PROOF OF WORK

Guest Written by Aaron Van Wirdum

Adam Back found the Cypherpunks mailing list as a postdoc in his mid-twenties at the University of Exeter. He was inspired by their mission to protect privacy in a digital age by writing software to guarantee this, and before long started sharing his own ideas and proposals to help realise that goal.

Like many Cypherpunks, he was particularly interested in creating a form of electronic cash. Back had experimented with Ecash, and even proposed that the Cypherpunks could open up their own Ecash bank. But he also suggested they could create their own form of digital currency from scratch, at one point outlining what properties such a system must possess to catch on.

Crucially, he proposed that electronic cash would not necessarily need to be backed with another type of money, but could attract value in its own right as long as it was scarce.

It was around the same time that spam was becoming a real problem on the internet; inboxes were increasingly filling up with bulk advertisement emails. The Cypherpunks therefore began discussing how to solve this problem, but — importantly — without relying on regulation: they were concerned that governments policing the internet would come at the expense of free expression online.

To this end, Back in 1997 proposed Hashcash, a type of postage scheme for the internet. In order to attach Hashcash to an email, users would need to take metadata from that email as well as a random number and perform a particular form of calculation on it to create a hash: a unique string of numbers derived from that email data and the random number.

The trick, however, was that not every hash would be considered valid. Only a hash that started with some predetermined number of zeroes would. In effect, to create a valid hash, users would have to perform many calculations, using a different random number each time until they found a valid hash. This valid hash would then have to be attached to the email — without it, the intended recipient should reject the email.

Creating a valid hash would not cost too much computing power for regular users who’d send maybe a handful of emails per day. But the idea was that it would be too costly for spammers to do this for millions of emails at once. Hashcash effectively attached a cost to sending emails, or what would later come to be called “proof of work.” Hashcash could not in itself be used as a currency. Each piece of Hashcash was uniquely tied to a specific email, so the recipient of that email had no way to take the Hashcash and spend it elsewhere.

But Hashcash did reveal a potential path forward. Proof of work in a way linked real-world scarcity — computing power or, ultimately, energy — to digital information. And scarcity, Back and others indeed realised, was a fundamental property of any type of money.

In the following years, proof of work would serve as an inspiration for several emerging electronic cash projects.