33 years of crypto wars: It started with Biden and ended with Biden

Original author: Chao (X: @cw web3 )

Late autumn of 2024, Washington, D.C. Golden maple leaves are slowly falling from the sycamore trees of the White House. President Biden stands at the window of the Oval Office, looking at the city he is about to say goodbye to.

Thirty-three years ago, as a senator on Capitol Hill not far away, he proposed the famous S.266 bill. At that time, he would never have thought that this seemingly ordinary bill would become the fuse of a crypto war that lasted for more than 30 years. He would never have thought that this war would end with the victory of the cypherpunks at the last moment of his presidency.

This is a story about failure and victory, oppression and resistance, centralization and freedom, an epic spanning an entire generation. In this war that lasted for more than 30 years, a group of geeks with mathematical ideals eventually changed the course of human civilization.

Part I: The Eve of War

Embers of the Cold War

This story starts earlier.

In 1975, at IBM Research Labs, a group of scientists were developing a revolutionary encryption algorithm, which later became known as DES (Data Encryption Standard). The computer industry was at a critical juncture: personal computers were about to enter millions of households, and encryption technology would determine the direction of this revolution.

But just when this work was about to be completed, the National Security Agency (NSA) of the United States suddenly intervened. They requested that the key length be reduced from 128 bits to 56 bits on the grounds of national security. This seemingly technical change actually reduced the security of the algorithm by trillions of times.

Under the shadow of the Cold War, no one dared to question this decision. Encryption technology was regarded as military equipment and must be strictly controlled. But as the personal computer revolution progressed, this Cold War mentality began to conflict with the needs of the new era.

War Begins

In the spring of 1991, an internal NSA report stated: With the proliferation of personal computers and the development of the Internet, the spread of encryption technology will become a major threat to national security. We must act before this problem gets out of control.

The report eventually landed on Senator Joe Bidens desk. As a ranking member of the Judiciary Committee, he decided to take action. He introduced S.266, the Comprehensive Anti-Crime Act of 1991. Section 1126 of the bill requires: Electronic communications service providers and equipment manufacturers are obligated to ensure that the government can obtain the plaintext content of encrypted communications.

On the surface, this is a bill aimed at crime. But in reality, it is the first time that the government has attempted to legislate to control the keys to the entire digital world.

Chapter 2: Code as Weapon

Revolt in the garage

While politicians in Washington debated the bill, in a garage in Colorado, programmer Phil Zimmermann was waging a quiet revolution: his software, PGP (Pretty Good Privacy), allowed ordinary people to use military-grade encryption technology.

When Zimmermann heard about S.266, he realized he had to complete the PGP before the bill passed. It became a race against time.

But completing the development was only the first step. The U.S. government classified encryption software as munitions and banned its export. Faced with this obstacle, Zimmermann came up with a genius idea: to print the source code of PGP into a book and publish it.

This is the famous Zimmerman Publishing incident. Because according to the First Amendment of the US Constitution, publications are protected by freedom of speech. The government can regulate software, but it cannot prohibit the export of a mathematics book.

Soon, this seemingly obscure technical book was circulated around the world. Programmers around the world bought the book and re-entered the printed code into their computers. PGP was like an unstoppable undercurrent, quietly flowing to every corner of the world.

The voice of academia

Academics also raised objections. In early 1992, when Congress held a series of hearings on encryption technology regulation, many academic experts stood up and clearly opposed the establishment of backdoor mechanisms. Their core argument was simple: encryption systems are either secure or insecure, and there is no middle ground.

Under strong opposition from the technology and academic communities, S.266 ultimately failed to pass. This was the first victory for encryption freedom, but the government obviously will not give up easily.

Chapter 3: The Rise of the Cypherpunks

The birth of a new force

1992. Berkeley, California.

At the home of John Gilmore, Suns fifth employee, a group of people concerned about privacy and encryption began to meet regularly. These gatherings attracted two or three dozen technologists from the Bay Area, including Intel scientist Timothy May and cryptographer Eric Hughes. Every month, the group met in Gilmores conference room to discuss cryptography, privacy, and civil liberties in the digital age.

These gatherings soon developed into the birthplace of the Cypherpunk movement. Participants realized that the emergence of S.266 foreshadowed a protracted battle over civil liberties in the digital age. After several meetings, they decided not to let physical restrictions become an obstacle, so they created the Cypherpunk mailing list. The name comes from the combination of Cypher and Punk. Soon, the mailing list attracted hundreds of members, including computer scientists, cryptographers, and libertarians.

A Declaration of Independence for the Digital Age

In March 1993, Eric Hughes published the Cypherpunk Manifesto. The document, which has come to be regarded as the Declaration of Independence of the Digital Age, begins:

Privacy is necessary to maintain openness in an open society. Privacy is not secrets. A private matter is something you dont want the whole world to know, but not something you dont want anyone to know. Privacy is the ability to selectively reveal yourself to the world.

This passage quickly spread on the early Internet. It accurately expressed the core idea of an emerging group: in the digital age, privacy is not a privilege, but a basic human right. And the tool to protect this right is encryption technology.

Government strikes back

The rise of the cypherpunks unnerved the Clinton administration, and in April 1993 the White House launched a new initiative: Clipper Chip.

It was an elaborate trap. The government claimed that the encryption chip would satisfy both privacy and law enforcement needs. They even convinced ATT to commit to buying 1 million chips.

But the plan soon suffered a fatal blow. In June 1994, ATT researcher Matt Blaze published a paper proving that the Clipper Chip was not secure at all. This finding embarrassed the government, and ATT immediately abandoned its purchase plan.

More importantly, this incident made the public clearly realize for the first time that government-controlled encryption systems are untrustworthy.

Beneath these public battles, there are deeper undercurrents. In 1994, in Amsterdam, a group of cypherpunks met in secret. They were discussing a more subversive idea: digital currency.

“The real reason governments control crypto is because they want to control money,” said one attendee. “If we could create a currency that we couldn’t control, that would be a real revolution.”

Chapter 4: Institutional Evolution

Netscapes Dilemma

1995. Silicon Valley.

A company called Netscape is rewriting history. Founded by 24-year-old Marc Andreessen and experienced Jim Clark, the company brought the Internet into the lives of ordinary people. On August 9, Netscape went public. The opening price was $28 and the closing price reached $58.25. The companys market value exceeded $2.9 billion overnight. This was the beginning of the Internet era.

During this critical period, the Netscape team developed the SSL encryption protocol. However, due to the export controls of the US government, they had to release two versions:

• US version: uses 128-bit strong encryption

• International version: only 40-bit encryption is available

This double standard soon proved to be disastrous. A French student cracked 40-bit SSL in 8 days. The news shocked the business community. This is the result of government regulation, Netscape engineers said angrily, They are not protecting security, but creating loopholes.

In 2009, Marc Andreessen, co-founder of Netscape, co-founded a16z venture capital firm with Ben Horowitz, and A16z quickly became one of the most active investment institutions in the crypto field. As a company, Marc Andreessen had to succumb to the governments demands. But as an investor, Marc Andreessen continued to support the crypto war.

The rise of the open source movement

In the war on encryption, there is an unexpected ally: the open source movement.

In 1991, a Finnish student named Linus Torvalds released the first version of Linux. In order to avoid US export controls, he deliberately placed the encryption module outside the kernel. This seemingly compromising decision actually allowed Linux to spread freely around the world.

The open source movement has changed the landscape of the entire technology world. The cypherpunk ideas that were once considered idealistic have begun to bear fruit in reality:

• Code should be free

• Knowledge should be shared

• Decentralization is the future

Microsofts Bill Gates called open source a computer virus, but he was wrong, open source is the future.

The crypto wars also greatly supported the open source movement itself. In 1996, in Daniel Bernstein v. U.S. Government Export Controls on Encryption Software, the court ruled for the first time that computer code is a form of speech protected by the First Amendment. This landmark ruling cleared the legal barriers for the open source movement, which is now the foundation of the Internet.

The first phase of the war ends

By 1999, the situation was irreversible. The Clinton administration finally relaxed the export controls on encryption technology that had lasted for decades. The Economist magazine commented at the time: This is not only a war about technology, but also a war about freedom.

The fruits of war are changing the world:

• PGP Becomes the Standard for Email Encryption

• SSL/TLS protects all online transactions

• Linux and open source software changed the tech industry

• Encryption technology has become the infrastructure of the digital age

But this is just the beginning. The cypherpunks have set their sights on an even more ambitious target: the monetary system itself.

Chapter 5: Currency Wars

Pioneer in digital currency

In 1990, cryptographer David Chaum founded DigiCash, pioneering the combination of cryptography and electronic payments. DigiCash created a system that protects privacy and prevents double spending through blind signature technology. Although the company eventually went bankrupt in 1998, its influence is far-reaching.

Over the next decade, a series of groundbreaking ideas emerged:

In 1997, Adam Back invented Hashcash. This system, originally used to combat spam, was the first to put the concept of proof of work into practical use.

In 1998, Wei Dai published the B-money proposal. This is the first fully described distributed digital currency system, in which participants create currency by solving computational problems, which is the familiar PoW. Wei Dais contribution is so important that many years later, Ethereum founder Vitalik Buterin named Ethereums smallest currency unit Wei to pay tribute to this pioneer.

Between 1998 and 2005, Nick Szabo proposed the BitGold concept. He not only cleverly combined proof of work with value storage, but also proposed the revolutionary concept of smart contracts.

The Birth of Bitcoin

The work of these pioneers seems to have touched the edge of their dreams, but they are still missing the last piece of the puzzle. How can all participants reach a consensus on transactions without a centralized organization? This problem has troubled cryptographers for 20 years.

On October 31, 2008, a mysterious person with the pseudonym Satoshi Nakamoto published the Bitcoin white paper on the cryptography mailing list. This solution cleverly integrated a number of existing technologies:

• Uses a proof-of-work system similar to Hashcash

• Drawing on the decentralized design concept of B-money

• Using Merkle trees for transaction verification

• Innovatively proposed blockchain to solve the double payment problem

This new system solves a problem that all previous digital currency schemes have failed to solve: how to reach consensus in a completely decentralized manner.

More importantly, the timing of the release of this plan is very delicate. Just one month ago, Lehman Brothers collapsed and the global financial crisis broke out. People began to question the stability of the traditional financial system.

On January 3, 2009, the genesis block of Bitcoin was created. Satoshi Nakamoto wrote a sentence in the block: The Times 03/Jan/2009 Chancellor on brink of second bailout for banks

This headline from The Times is not only a record of the time when the block was generated, but also a silent indictment of the traditional financial system.

The recipient of the first Bitcoin transaction was none other than Hal Finney, who had interned at DigiCash. When he received 10 Bitcoins from Satoshi Nakamoto in January 2009, he simply tweeted: Running Bitcoin.

This ordinary tweet has become one of the most famous records in the history of digital currency. From the DigiCash laboratory, to the cypherpunk mailing list, to the birth of Bitcoin, a revolution that has been brewing for nearly 20 years has finally found its new form.

First conflict

Bitcoin first came to Washington’s attention in 2011.

When WikiLeaks began accepting Bitcoin donations after being blocked by credit card companies and banks, the world saw for the first time the true power of Bitcoin: it is uncensorable and unblockable.

Senator Charles Schumer then issued a warning at a press conference, calling Bitcoin a digital money laundering tool. This was the first time the U.S. government publicly stated its stance on Bitcoin.

The Storm is Coming

In 2013, an unexpected crisis gave Bitcoin new recognition.

The Cyprus banking crisis broke out, and the government forcibly collected deposits directly from depositors accounts. This made the world see the fragility of the traditional financial system: your deposits do not really belong to you.

The price of Bitcoin surpassed $1,000 for the first time. But with it came a more severe crackdown by the government. In the same year, the FBI shut down the dark web market Silk Road and seized 144,000 Bitcoins. The government seemed to be proving that Bitcoin is a tool for criminals.

The system strikes back

In 2014, cryptocurrency encountered its first major crisis. Mt.Gox, the world’s largest Bitcoin exchange, suddenly closed down, and 850,000 Bitcoins disappeared. This was equivalent to 7% of all Bitcoins on the Internet at the time.

Governments around the world have begun to strengthen regulation in the name of protecting investors. In 2015, New York State introduced a strict BitLicense system. This regulatory framework, known as the magic mirror for digital currency operators, forced many cryptocurrency companies to leave New York.

But every crisis makes the industry stronger, and more importantly, these crises prove a key point: even if centralized exchanges may fail, the Bitcoin network itself remains rock solid. This is the value of decentralized design.

Institutional breakthrough

2017 marked an important turning point for cryptocurrencies. This year, Bitcoin soared from $1,000 to $20,000. But more important was the institutional breakthrough: the Chicago Mercantile Exchange (CME) and the Chicago Board Options Exchange (CBOE) launched Bitcoin futures contracts.

This marked the beginning of Wall Streets official acceptance of this once underground asset. The attitude of regulators also began to subtly change, from complete denial to attempts to understand and regulate.

But the real turning point occurred in 2020. The outbreak of the COVID-19 pandemic triggered unprecedented monetary expansion in various countries. Against this backdrop, institutional investors began to re-examine the value of Bitcoin.

In August, MicroStrategy CEO Michael Saylor announced that the companys reserve funds would be converted into Bitcoin. This decision triggered a chain reaction in the corporate world. By February 2021, Tesla announced that it had purchased $1.5 billion in Bitcoin, and the news shook the entire financial world.

Chapter 6: The Final Battle

In 2021, the Biden administration launched a full-scale crackdown on the crypto industry. This time, the governments crackdown is more organized and comprehensive than ever before. After the failure of S.266 thirty-three years ago, the government can no longer stop the development of crypto technology. Now, they are trying to control cryptocurrencies through regulation.

But the situation is different now. Under the surface regulatory storm, cryptocurrencies have been deeply embedded in every corner of modern society: more than 50 million Americans hold cryptocurrencies, mainstream payment companies have connected to crypto payments, Wall Street has established a complete cryptocurrency business line, and traditional financial institutions have begun to provide cryptocurrency services to customers.

More importantly, the new generation has fully accepted the ideas of the cypherpunks. For them, decentralization and digital sovereignty are not revolutionary concepts, but things that are taken for granted. This change in concept is more profound than any technological innovation.

In 2022, the crypto market experienced a serious crisis. The collapse of FTX plunged the entire industry into a cold winter. In 2023, the crypto industry began to recover. Every crisis makes the industry more mature and more standardized. The attitude of regulators has also begun to change subtly, from simple suppression to seeking a reasonable regulatory framework.

A turning point in history

In 2024, an ironic turn of events occurred. Trump made support for crypto innovation an important campaign policy, and he promised to create a more friendly regulatory environment for the crypto industry. His running mate, Ohio Senator JD Vance, is a Bitcoin holder himself and has been at the forefront of crypto innovation for many years. They won this presidential election in a sweep.

Thirty-three years ago, when Biden proposed S.266, he thought he was defending order. But history is always full of irony: it was this bill that became the fuse for a revolution that changed human civilization. Now, he is about to hand over the presidency to a successor who supports encryption. This turn comes so naturally: when a revolution finally wins, even former opponents have to admit its value.

But for cypherpunks, winning government approval has never been the ultimate goal. As Satoshi Nakamoto said, Bitcoin is a tool that allows everyone to gain financial sovereignty. The governments attitude is just a signpost on the road, witnessing how encryption technology has moved from an underground movement to mass life, and how it has developed from a technical experiment to a force that changes the world.

From the initial resistance of cryptographers and programmers to the hundreds of millions of people using cryptocurrency today; from geek experiments in garages to the power that shakes the global financial system; from ideals that are regarded as utopias to the foundation of a new world. In this war that has lasted for a generation, cypherpunks have been underestimated time and time again. They are called idealists, extremists, and even criminals. But they just stubbornly believe that the truth of mathematics will eventually defeat political power, and decentralized freedom will eventually defeat centralized control.

Now, their dream is becoming a reality. Encryption technology is no longer a weapon hidden in the dark, but a torch that illuminates a new civilization. It is reconstructing every aspect of human society: when wallets become passwords, when contracts are executed by programs, when organizations are managed by code, and when trust is built on mathematics, the world is standing at the doorstep of a new civilization.

In future history books, 2024 may be recorded as the year of victory for the crypto revolution. But the real victory does not lie in the recognition of a certain government, but in the awakening of millions of ordinary people.

This is a gift from the cypherpunks, a new world built by code and protected by mathematics. In this world, freedom, privacy, and trust are no longer slogans, but in every line of code, every block, and every point-to-point connection.

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