In the early 1990s, a group of mathematicians, misfits, hackers, and hobbyists calling themselves “the cypherpunks” came together around a shared belief that the internet would either demolish society’s artificial walls or lay the groundwork for an Orwellian state. They saw cryptography as a weapon against central planning and surveillance in this new virtual world.
The philosophical and technical ideas explored on the cypherpunks’ widely read email list, which launched in 1992, influenced the creation of bitcoin, WikiLeaks, Tor, BitTorrent, and the Silk Road. The cypherpunks anticipated the promise and the peril that lay ahead when the internet went mainstream, including new threats to privacy and the possibility of building virtual platforms for communication and trade that would be impervious to government regulators.
The first episode in Reason‘s new documentary series on the cypherpunks looks at a clash of ideas over how the internet could lead to a more free society, which was a precursor to the formation of the cypherpunk movement. It took place between the economist and entrepreneur Phil Salin, and the former Intel physicist Timothy C. May, who became known as the father of “crypto anarchy.” (Salin died of cancer in 1991 at the age of 41, and May passed away in 2018 at the age of 66.)
Salin was part of a community of young computer scientists in Silicon Valley, who the George Mason University economist Don Lavoie dubbed the “High Tech Hayekians” because of their efforts to blend the insights of Austrian economist Friedrich Hayek with computer science. The group included the pioneering technologists Mark S. Miller, Chip Morningstar, and E. Dean Tribble; Salin’s wife and business partner Gayle Pergamit; the software developer and science fiction writer Marc Stiegler; K. Eric Drexler, who is best known for his pioneering work in nanotechnology; and Christine Peterson, who later co-founded the Foresight Institute with Drexler.
Salin believed that personal computers linked up in a global communication network would make it possible to build a borderless, frictionless, global marketplace that would improve human coordination in the economy. May thought this would have negligible impact, positing instead a new world in cyberspace similar to what the science fiction writer Vernor Vinge had described in his novella True Names: an “other plane” completely shielded from government surveillance and control.
When May met Salin in 1987, it was before the release of the World Wide Web, but home computer hobbyists were already getting online in limited ways. Users could dial into servers through their phone lines to post to message boards, check their horoscopes, read the news, or go shopping.
While the e-commerce services from this period, such as CompuServe’s “Electronic Mall,” were basically digital versions of the old mail-order catalog, in a prescient 1991 essay published in Esther Dyson’s influential tech-industry newsletter, Salin foresaw how the internet would change the world by 1995, 2000, and beyond. The static roles of store and shopper, seller and buyer, author and reader—systems defined by their “one-way information flows”—would be replaced by new forms of media, he argued, enabling “two-way information flows.”
“The ability to buy or obtain exactly the information you need, when you want it, in the form you want it, is about to explode at a speed unmatched since the invention of printing,” Salin predicted.
But Salin was more than just a theorist. In the mid-1980s, he founded a dialup e-commerce startup called the American Information Exchange (AMIX). Users could buy or sell advice about the real estate market, writing software, or what companies to invest in.
Though it was similar in ways to services that would launch a decade later, AMIX was more than just an idea before its time. What set it apart was its grounding in political philosophy and its lofty goal of elevating individual decision making over central planning. Salin envisioned AMIX as a tool for improving human coordination that could lead to new levels of local knowledge sharing. It would help reduce transaction costs in the economy and serve as an alternative to central planning.
A “fluid, transaction-oriented market system, with two-way feedback,” Salin wrote in Dyson’s newsletter, would result in “crowding out monolithic, mostly government bureaucracies.”
AMIX’s chief architect was the pioneering software engineer Chip Morningstar, who had come from a stint at George Lucas’ production studio, where he oversaw the creation of the video game Habitat, one of the first virtual online communities.
After joining AMIX, Morningstar co-authored an essay about building Habitat, which echoed the Austrian economist Ludwig von Mises’ famous claim that socialism is “impossible” with the assertion that, when building a world in software, “detailed central planning is impossible; don’t even try.”
“The world is just more complicated, people are more complicated, you can’t know what all their goals are,” Morningstar told Reason in a recent video interview. “What you can do is put them into an environment where certain things are possible.”
In December 1987, Morningstar decided to introduce May, who he had befriended through a science fiction fan club, to Salin.
“Chip said there’s this guy out in Santa Cruz that you ought to talk to,” May recalled.
As a scientist at Intel, May had solved an issue affecting the reliability of the company’s memory chips called the alpha particle problem. Rich on stock options, he had retired early, spending his days at the beach reading science fiction novels, thinking about how networked personal computers could turn some of their futuristic scenarios into reality.
“So I met with Phil…and he described how AMIX would work. And I said, ‘people aren’t going to be selling meaningless stuff, like surfboard recommendations.'”
In May’s view, an online information marketplace like AMIX would only have a major societal impact as a tool for undermining state power by shattering social and legal norms. He had a different vision of a virtual marketplace for any and all goods and services, which he dubbed “BlackNet,” or a “technological means of undermining all governments.” He suggested to Salin that he reconceive of AMIX as an anonymous platform for selling company trade secrets, “such as plans for that B-1 Bomber or a process for a technology.”
On AMIX, user activity was out in the open, but BlackNet would be impervious to government tracking and surveillance. Many people’s “first response” would be to say that BlackNet “won’t be allowed to happen,” May noted at the time. “Perhaps” but technology would “probably make it inevitable.”
This debate sparked May’s interest in cryptography and cryptocurrency and would lead him to co-found the cypherpunks. Salin had an objection that May couldn’t answer: There would be no way for sellers to get paid. The only anonymous form of payment was cash, and you couldn’t shove cash through a computer screen. “I admitted to Phil that the big problem was untraceable payments,” May recalled. But it “seemed like a solvable problem.” He remembered reading something on the topic.
A couple of days after his meeting with Salin, May dug out his copy of the October 1985 issue of Communications of the ACM. The cover story was by the computer scientist David Chaum and titled, “Security Without Identification: Transaction Systems to Make Big Brother Obsolete,” which described a method for sending relatively anonymous payments using cryptography, which he would later attempt to commercialize through an early online startup called DigiCash.
That such a thing was possible “was an epiphany.” May recalled. “It was like standing on top of the mountain and seeing what’s out there.”
In 1988, AMIX was acquired by the software giant AutoDesk. A growing scene of young technologists came together around Salin and the High-Tech Hayekians, all working toward a common vision of enhancing human freedom through networked personal computing.
“It was a hothouse of ideas,” recalls Miller.
AutoDesk eventually abandoned AMIX, and Tim Berners-Lee’s World Wide Web became publicly available the same year Salin died. But Salin’s intellectual contributions and conflict with May had laid the groundwork for what would come next for the cypherpunks: the long effort to build a self-sovereign and anonymous form of digital money and the embrace of a branch of mathematics called cryptography, which they viewed as the key to personal liberation on the internet.
Written, shot, edited, narrated, and graphics by Jim Epstein; opening and closing graphics by Lex Villena; additional graphics assistance from Isaac Reese; audio production by Ian Keyser; archival research by Regan Taylor
Music: “Moving on” by Jay Denton, licensed through Artlist; “High Flight” by Michele Nobler, licensed through Artlist; “Machinery” by Kai Engel, Creative Commons — Attribution-NonCommercial 4.0 International
Photos: Hugh Daniel at the Ottawa Linux Symposium, Paul Wouters/Creative Commons Attribution-Share Alike 3.0; John Gilmore, Paul Kitagaki Jr./ZUMA Press/Newscom; John Gilmore at Burning Man 2005, Creative Commons — Attribution 2.0 Generic License; Whitfield Diffie, Chuck Painter/Stanford News Service; David D. Friedman, Gage Skidmore, Creative Commons Attribution-Share Alike 3.0; Cody Wilson, Jay Janner/TNS/Newscom; Ross Ulbricht, freeross.net; Julian Assange, Dominic Lipinski/ZUMA Press/Newscom; London Protester, Tal Cohen/Photoshot/Newscom; Louis J. Freeh and Bill Clinton, Ron Sachs—CNP/Newscom; Bill Gates, Staff/Mirrorpix/Newscom; David Chaum, AP PHOTO/DUSAN VRANIC.