The Good News of Crypto's Long Ancestry
Newsletter readers, I've learned, are a savvy bunch. So if I were to ask what the first blockchain was, I'm confident you'd immediately suss it out as a trick question and decline to answer.
Unless, that is, you've heard of Surety, which offered a blockchain-based timestamping service for digital documents starting way back in 1995.
If, like everyone else, you associate blockchains with the distributed-computing systems that are Bitcoin and Ethereum, you might question how Surety could classify as such — running algorithms on a decentralized set of computers would have been impractical in the dial-up era of the 1990s.
But that's not the only way to do it. Surety held customers' documents on its own servers, but achieved trustlessness in a most analog manner: by printing its hashes once a week in the classified section of the New York Times.
That admittedly does not sound very useful by today's standards (one-week block times???).
But I offer it here as evidence that the history of blockchains predates Satoshi's white paper of 2008 …. and as a fun fact to drop into conversation at your next crypto conference.
(Permissionless, maybe?)
And here's an even funner fact to wow your crypto friends with: That first blockchain is itself predated by smart contracts.
Crypto's family tree
You are probably like me in thinking of smart contracts as the second big step in the evolution of blockchains: Satoshi invented internet money with Bitcoin and then Vitalik made blockchains programmable with Ethereum.
But smart contracts have a pre-history of their own: In this fascinating note, Professor Michael Manelli, co-founder of the Z/yen think tank, offers a step-by-step guide on how proto-smart contracts were used to settle FX swaps as early as the 1980s:
Counterparties would agree the terms of a swap, with contractual calculations written into a spreadsheet stamped with a hash (no different than the hashes used in Ethereum blocks).
The hashed spreadsheet file was saved on a floppy disk and given to a lawyer to be held for safekeeping.
When the swap was due to settle, the counterparties would convene at the lawyer's office, where the floppy disk would be retrieved from the safe.
The hash on the file would be checked to ensure it was the same spreadsheet, with the same terms, as originally agreed.
An oracle (e.g., that morning's newspaper) was referenced for the prices of the relevant FX rates, which were entered into the spreadsheet.
The spreadsheet would calculate who owed what to whom.
Settlement (I'm guessing) would then follow per normal channels.
In this, the arrangement had "all the characteristics of a smart contract": a transparent, immutable, and secure agreement between counterparties to exchange value according to the rules agreed.
Definitely a contract and definitely smart.
Still, I wouldn't blame you for thinking that settling swaps with floppy disks is about as related to settling NFTs and meme coins on Ethereum as humans are to amoebas.
But humans are related to amoebas. And that's a useful thing to know: Ultimately, we all come from the same place!
I'd argue it's similarly useful to know that blockchains have a history that predates Bitcoin: Because if crypto is its own, entirely original thing, immaculately conceived in 2008, it may also be prone to immaculately disappear.
If Satoshi's 2008 white paper was a big bang responsible for creating the entire universe of crypto, there's a chance that whole universe could be one big mistake — a detour that turns out to be nothing more than a horrendous waste of investor money and developer talent.
But if crypto is just another step in the long-running digitization of everything, it's more likely to have staying power.
History suggests it's the latter: Surety's early blockchain was based on a 1991 paper, "How to time-stamp a digital document," written by cryptographers Stuart Haber and Scott Stornetta.
On a crypto family tree, that puts Surety not far removed from Bitcoin: Three of the eight papers cited in Satoshi in 2008 were authored by Haber and Stornetta. (So, second cousins, maybe?)
And the ideas from those papers can be traced back even further: In the aforementioned Z/yen article, Professor Mainelli and his co-author recount the intellectual history of blockchains going all the way back to 1953, when "hash-chaining" was mentioned in an internal memorandum at IBM.
This, the authors suggest, demonstrates "that discussion of an effective 'blockchain' may have predated Satoshi Nakamoto's Bitcoin white paper by 55 years."
And that, in my opinion, is great news.
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