REUSABLE WORK

Guest Written by Aaron Van Wirdum

The Cypherpunks as a collective set out to create a form of electronic cash, but few were as committed to this as Hal Finney. The video game developer from California, who’d also been instrumental in the early development of PGP, was always among the first to review new proposals and share his insights with other readers of the Cypherpunks mailing list.

Even well into the 2000s, when many other Cypherpunks had started to lose hope that an electronic form of cash would become a success, Finney was not ready to give up. In 2004, he launched his own anonymity-preserving digital currency system: Reusable Proof of Work, or RPOW for short.

Like Hashcash and Bit Gold, RPOW used proof of work for the generation of new currency. Users would connect to the RPOW server — hosted by Finney himself — which would issue them a proof of work challenge. When solved, the users would be awarded an RPOW “token”: a unique string of numbers, which the server would also store in a local database.

To spend these tokens, users would simply send them to other users. These recipients, then, would in turn send them back to the RPOW server, which would check against its internal database that the tokens had indeed indeed been issued (and not previously spent). If that was the case, the server would return a new RPOW token to the recipient, and update its own database to include the new token.

In this way, RPOW made proof of work — indeed — reusable.

Privacy in this system came from the fact that users would only connect with the server through anonymized internet traffic over Tor. The RPOW server would never learn the identity of the system’s users.

What’s more, Finney leveraged free and open source software as well as a relatively new technology called “remote attestation” to guarantee that the system was run honestly. In short, the RPOW software ran on a special IBM chip which embedded a private key from the chip manufacturer. Anyone could connect with the server, which would on request digitally sign the software it was running, thereby proving there were no secret backdoors that would let Finney create tokens for himself (or anyone else) without providing proof of work.

As opposed to Bit Gold, RPOW was actually implemented by Finney, who indeed operated the RPOW system for some time. However, one problem remained. As computers would become more powerful over time, it’d become easier and easier to generate new RPOW tokens.

As a result, there was no economic incentive to accept RPOW tokens for payment: why accept a form of money that was practically guaranteed to drop in value over time? And with no one to accept RPOW tokens, there was even less reason to take them as payment in the first place… While the RPOW system was operational, it never really caught on.

Finney had realized electronic cash on a technical level, but it became clear that for a form of digital currency to succeed, the economic incentives had to align as well.