SEEING THE VALUE OF BLIND SIGNATURES

Guest Written by Aaron Van Widrum

David Chaum first learned about public key cryptography as a computer science and math student in the late 1970s. This breakthrough in cryptography had only been published a couple of years prior, and Chaum was quick to realise its great potential; by the early 1980s he was organising some of the first cryptography conferences in the United States and Europe.

Perhaps more importantly, Chaum started to contribute to the field of cryptography with his own innovative proposals. He designed a protocol for remailers: the technology that would let users obfuscate their email metadata, which was later implemented by the Cypherpunks.

And in his 1983 paper “Blind signatures for untraceable payments,” he designed the first ever form of electronic cash: a digital form of money that would allow people to transact over the internet anonymously.

Chaum’s electronic cash system leveraged what Chaum called “blind signatures.”

Specifically, users could create a “digital banknote” (really a unique serial number), encrypt this banknote (mathematically converting it into a different string of numbers), and send it to their bank. The bank would then sign the encrypted bank note with a dedicated private key and return it, meanwhile subtracting a matching amount of money from the user’s bank balance.

Importantly, this digital signature would mathematically correspond to the original, unencrypted bank note as well. The user could then pay someone else with the bank note, who could in turn send it back to the bank. This would allow the bank to verify that the banknote was signed with their own private key, and then credit the recipient’s account with the value of the banknote.

In 1990, Chaum decided to bring his vision to life through his own company, Digicash. The Amsterdam-based startup would over the next couple of years successfully implement electronic cash technology called Ecash. The goal was to licence the technology to banks, which could then offer it to their customers.

Initially, Digicash booked some successes. Some of the largest banks in Europe — including Deutsche Bank and Credit Suisse — implemented Ecash, while some banks outside of the continent (like Mark Twain Bank in the US and Advance Bank in Australia) did too.

Moreover, it’s been rumoured that even bigger players — like Microsoft and Visa — had shown serious interest. Meanwhile, the Cypherpunks started to experiment with the technology too, with several of them even working at Digicash in various roles over the years.

However, Ecash ultimately did not take off the way Chaum had hoped it would. Whether it was because there was simply no market demand for the electronic cash system, or (as some Digicash employees would later claim) because Chaum lacked the business chops to bring his technology to the mainstream, actual usage remained low. By 1997, after a change of leadership and a move to Silicon Valley, Digicash ultimately filed for bankruptcy. Still, in its seven-year run, Chaum’s startup had inspired a generation of hackers, cryptographers, and privacy activists by showing them that the creation of a digital form of cash was, in fact, technically possible.