become like a digital slave, or an identity server, or something like that. Or government agents, they take over people's identities and emasculate them today. It's done in certain situations that it's very debasing for democracy. So it turns out if you want to have like, if you want to

if democracy is going to survive, it really needs to have a slightly more effective and accessible mechanism. People have to be able to vote without going to booths because they can vote on a lot of different things. The sample voting stuff I partnered with,

we actually ran it here at Consensus, the seventh state election. You can read about it on my website. But there's powerful new kinds of voting, but you can't do it in the old-fashioned way with booths. So if you want to vote remotely from home without the possibility that someone could buy your vote or coerce you, then you need this inalienable identity, it turns out. And there's a lot of good uses for it.

So there hasn't been any real improvement in identity technology in many decades. And, you know, it figures into a lot of, it's a lot of the inconvenience of being in the crypto space, you know, and all this. For sure. So really cool new way to solve it. It's also a stronger property that, you know,

is really what you want and that enables real participation in the all-digital world. So that's a thing I'm working on as well. It feels like the cat is so far out of the bag with our privacy and big tech that maybe we can never corral it and put it back in. Is this a solvable problem at this point? Well, Scott, I'm glad that you asked that. Well, here at Consensus, we announced what I believe is a really effective solution to this problem. And I can tell you about first what we have done to date, and then I can tell you about the announcement, because I think that one builds on the other is that sure of course so uh earlier this year we launched the xx messenger

which is a very basic messaging app you know with group chat and recovery full featured messaging that runs on Android and iOS. It's a clean, simple-to-use interface, and it is unique in two ways. One is that the confidentiality of message content, you know, from end to end, is protected against quantum computers, and no other messenger has that. So we announced it, and a lot of media picked it up. They thought, oh, this is very interesting.

But we said, but it also has metadata shredding. So who you talk to and when, the social graph, your contacts, they never leave your phone. This is also part of the XX Messenger. And that sort of didn't really register with most people. That's a new kind of a notion. So since then, I was really surprised that none of the other messengers took the challenge and had quantum-resistant cryptography for the message

content, even though that's their big claim to fame. They're always talking about, oh, we have strong end-to-end encryption. You know, Facebook has said that about all the, you know, this is what messengers have been their big claim to fame. That's why they drew users from other messengers, right, because they had strong end-to-end. But they never even upgraded the quantum. So the U.S. government is using mandated quantum resistance security for these.

The messenger has not done it. But the metadata shredding is something no one has actually offered. And that is key. You see, one of the things I learned back when I was at Berkeley is that military, you know, they like tapping people's phones and listening in and stuff, but that's a lot of work. And people might mislead them you know and talking code and and so on and so forth so what's uh much more effective is just figuring out who talks to who and when you can learn everything you need to know from that and the social graphs that's the

real valuable thing so um that you know there's just a lot of misdirection people say oh look don't don't think about metadata shredding you know just focus's just a lot of misdirection. People say, oh, look, don't think about metadata shredding. You know, just focus on strong encryption. But now it's revealed that how fake that is because they haven't even upped the encryption. So the XXMessenger has, you know, kind of simply the phone, metadata shredding. Every message goes through five randomly chosen nodes around the world. We have like 500 nodes running on the main net, you know, and they shuffle the message with a batch of thousand and all this. And so no one can see who's talking to whom and when, and that's very important. And so, you know, our community has given us advice about the user experience.

We've had all these, you know, 10 videos and all the little upgrades. So now we've really refined it, and it's been featured complete for quite a while, and so it's in quite good shape. And so, in fact, that latest, that UX, the revised UX has just released this week. But here at ConsenSys, what we announced is the Elixir Privacy Platform. And that takes just what is just a plain vanilla messenger, you know, and it turns it into a broad-spectrum privacy offering that's accessible to the general public.

Because the Messenger is anyone could use. It's like any other Messenger. And now, with this platform, you can, let's say you want to search for something, but you don't want to get ads about it, or you don't want anyone to know you're searching. You can do that private search. If you want to participate in Twitter, say, but not have it be traced to you, or you want to, you know, you have like a public health issue, you know, like it's going to be a big issue, right, with productive rights.

You know, you want to inquire, but you don't want anyone to know. You know, so, but that's, it's important that you understand your options and you don't do anything wrong. So we have like a way to, you know, FAQs and then you can connect to the right help centers, legacy help centers for a whole range of kinds of helps. We call that shielded help. And then we have, you know, social media has, the public now is aware of it really just contributed to or cause the, you know, the fractionation and the, you know, the discord that we have that's threatening society now by kind of incentivizing people to you know wrangle with each other or whatever so um we have social media offerings on the platform that are you know because no you know you you participate synonymously using your your identity in the xx messenger system so

um or for example in the crypto space you know we often have to send like little payments to see if we really got the keys right all this funny stuff the test payment test payments it's kind of silly you know there's a lot of weird ways to do it none of it's really that secure but here you know you have this infrastructure already in place secure you have these secure relationships with your associates so you can you know you don't have to do that. So we have like, so for instance, another part of the meeting office is we have, you know, select any wallet and go through the messenger to like any crypto. So, but those transactions are private now. So you can make any cryptocurrency private, but moreover, let's say the payment requests and other messages related to payments are part of the message stream, but they're

digitally signed. So they appear in a different color, but they're in your list of messages. So if you click on them, hard as whatever, you'll get the digital signature of that copy to the clipboard. So you have like a proof that you requested or you sent an invoice or that they did say they paid you or whatever. But you don't have to put that kind of stuff in your personal language. You just send it as a form. But it's integrated. But there's a whole, you know, there can be various template for like, say, you're running

a small business or, you know, your OTC desk or whatever. There can be different sets of those messages that you might want to use to integrate it within your messaging. And so, like, let's say, you know, you're in a group chat with your friends, family, and you say, well, hey, you know, I want to share these keys with you guys because, you know, maybe something, you know, I'm going on vacation or whatever. Yeah. And so, like, let's say there's seven people in this chat, right? My buddy's well. I want to share these keys with you guys because, you know, maybe something, you know, I'm going on vacation or whatever.

Yeah. And so, like, let's say there's seven people in this chat, right? My buddy's well. Any five of you get together, you know, you can get the keys. So here, boom, done. And they have it. So, but all the infrastructure is there for this, you know. So, you know, I've heard about, like, the idea that you could play poker securely online with cryptography.

We've known that for decades. But to actually have it all set up in the infrastructure so that it really is secure, that's, you know, for any kind of games like that, it's, you know, from coin flipping all the way to, you know, like making book, you know, in the office or whatever. And so there's a whole bunch, you know, and we try to categorize these mini apps and we have seven categories and they you know each category looks looks pretty promising but then even just drilling down into one app you see that because kind of it's there's a lot of opportunity there and so we've totally opened this up so we're giving you know the community foundation is not the network but the Community Foundation is giving the grants for people to, you know, make the 20 mini apps that we've detailed. But we are also giving grants if people come up with better things or different things, too. And they can also just do whatever they want because all the APIs are public. So, you know, by providing this messenger that anyone could use and then making it so that you see these mini apps, it's like a little mini desktop like WeChat, you know, in China.

You know, you see the icons for the mini apps, the mini app of the day, you know, feature mini apps, and you can choose to find one. And you click on that icon, and then it'll download it automatically from the App Store for you, install it, and it'll be one of your mini apps that's linked to the messenger. And you can just activate it when you want to use it. So you get the kind of like a smorgasbord, you know, bundling economics, right? There's a whole range of these. You might not use any of them much of the time. But just knowing that you have them all is already, you know, makes, is valuable for people. And it's a, it's a super exciting thing. And I think that's a,

you know, if you look at the world today, I mean, there's really like five main platform businesses. And I thought this is not really a great thing, right? So Eric Schmidt, I mentioned earlier was kind of pretty instrumental in one of those, but there's, you know, we have Amazon and so on, but they on but they've all basically uh you know flourished by first creating a killer app something that people really want to use and then using the the eyeballs from that to uh enable it what's technically referred to as a business because a double-sided business model mostly a business model i don't know if you really i would say they've used it to gather all of our data. But they didn't do it.

They couldn't do it themselves. They let other people help them. So on Amazon, a lot of what you buy, it's not really from Amazon. For all these, yeah, and the same thing with Facebook. They said, oh, other people can build stuff, and that really opened it up. So by having a very clean, simple message that people can easily use

and then opening this up, we believe we've created a Web3 platform, which is the kind of Web3 that people want. It has privacy, and WeChat has proven that's what people want, is messaging integrated with payments, but now with all this other stuff, and it's accessible to the general public. So to your question, I mean, this is a way to expose people to the world that, you know, where they own their own data and they could in all kinds of contexts. So, you know, including messaging and payments. Well, that's incredibly exciting.

It's nice to know that we actually do have a fighting chance here. I think so. So thank you very much for sharing. Hey, pleasure, pleasure. Yeah, really great. Yeah. Thank you very much for sharing. Hey, pleasure. Pleasure. Yeah, really great. Yeah. Thank you so much for listening to this episode. If you haven't already left a rating or a review on Apple Podcasts or Spotify, please do that now. Spotify just added ratings. So please

go ahead and click that five star. I'll see you guys next time.