The History of Cryptography to Cryptocurrency

Why is cryptocurrency called cryptocurrency? How has cryptocurrency come from cryptography? What does KFC fried chicken have to do with crypto? The original article by Wilton Thornburg was published at

What is Cryptography?

The art and science of cryptography encodes (i.e. encrypt) messages so that no one can read them except the intended audience. Only the proper recipient decodes (i.e. decrypts) the message, maintaining privacy between communicators.

A key (usually alphanumeric code) is used to encrypt and decrypt messages. In asymmetric encryption (public key cryptography), the key to encrypt a message is different from the key to decrypt the message.

In symmetric encryption (private key cryptography), the key to decrypt a message is the same as the key used to encrypt it. This strategy creates a key distribution problem: the sender not only has to send the message but also find a secure way to send the key as well.

Without public key cryptography, cryptocurrency fails as a baddie can intercept keys and messages. Public key cryptography proves ownership and enforces privacy. Public key cryptography has been around for a while since the mid-1970s roughly at the same time as the PC revolution.


Cryptography Roots

Cryptography in ancient times used to revolve around puzzles, and linguistics. However, this changed in the 20th century with math being predominant in cryptography.

In the 1970s at Stanford University, Whitfield Diffie, Martin Hellman, and Ralph Merkle found a mathematical solution to the key distribution problem. In their solution, they used modular arithmetic and one-way functions. In mathematics, one-way functions execute easily but strongly resist reverse engineering.

Modular arithmetic deals with remainders and incorporates a set of numbers that wrap around to the beginning after a certain point. That is, 7 mod 3 equals 1 because 1 is what remains after dividing 3 into 7.

Or a simpler analogy is to think of fried chicken from KFC. The KFC cook easily follows a recipe to prepare the fried chicken with its 11 secret herbs and spices. You may be able to recognise the unique taste of KFC chicken and some of the spices, but without the recipe and exact ingredients from KFC, it is impossible to duplicate that fried chicken in your kitchen.


Enter Asymmetry

Ron Rivest, Adi Shamir, and Leonard Adelman from the MIT Laboratory for Computer Science began building on the Whitfield Diffie mathematical concepts to discover a solution for asymmetric encryption. In April 1977, the three succeeded and RSA came into existence, named after the creators.

In asymmetric encryption, you publish a public key that everyone knows. People use this to encrypt messages that only you can decrypt because you know the private key. Simply put, a public key is just a number created by multiplying two numbers of the private key. If the numbers used are sufficiently large, discovering those two numbers is computationally intensive and time-consuming.

Using RSA encryption challenged the resources of the computers in those days. Encryption belonged only to the powerful and wealthy – namely governments, military, and large corporations. Paul Zimmerman envisioned encryption available to anyone with a personal computer. He implemented Pretty Good Privacy (PGP) and released it to the public for free in June 1991.

Zimmerman overcame the resource intensive computational slowness of asymmetric encryption by implementing a hybrid algorithm. The message itself used a symmetric key, and asymmetric cryptography encrypted the key to safely send it with the message.



PGP to BTC: Beyond Pretty Good

The first employee Phil Zimmerman hired at PGP was Hal Finney. Hal Finney would become the first person to show any interest when an unknown person calling himself Satoshi Nakamoto arrived on the scene in 2008 proposing something he called Bitcoin.

Multiple attempts to create private digital money protected by asymmetric encryption failed throughout the 1990s. In Amsterdam, David Chaum created DigiCash but required all transactions to be validated by a centralized company. DigiCash failed when Chaum’s company went bankrupt in 1998. British researcher Adam Back created HashCash in 1997 utilizing a Proof of Work method to create new coins. HashCash failed because a coin could only be used once. Users needed to create new coins every time they wanted to purchase something.

Hal Finney solved the HashCash problem by making the first reusable proof of work system (RPOW). He made his attempt at a digital money project with something he called CRASH (short for Crypto cASH). (Lesson learned: call a computer program CRASH and expect it to fail.)


Hello, Bitcoin

Hal Finney became the first person after Satoshi to run a Bitcoin node and was the first recipient of Bitcoin from the first transaction on the network. Hal encouraged Satoshi with the wisdom of a seasoned pro who has not grown jaded with cynicism.

”Imagine that Bitcoin is successful and becomes the dominant payment system in use throughout the world. Then the total value of the currency should be equal to the total value of all the wealth in the world… Even if the odds of Bitcoin succeeding to this degree are slim, are they really 100 million to one against? Something to think about.”

The history of cryptography from Whitfield Diffie to Bitcoin and beyond continues to progress. Math provides the foundation. Modern math unlocks possibilities unheard of before the middle of the twentieth century. Mathematical research continues, and when quantum computing becomes common, new mathematical possibilities will emerge.

Beyond math, decentralization drives the history of modern cryptography. Everyone deserves privacy. When Rivest, Shamir, and Adelman created public key cryptography, only powerful and centralized organizations benefitted immediately. Phil Zimmerman’s Pretty Good Privacy (PGP) expanded the market to include anyone wanting to use cryptography on a personal computer. With Bitcoin, anyone who uses the cryptocurrency gets the privacy of public key cryptography as an integral component of the system.


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