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Essay: Before Bitcoin Pt. 1 - 70s "Public Key Saga" by Pet3rpan

Vikrant Duggal
Vikrant Duggal
• 5 min read

In my search to gain context of crypto and build conviction in the space I discovered a series of four essays by Pet3rpan. I'll share my notes and thoughts on these essays this week in lieu of a book. Today I'm covering my thoughts and highlights from Part 1.

The core essence of this essay is the backstory that Bitcoin was born out of the cypherpunk movement and the work of three key figures (Martin Hellman, Whitfield Diffie, and Ralph Merkle) to progress the cryptography space. In essence they unlocked much of what was kept behind closed doors by governments.

Enjoy the highlights below.

Link to full essay.


What many do not know is that Bitcoin was a creation born out the cypherpunk movement.

Part One — 70s: How cryptographic knowledge was democratised through the publication of public key cryptography.

Part Two — 80s: The origins of decentralised services, anonymous communication networks and digital cash.

Part Three — 90s: The origins of the cypherpunks.

Part Four— 00s: The technologies born out of the cypherpunk movement during the 2000s.

Part Five — Bitcoin: The original designs of bitcoin and early coin forks.

Until the 70s cryptography was mostly used by the military to secure communications. Research was mostly conducted by intelligence agencies (GCHQ, NSA etc.) or licensed research labs operated by enterprises such as IBM. Cryptography was used for commercial purposes and the public had little access to the knowledge. This hold on modern day cryptography would be broken by the publication of public cryptography, released by three cryptographers known as Hellman, Diffie and Merkle. Their work would result in the first big public wave of interest into cryptography.

Public key cryptography is a shift in the use of cryptography that now secures most cryptocurrency protocols.

This was an extremely important concept for cryptography and would lead to the first big interest in cryptography

Martin Hellman, a young ambitious man

he met a German researcher called Horst Feistel

This was where he met Peter Elias, MIT’s Head of the Electronic Engineering, who collaborated on research with Claude Shannon “the Father of information theory”. If that means nothing to you, he essentially invented the modern day cryptography that was used in WWII.

Peter gave Hellman a copy of Shannon’s landmark paper: “A Mathematical Theory of Communication” (1948). This was another major influence of Hellman that shaped his mathematical understanding of cryptography.

How could I hope to discover anything that the National Security Agency, which is the primary American code-making, code-breaking agency, didn’t already know? And they classified everything so highly that if we came up with anything good, they’d classify it.”

He gave his first talk and released his first technical report on cryptography in 1973. Hellman’s work soon spread and did not go unnoticed. In 1973, a researcher called Whitfield Diffie reached out to him.

Whitfield Diffie, a very bored young man

first introduced to cryptography early at the 10 year old, when his Father, a history professor, brought home cryptography books from a local library

And in 1974, as part of his research, he visited the IBM Thomas J. Watson Laboratory at Yorktown Heights to meet with the cryptography research team. At that time it was led by Horst Feistel, the guy who introduced cryptography to Hellman.

he couldn’t learn much as much of the work was classified by the NSA. Instead, he was referred to Martin Hellman, a professor at Stanford University who was working on similar cryptography.

Hellman meets Diffie

Data Encryption Standard (DES)

In early 1975, the government published the DES. It was the first encryption cipher that was approved for public and commercial use. The NSA pushed for the adoption of the DES by financial services and other commercial sectors where strong encryption was needed (SIM cards, network devices, routers and modems).

Previous to the DES, the first amendment classified cryptography along with Munitions and other items that were military in character. You had to be licensed to handle any form of cryptography and all work related to it was classified by the NSA. This was the publicly approved use of such technology.

Hellman and Diffie initially embraced the DES with open arms as they saw it as a huge step towards bringing cryptography into the public view. But as they looked closer, they foresaw how the shortened key length was vulnerable to brute force attacks.

During the 70s, there was a general sense of distrust about the government. This wariness stemmed from the period after WWII. Learning from the control of totalitarian governments (USSR, Nazi Germany), the public was vigilant against the intrusion by the government. The public’s fears were reflected in Orwell’s 1984 and other popular texts that explored government surveillance, control of society and personal freedom. This sentiment continued into the 60s where the decade was rocked by the assassination of JFK, the Cuban Missile Crisis and sociopolitical movements such as black rights and gay rights. In the 70s, this was exacerbated by the Watergate incident in 1972 which was a controversy surrounding President Nixon’s authorised bugging of the Democratic National Committee Headquarters inWashington DC. To the public, their fears were slowly but surely manifesting before their eyes.

Merkle, the kid who knew nothing

Soon after the release of the DES, Hellman and Diffie released a technical paper called “Multi-User Cryptographic Techniques”, and they soon learnt of Ralph Merkle, a young 23 year old computer science student from Berkeley, (Hellman was 30 years old at the time and Diffie was only one year older).

Merkle's Puzzles

He put everything into a paper and shared it around. The Head Teacher of the security course couldn’t understand his work and told Merkle to bugger off. And when he submitted his work to the CACM, a well respected computer science journal, he was rejected. But this time, not because it was nonsense, but because the Editor thought the contents of his work was…
“…not in the main stream of present cryptography thinking…."

“There are these guys at Stanford who talk just like you.”

But Hellman and Diffie found his solution inefficient. With their cryptographic understanding, they had found a far more compact solution to the key distribution problem and came up with a new iteration of public key cryptography. Soon their concepts would be formulated into a paper that would be known as: ‘New Directions in Cryptography’.

New Directions in Cryptography

In November 1976, the paper: ‘New Directions in Cryptography’ was released. It discussed fundamental problems of cryptography, public key cryptography and protocols that facilitated authenticated communication.

The concepts discussed in the paper are used to design and secure blockchains we use today.

Hellman, Diffie and Merkle’s publication managed to incite a new wave of innovation that would last for decades whereas governmental agencies kept their findings behind closed doors. This contrast very much highlights the importance of open collaborative work within cryptography and but also other sciences.Fittingly, in the first line of the paper, it had begun with: “We stand today on the brink of a revolution in cryptography”

While Hellman and Diffie continued working on cryptography, Merkle was the one that continued to excel. Spending the rest of the 70s as a student of Hellman and Diffie, Merkle continued to impact cryptography in the 80s; later going on to invent cryptographic hashing.