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David Chaum's Vault System: The World's First Blockchain


Thanks to his prolific contribution to cryptography, game theory, and the world economy via Bitcoin, Satoshi Nakamoto seems to get a lot of lesser deserved credit. While some observers overstate his abilities by implying he (or she, or it) must have been some sort of time traveler, alien being, or artificial intelligence (which has been proven to be fallacious by both developer contributions and early works of prolific cypherpunks), others point out to all the instances where researchers have almost invented elements of Bitcoin. 

This article is inspired by a popular tweet by Jameson Lopp and also makes use of a recent academic research paper titled "On the Origins and Variations of Blockchain Technologies" . In this regard, it seeks to explain why Satoshi Nakamoto didn't really invent the blockchain. The mysterious computer scientist might have given it the best of applications, and he's definitely released the first successful and functional public version of the concept. However, the concept predates his prodigious work. Researchers like David Chaum, Ralph Merkle, Stuart Haber, W. Scott Stornetta, Moni Naor, and Cynthia Dwork (most of whom have been cited by Nakamoto as sources of technical inspiration in the Bitcoin whitepaper) have had significant contributions which definitely paved the road towards Bitcoin. Nonetheless, academics and cypherpunk historians seem to agree that all modern "crypto" inventions have their roots in the works of David Chaum. 

1979: David Chaum creates the vault system at Berkeley

The concept of having mutually suspicious groups trust each other without the intervention of an equally suspicious third party isn't new and has been an important goal on the cypherpunk agenda for decades. But with his vault system, originally developed in 1979 and published as part of his 1982 dissertation at Berkeley, David Chaum has made a series of significant discoveries in distributed computing. His prototype had physical vaults (best described by encrypted servers) which participated in constant exchanges. Each of these vaults would sign, record, and broadcast every transaction on the network. 

Also, various roles would be assigned to vault participants in order to create a framework for checks and balances: there would be passive watchers (the equivalent of today's blockchain explorers and analysts), doers (Level 1 trustees who serve similar functions to today's full nodes), executives (Level 2 trustees who sign the blocks), and czars (Level 3 trustees who are empowered to change the executives and their policies). Though it's rudimentary and Chaum hasn't made it clear if all roles can be algorithmic as a way of eliminating trust in corruptible humans, it's philosophically close to the governance of Bitcoin. Maybe that the Core developers are the czars who can change the rules through their approved BIPs, but Satoshi's consensus also has checks and balances through which full nodes can refuse to run the new code.

The consensus algorithm would also involve a majority vote of nodes based on the signed messages observed in various exchanges. However, researchers have had difficulties in the process of identifying the permissionless character of the vault system. Three decades later, Satoshi Nakamoto has envisioned an environment where anyone can join in and participate without requiring political hierarchies or reliance on a greater authority. In the case of David Chaum's invention, the academic consensus is that his system is "publicly permissioned", meaning that nodes need public authorization. 

Another element which the grandfather of cypherpunks missed is the basis of consensus: it would take about two more decades until Adam Back comes up with the Proof of Work system, only for it to be improved and adapted by Hal Finney in 2004. Therefore, the major problem of the vault system would have emerged when concurrent client requests emerged: which one becomes the official version and what is the metric to make this kind of decision? Forks like Bitcoin Cash could happen all the time, but without being able to determine which implementation is the one that should be followed. The chain with the longest proof of work happens to be an efficient system in this regard, but one that would take more than 20 years to develop.

Conceptually speaking, David Chaum was really close to inventing Bitcoin. However, some elements that make the Nakamoto consensus work so well were not as developed at the time. Also, Chaum's work has remained obscure in academia mostly due to his decision to not publish his efforts in a journal or present them at a conference. In the following years, he spent most of his time conceiving systems which help individuals achieve privacy (blind signatures, mixes, and eventually ecash). This would help more liberty lovers discover the idea of privacy-friendly digital money, outline some of the core elements of the cypherpunk ideology, and also make room for academics like Merkle, Stornetta, and Haber to innovate. David Chaum didn't get to become Satoshi, but he definitely ran the first proto-blockchain at Berkeley and inspired Bitcoin in many conceptual ways.

David Chaum throughout the years

From writing visionary academic papers in the late 1970s and 1980s, and all the way to his subsequent contributions in the field of privacy and electronic cash, David Chaum has definitely earned his spot in the "crypto" (which can mean both cryptography and cryptocurrency) hall of fame.

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