Cypherpunk, Crypto Anarchy and How Bitcoin Lost the Narrative

Start with the realization that the cypherpunks were right.

Back in the early 1990s, prescient software guys got both excited about the internet and anxious about a future in which it would ruin every meaningful bit of privacy.

The cypherpunks’ work and their writings laid out the assumptions that would drive the cryptocurrency industry, years before the Bitcoin White Paper was even committed to text. But as bitcoin’s price nears an all-time high, it’s important to understand one thing: The industry tends to give “cypherpunk” vibes a great deal of lip service without much attention to their real values. 

Bitcoin‘s philosophical forebears

Usman Chohan, in his 2017 paper “Cryptoanarchism and Cryptocurrencies,” describes the long path of thinkers whose ideas ultimately found expression in encryption technology.

“Thinkers such as [19th-century Russian anarchist communist Pyotr] Kropotkin described decentralized self-governance along lines that had a ‘vague and ambiguous’ presentiment of the nature of cybernetics,” Chohan wrote, but such premonitions needed the internet to fully manifest. 

It arrived, and the cypherpunks started hiding things. They hid secrets. They hid actions. They hid themselves.

“Cypherpunk. It’s just a couple of people who have dealt with cryptography in a punk way, which is: Do it yourself. Don’t ask permission,” Smuggler, a crypto-native developer and philosopher so dedicated to privacy he usually appears in a mask, told CoinDesk over Jitsi, the open-source encrypted video service.

Cypherpunk, the practice, quickly evolved into crypto anarchy, a philosophy that’s all about using cryptographic technology to build communities invisible to the state and multinational corporations. “The main core of crypto anarchy is, ‘How do we deal with this very interesting technology?’ And, in a way, the ideologies come on top of that,” Smuggler said. 

Ideologies and frustrations – the tone among committed cypherpunks shifted markedly over 20 years, from prodding to flabbergasted. 

Eric Hughes would write gently in 1993’s “A Cypherpunk’s Manifesto” about how, with cryptography, “in most cases, personal identity is not salient.” 

Twenty years later, Amir Taaki’s “The libbitcoin Manifesto” would describe Bitcoin advocates going to Washington and asking for permission to use crypto, writing: “Why would you willingly give your power away? Are you stupid?”

That shift in urgency reflects how much had changed since Bitcoin hit the scene in 2009. Code embedded with ideas now has a cash value. But it also points to a worldview that moved from closing blinds to kicking down doors.

“I wouldn’t necessarily put Bitcoin into the realm of crypto-anarchistic thought,” Smuggler said. “It does not undermine the ability to observe. In fact, it enhances it.” 

Cypherpunk dogma

Eventually, some crypto natives would lose patience with endlessly re-litigating the merits of privacy, preferring to seize it instead. Perhaps foremost among them is Taaki.

The libbitcoin software is a library for building applications on the Bitcoin protocol. White papers are normal for software in this industry, but manifestos are a mood. Taaki released the libbitcoin manifesto in 2013, after tensions arose between him and other contributors to Bitcoin Core (the software that runs the protocol’s software).

The manifesto signals that libbitcoin’s intent is much larger than Bitcoin’s, not even mentioning cryptocurrency until the fifth page of a seven-page document. Instead, it takes on much larger questions about how people approach the world, arguing:

Taaki wrote that years ago, but in a March interview with Bitcoin Magazine, he said, “We’re in this very strange place inside of crypto culture where we’re facing significant challenges to the technology, of it being co-opted by external actors, by actors who don’t necessarily have a philosophical vision or goal we originally had in mind.”

The explanation here is simple. The space has been colonized by entrepreneurs motivated not by mission but money. 

“Too much of our thinking, speaking, developing is: ‘How can we make suit-and-tie buy coins?’ Why do we do that? … The suit-and-ties are not our friends,” Smuggler said, echoing Taaki. “Quite frankly, why should we do any crypto anarchy if we don’t want to become outlaws?”

Tim May’s 1994 “The Cyphernomicon” may have informed the origins of this industry, but that industry hasn’t lived up to the future May foretold when he wrote, “Crypto anarchy is in a sense a throwback to the pre-state days of individual choice about which laws to follow.”

From ideas to value

This worldview started as a set of ideas that led to a technology that yielded an industry. All three parts have kept expanding and changing, but the last two are much easier to cover than the first, where it began, the ideas. 

Castle Island Ventures’ Nic Carter told CoinDesk in an April phone call, when the “Money Printer Go Brrr” meme was still firing up Crypto Twitter:

On some level, cypherpunk seems less philosophical and more like a set of best practices, an approach to engineering more than a full system for understanding. But crypto anarchy extends that DIY privacy ethos to a strategy for creating new societies unobservable to existing authorities.

And the state is not the only threat. No good crypto-anarchist sees authority defined merely by the cops. They know companies like Google and Amazon are a new breed of authority, the kind that, increasingly, can kick people out of the realm that means most to them: cyberspace.

Monied interests are already taking a pass at neutering the ideas behind blockchain with their favorite opening move: co-optation.

In fact, the Hail Mary pass of blockchain-but-definitely-not-crypto came when Facebook and its Libra project showed up barking like a Jack Russell terrier in a room full of kittens, only for Mark Zuckerberg’s empire to tuck tail and prostrate itself before the regulatory equivalent of a basset hound. 

Opting out

The more one digs into crypto anarchy, the more it does seem like an ethic for living among other humans; that is, a political philosophy.

See, the logistically hard part for most systems of political philosophy is that on any given piece of land, only one system of order can reign. Two people can live by wildly different epistemologies (philosophies of knowledge) but we really only get to live under one political philosophy at a time.

Until crypto anarchy.

Crypto anarchy’s logistical insight makes it a surprising political system. It asks whether or not another regime can be hidden right under the authority’s nose. That’s not entirely new (for example, see: agorism), but cryptography presented the first credible tactic to even approach the ideal.

“I think crypto anarchy is one of the few real contributions to ideology in recent memory,” May’s “Cyphernomicon” crowed in 1994. Along with Hughes’ essay and May’s prior “Crypto Anarchist Manifesto,” the three documents make up the foundational texts of this thinking.

As blockchain and cryptographic technology get better and better, it becomes more feasible to run economies in parallel and invisible to the one the S&P 500 measures. That’s what Taaki’s DarkTech Renaissance is aiming at, and considering how far bitcoin has come in a decade, it might be worth students of history taking seriously now. 

I wouldn’t necessarily put bitcoin into the realm of crypto-anarchistic thought.

As one sociologist of money, Lana Swartz, told CoinDesk, “I think there are all kinds of people living outside the state all the time and that will absolutely be true in the future.”

There seems little doubt that a vision of parallel societies informed Satoshi Nakamoto as he wrote the Bitcoin white paper, so much so that many believe he had been one of the cypherpunks (though everyone wants to claim Satoshi).

When people first start to grasp this undercurrent of societal exit in the cryptocurrency scene, there’s a typical conclusion newcomers usually jump to.

“There’s a received view among crypto people that libertarianism is driving all of this. … I’m not at all convinced that’s true. When these things work it’s always because you have communities built around them,” Peter Ludlow, philosopher and editor of the book “Crypto Anarchy, Cyberstates, and Pirate Utopias,” told CoinDesk in a phone call. “It might be something more interesting.”

Going unseen

Even at the dawn of philosophy, thinkers realized that many of the most important truths are hidden.

For example, Heraclitus is credited as one of the progenitors of ontology, the study of existence itself, and he predated Socrates. But his work only survives in quotations from later writers. In one of his surviving fragments, he wrote, “Nature loves to hide.”

But cypherpunks decided that the most immediately valuable knowledge was not what is hidden but how to effectively hide.

For the crypto-anarchist of today, Smuggler provides the most illuminating way of thinking about these concepts as a strategy.

He uses a construction that comes from military and intelligence circles: the OODA loop. OODA stands for observe, orient, decide and act. It’s a way operatives are trained to always take information in, analyze and assess it in context, make a choice based on that and do it. It’s called a “loop” because once finished an operative just starts over.

Smuggler argues OODA is also how the state manages its subjects. He uses the construction to point out that most political philosophies deal with the last two parts: What does the state “decide” based on a given set of information and how does the state “act” to enforce norms.

Smuggler contends that crypto anarchy is distinct from other political frameworks because, instead, it concerns itself with the first two parts of OODA, “observe” and “orient.” If the state can’t ever see a group or it can’t make sense of what it does observe, then it simply won’t be able to do anything about it.

This framing squares also with James C. Scott’s 1998 book “Seeing Like a State,” which argued the chief work of governments is to make their peoples’ activity legible to the sovereign. So, for example, it is easier to determine how much to tax subjects when they all transact in one currency, and that is even easier when electronic systems log every single transaction.

Crypto-anarchists seek ways for those who associate by different sets of rules to gather, transact and engage with each other, unobserved by the massive organizations attempting to assert control.

Secret self

The ability to have and know secrets, Smuggler contends, is a part of how a person knows they have a self, that they are distinct. 

“That’s really what surveillance capitalism is built on, the realization that a lot of people in their outward appearance are the same and a lot of people in their causal behavior are the same,” Smuggler said.

By keeping secrets and sharing them in a controlled fashion, individuals can be reassured that they are distinct from others.

“The moment we lose all secrets we lose all the ability to have territorial and social sorting. Then we truly have nothing left to determine identity,” Smuggler said.

Thus, O.G. cypherpunks get exasperated by newcomers who don’t permit the public to use their creations while revealing only the essentials. To harken back to Hughes, cryptography enables a world in which people can reveal to computer systems no more than what’s necessary.

So, for example, on the current internet you have to log into sites with some kind of personally-identifying information, like an email.

There wasn’t really a better way, though, in the Web 2.0 era, but there are in the blockchain era.

Crypto anarchy is in a sense a throwback to the pre-state days of individual choice about which laws to follow.

Take online games. To play many of them, you need to be able to prove you own the assets needed to play. On Web 2.0, players did it with an identity-connected account. But blockchains allow users to prove only that they control a wallet holding the needed assets. Nevertheless, on crypto-adjacent games like Immutable’s Gods Unchained, the terms of service require Web 2.0 credentials for a Web 3.0 world.

Cypherpunks understand that when companies ask for more than they need to, they are taking more than they seem to be.

There are signs the public is starting to get this, too. Every time there’s a wave of unsettling news, people start to download the encrypted messaging app Signal, as The New Yorker recently reported in a profile of its creator. 

Using Signal is the cypherpunk equivalent of smoking weed once in college, but it’s a start.

After the exit

Today crypto is divided between the side that wants to express a viewpoint and the side that wants to build a new corner of the economy so that “number go up.”

“I don’t consider it to be homogenous at all,” Castle Island’s Carter said of the crypto community. “People think of us as monolithic, which is to our detriment.”

We are seeing that divergence play out, but few aspects of crypto’s various ideological pieces are more widely – at least – name-checked as the cypherpunk vein of thought, while crypto anarchy is, admittedly, much less so. Nevertheless, every day brings examples of cypherpunk commitments downgraded in the interest of user experience.

Case in point: The mobile-friendly decentralized finance app Dharma is built on the whole premise that MetaMask, a traditional (but simple enough) Ethereum wallet is just too hard to use. So because Dharma users didn’t use a crypto wallet, they had no identity from the perspective of the Ethereum blockchain, and they missed out on Uniswap’s big airdrop to all past users. Dharma’s team tried and failed to win it for them retroactively.

Not your keys, not your windfall.  

But it’s also easy (particularly in an ideological group so dominated by engineers) to rely too much on code. Code is necessary but not sufficient to achieve the ends of privacy and self-determination.

‘Re-intermediation’

“This tendency to want to stick a protocol in front of everything, you end up with this layers and layers of re-intermediation,” Jaya Klara Brekke, a researcher at Durham University who did her Ph.D. work on a political analysis of blockchain, told CoinDesk in a phone call.

Smuggler, for his part, concurred. “I’m very not a fan of replacing trust in people with trust in machines. And I don’t believe that code is law. And I don’t think if you’re a sane person you can think that.”

Which may explain why he’s reluctant to elevate these sets of ideas to the status of “philosophy,” despite explaining and expanding them in such compelling ways. 

“What I think is: With crypto-anarchistic tools we have an ability to create different societies,” he said. And by that he means to “reduce the depth of influence that the territorial state has on you while at the same time associating with new groups.”

In Smuggler’s telling, crypto anarchy is a method of discovering the unlikely path to exit-without-leaving; the question of what to do once having done so is left to others.

And, in many respects, paths to different alternative futures are represented by distinct blockchain protocols, each with its own coin. Said Carter: