Before they were cypherpunks, the forefathers of Bitcoin were Extropians.
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Extropianism, a radically techno-optimistic and forward-looking philosophy developed by Max More in the 1980s, had by the early 1990s grown into a small Californian subculture. It attracted scientists, engineers, researchers and future-minded individuals who shared the transhumanist conviction that acceleration of technological advancements could realize an “upgrade” for mankind.
Extropians believed that humanity could transform through, and even merge with, technology. Brain chips would improve cognitive performance, nanobots could find and destroy cancer cells from inside the body, and consciousness was to be uploaded into computers. By eventually curing all disease as well as old age, even death itself could be conquered. As humans would attain indefinite life spans, civilization could grow, expand and prosper, forever.
Of course, nothing offers more potential for growth than outer space. Exploration of new planets, solar systems and galaxies was a key goal for the technoutopian movement. Extropians dreamed of expanding throughout the universe: Humankind was destined to establish industries in space, colonize exoplanets and travel to new horizons.
They explored this potential in Extropy, a magazine dedicated to the Extropian cause. Extropians interviewed biosphere researchers to learn if an ecosystem dome could be built on Mars. They speculated about faster-than-light travel through wormholes and considered the interstellar political implications of such a feat. And they outlined what technology and resources were required to migrate to different parts of the solar system: Think of asteroid mining, self-replicating green houses or microgravity.
And importantly, Extropians didn’t just want to fantasize about the future. They wanted to actually make that future happen, starting with the optimization of human potential, today, on Earth.
”From Konstantin Sokolovsky to Freeman Dyson and beyond, visions of space have fired our imagination. Space offers a vast field of future boundless expansion,” Extropy magazine contributor Nick Szabo wrote in an essay exploring the potential of extraterrestrial settlement. And, concluding the article:
“Space colonization will emerge from the work we do now to make Earth a free and prosperous place, an extropian planet.”
The Extropians would find that the development of digital cash was key to achieving this goal.
In order to realize the Extropian vision, founder of the philosophy Max More had outlined the goals and strategy of the movement in an operation manual of sorts called “Principles of Extropy.” In it, he outlined the goals of the Extropian movement, while establishing that the Extropian tools to accomplish these goals were science and technology, built on reason and mixed with a dose of courage to transcend natural limitations.
“Science and technology are essential to eradicate constraints on lifespan, intelligence, personal vitality, and freedom. It is absurd to meekly accept ‘natural’ limits to our life spans,” More posited in “Principles of Extropy.” “Life is likely to move beyond the confines of the Earth — the cradle of biological intelligence — to inhabit the cosmos.”
Inspired by libertarian thinkers like economist Friedrich Hayek, author Ayn Rand and Enlightenment era philosophers, More explained that Extropianism called for “rational individualism.” By fostering a free market environment where productive, creative and innovative individuals could collaborate, interact and experiment, technological progress would flourish.
On the flipside, he believed that powerful states and big governments could really only hinder such progress: “Societies with pervasive and coercively enforced centralized control cannot allow dissent and diversity,” More asserted in the “Principles of Extropy.” “No group of experts can understand and control the endless complexity of an economy and society composed of other individuals like themselves.”
In the Extropian worldview, laws and regulations frustrated and limited the freedom to experiment and innovate, while taxes and subsidies interfered with the free market’s ability to effectively allocate resources to where it benefited society the most. By distorting both the creative process and the free market, governments represented brakes on human potential.
The short-lived fate of Starstruck served as one example of detrimental government interference. Cofounded by Extropian Phil Salin in the 1980s, Starstruck was a private space transportation company that experimented with sea-launched rockets. Salin believed that the time was ripe to establish a private space flight industry, where market dynamics would stimulate entrepreneurs to innovate and improve on existing rocket designs and other spacefaring technologies. Competition would drive humankind further into the galaxy.
But when Starstruck started offering its services, the company had a hard time attracting commercial partners. Salin didn’t believe that was due to a lack of interest in space transportation, however. Instead, he found that the taxpayer-subsidized Space Shuttle was consistently undercutting their business. As long as NASA’s trips to space were funded with government money, Starstruck couldn’t possibly offer competitive prices.
After just a few years and only one successful launch, Starstruck ceased operations. By extension, a competitive commercial industry for space travel had failed to lift off. Although NASA had been an early pioneer to promote innovation and progress in space technology, Salin believed that the government agency had now come to hinder further innovation and progress by discourging free market competition.
Even where governments tried to advance space exploration, Salin concluded, they hampered it — and that’s not even considering all the ways governments could limit private space enterprise through laws and regulation. For him and other Extropians, it proved that humanity’s expansion into the cosmos depended on reducing the role of the State.
Extropians believed that government interference had to be resisted, subverted and ignored. This led them to a new subdomain of interest: digital cash.
As the world was increasingly becoming digital, cryptographer David Chaum — not an Extropian — was early to realize that money would eventually go fully digital, too. The problem, as he saw it, was that digital forms of money usually relied on a central ledger to maintain all currency balances.
Whoever controlled this ledger could then see exactly who was paying who, when, how much, and perhaps where, while they could even change balances or block transactions. Chaum was concerned that this power would end up in the hands of governments and that the implications would be draconian: a “Big Brother” for everyone’s finances.
Chaum had, therefore, in the early 1990s, founded a startup, DigiCash, to realize a digital cash system: A form of money for the internet that could change hands anonymously. His system was designed for the customers of regular banks, and typically used fiat currencies like the U.S. dollar, but offered private transactions by utilizing a clever new cryptographic solution for moving funds from one bank account to another.
When one of the Extropians, Hal Finney, learned about Chaum’s startup, he was quick to recognize the importance of digital cash, and decided to bring it to the attention of his fellow Extropians. Spread across seven pages in a 1993 edition of Extropy, Finney extensively explained the inner workings of Chaum’s digital cash system.
And, tapping into the group’s libertarian ethos, Finney explained why Extropians should care:
“We are on a path today which, if nothing changes, will lead to a world with the potential for greater government power, intrusion, and control,” he warned.
“We can change this; these [digital cash] technologies can revolutionize the relationship between individuals and organizations, putting them both on an equal footing for the first time.”
Finney was right. The Extropian movement proved a fertile environment for digital cash. Extropians agreed that privacy was a necessity if the State and its coercive forces were to be resisted, and they understood that privacy of transactions was an important aspect of that resistance.
The 15th edition of Extropy, published in mid-1995, could even be considered something of a digital cash special. About half of the magazine’s content was dedicated to the digitization of money, with a strong emphasis on the importance of protecting privacy in such a future.
Moreover, as they learned about cryptographically secured money, some Extropians began to realize that the potential could be even greater than privacy alone.
Where Chaum had concerned himself with the anonymous features of digital cash, the “digital cash special” of Extropy included articles that were more geared toward monetary reform. One magazine contributor speculated about local digital cash schemes backed by something other than national currencies, like access hours to a developer, who upon redemption of the notes would offer his or her services in exchange. Another contributor wrote a raving review of George Selgin’s book, “The Theory of Free Banking,” which outlined a financial system without fiat currencies. Lawrence H. White, Selgin’s closest ideological ally in the free-banking movement, had even contributed an article to the magazine himself.
Max More, the Extropian founding father, took it on himself to summarize and present, “The Denationalization of Money,” Hayek’s seminal work on competing currencies. More explained that inflation distorts prices, which causes malinvestment. He detailed how national currencies cause undesirable and otherwise unnecessary balance-of-payment issues between countries, and pointed out that fiat currencies make it harder for individuals to escape oppressive governments with their wealth intact. And perhaps most importantly, More explained how fiat currency helped grow the scope of government, as governments essentially “tax” people through inflation, which usually goes relatively unnoticed.
“The state expands its power largely through taking more of the wealth of productive individuals,” he wrote. “Taxation provides a means for funding new agencies, programs, and powers. Raising taxes generates little enthusiasm, so governments often turn to another means of finance: Borrowing and expanding the money supply.”
All of this meant that the fiat currency system frustrated the Extropian mission, More argued. If humankind was to realize breakthrough technological advancements, if it was to conquer death and explore space, governments’ persistent stranglehold over society and the economy had to be overcome.
The solution, as More summed up Hayek’s treatise, was to get the State out of the currency business and leave money to the free market:
“Instead of politically-influenced control by government, competitive pressures would determine the stability and value of competing private currencies.”
Max More focused his hope on electronic currency. He believed that Hayek’s vision could be made a reality by leveraging the recent interest and innovation around digital cash, calling on Extropians to consider the two issues — privacy and monetary reform — in tandem. Combined, it “would provide a potent one-two punch to the existing order.”
And then there were the Cypherpunks.
Around the same time that Finney started advocating digital cash in Extropy magazine, fellow Extropian Tim May had been taking action. He’d started recruiting privacy activists, programmers and cryptographers from the Bay Area, with his recruitment efforts extending to a special mailing list centered around the Extropian cause.
The group that May brought together would come to be known as the Cypherpunks. The Cypherpunks were dedicated to taking the cryptographic breakthroughs that had been circulating in academic circles for the past decade and a half, and bringing them to the public in the form of working software. The realization of digital cash was no small part of this effort.
The Cypherpunks were well aware of Chaum’s efforts to realize digital cash in order to offer privacy in transactions and prevent a dystopian future where “Big Brother” would have insight into everyone’s finances. But they merged this idea with More’s utopian vision where electronic money could, by helping limit State power, ultimately help humankind overcome death and venture into space.
It had an effect. In the years following More’s article in Extropy, several of those Extropians that had also followed Tim May to the Cypherpunk movement proposed digital cash schemes that offered a degree of anonymity and a monetary policy divorced from fiat currencies to boot.
Nick Szabo, the author of the Extropy piece on space colonization, proposed a system called Bit Gold. Hal Finney, who’d introduced the concept of digital cash to the Extropian community, offered a digital cash solution branded RPOW. And Wei Dai, a computer scientist who was active in both the Extropian and Cypherpunk communities, laid out a design named b-money. All three of them could operate independent of dollars, pounds or yen, instead relying on proof of work (hash power) to generate units of the currency and relying on the free market to value them.
In the end, these projects did not succeed. Bit Gold, b-money and RPOW suffered from some loose ends in their designs, in particular regarding the establishment of a universally accepted ledger without relying on trusted parties, while controlling inflation proved to be a challenge as well.
Yet, Szabo, Finney and Dai probably hadn’t wasted their time.
Satoshi Nakamoto almost certainly took inspiration from their projects — and learned from their mistakes. When designing Bitcoin, he solved the inflation problem by applying proof of work for currency creation more indirectly and leveraged that same proof of work for a trusted consensus system. It resulted in a digital cash system that offered both a degree of privacy as well as a free-market alternative to State-imposed monetary policy.
Almost 20 years since the Extropians started discussing digital currency, Satoshi’s electronic cash system represents the realization of a key step toward achieving their techno-utopian dreams. If the Extropians were right, Bitcoin will, in the words of Nick Szabo, “make Earth a free and prosperous place, an extropian planet [where] space colonization will emerge.”