Why We Need Bitcoin: A Brief History of Privacy

“Privacy is actually an anomaly,” Vinton Cerf, leading developer of the original Internet Arpanet


Marcell Nimfuehr

3 years ago | 13 min read

Bitcoin is not just a means of payment. We have Dollar and Euro for that. Bitcoin is not just a means of money transfer. We have PayPal. Bitcoin is not just a store of value. Better use gold. What is special is that there is no state regulation.

The inventors of Bitcoin and other crypto-currencies want to create a currency that is beyond state and corporate control. This opens Bitcoin to criticism that it is money for criminals. But the inventors are concerned with something else: privacy.

This is a term that has only been around for a short time. Even what the term privacy describes has only become a value in the last century. To understand why Bitcoin has this lack of control and regulation as a central feature, we need to look briefly at citizens’ struggle for the right to privacy.

Definition: Privacy is the freedom to decide what information you want to disclose about yourself. It is by no means the case that you have something to hide when you insist on your invisibility. Privacy is like a curtain on a window you can draw when you’re dancing around naked.

Bitcoin developers invoke a kind of secrecy of correspondence for money. The secrecy of correspondence applies to the mail service and thus to the state and protects written communication between two private parties. The same thing shall count for money.

Metternich. Kunsthistorisches Museum, Vienna. Source: Wikipedia
Metternich. Kunsthistorisches Museum, Vienna. Source: Wikipedia

But let’s go back to the secrecy of correspondence and find parallels to Bitcoin: No privacy without Metternich. Clemens Wenceslaus Nepomuk Lothar Fürst von Metternich-Winneburg zu Beilstein, Foreign Minister of Habsburg Austria and architect of the Vienna Congress of 815. Metternich and his country of service Austria lived in difficult times in the first half of the 19th century.

In Trieste and Savoy the Italians want an Italian state for the first time. Hungarians want almost-equal rights with Vienna. The Czechs seek more autonomy. Galicia remembers the wonderful Wielkopolska. The Romanians do not want to be oppressed by the Hungarians.

The Serbs won’t serve no one and certainly not the Austrians. Everywhere there are new ideas, bland words like liberalism and nationalism are discussed and must be suppressed at all costs by the conservative Metternich.

That’s how he censors the press. Thick books are allowed, but anything shorter than 320 pages must be censored before printing. To quote a beautiful article in Die Zeit:

“But most of all, they are constantly collecting material, piling up mountains of paper, drawing up countless lists of alleged conspirators and indulging in the delights of state paranoia. Metternich also acts for the German Confederation and maintains an espionage office in Mainz that spies on German intelligence.

Who then wants to slide completely into a well maintained national paranoia, may not even leave the private any more privately. In hot rooms, thousands and thousands of letters are opened by steam, read by a censor, combined, aggregated and forwarded upwards until they land on Metternich’s table. But that’s not all.

He too summarizes once again and brings the censorship — no not to the emperor, because Ferdi is only an apparently underdeveloped figurehead.

Emperor Ferdi, the straw. Source Wikipedia
Emperor Ferdi, the straw. Source Wikipedia

The nation is run by Franz Karl, father of Franz Josef I. Franz Karl practices himself in micromanagement, he apologizes over the years for various reform proposals because he does not get to read them.

But Metternich’s censorship reports he finds delicious, because of all the gossip about the rich and beautiful of his country. Sometimes even the chief censors lose sight of their own objective.

So, it is not the USA with Echelon that is the first to perfect surveillance, not even Stalin’s Soviet Union. But they have one thing in common: in order to avert political dangers, the rights and freedoms of all citizens are curtailed.

The destruction of privacy is not a new phenomenon (Metternich was not the first censor either), nor is the attempt to escape it. People have been encrypting their messages for thousands of years: Books are secretly smuggled into the country and messages are passed on orally in a whisper.

Today there is an additional space that needs monitoring — the Internet. It includes a lot: emails, chat messages, blogs, Facebook entries, tweets, online purchases and online banking. Then databases: of credit card companies, insurance companies, hospitals. Privacy can be taken by governments, to keep it is the responsibility of each of us.

Metternich (sitting) receives the message that France proclaimed the Republic in 1848 (Amédée de Noé). Source wikipedia
Metternich (sitting) receives the message that France proclaimed the Republic in 1848 (Amédée de Noé). Source wikipedia

The Invention of Privacy

“The triumph of headphones lies in the fact that they create an oasis of privacy in a public space”, Derek Thompson, columnist.

Metternich’s surveillance state is nothing out of the ordinary for its citizens. They barely know privacy. The bedroom is an invention of the early 17th century. The single bed is invented 100 years later. As late as the 19th century, most dwellings still have no interior walls. The whole family lives in one big room. Parents, children and perhaps also guests sleep in a large bed. It is quite normal for sexual intercourse to take place alongside the children.

Even at the beginning of the 20th century, apartments and houses still have no bathrooms, people go to a bathhouse for washing and wash themselves in semi public.

The legal right to privacy was not developed until 1888 by Louis Brandeis in the USA. The article published in the Harvard Review of Law of 1890 is still current today: “

The intensity and complexity of life, attendant upon advancing civilization, have rendered necessary some retreat from the world, and man, under the refining influence of culture, has become more sensitive to publicity, so that solitude and privacy have become more essential to the individual; but modern enterprise and invention have, through invasions upon his privacy, subjected him to mental pain and distress, far greater than could be inflicted by mere bodily injury.”

But Brandeis is denounced as thin-skinned and his desire for legal privacy is ignored. At the same time, for cost reasons, the US census is not conducted by letter but by postcard. The people communicate their data on the visible back of the postcard. It will be decades before the right to privacy is also reflected in court rulings.

Most people do not value either the right or the private sphere itself. In 1908, every American sends an average of 7.5 postcards a year and thus shares his message with at least all postal workers.

The next invention, the telephone is very popular and very expensive, so several households share a line. While the quarter telephone, which existed in Austria until the 1980s, offers some degree of privacy, the neighbors were able to listen in at the beginning of the century. The telephone companies make a virtue out of necessity and simply call it “party line”.

A user of a party line, Bell Telephone Magazine, 1922, source wikipedia
A user of a party line, Bell Telephone Magazine, 1922, source wikipedia

It was not until the second half of the 20th century that privacy really came into fashion. It is the time of individual telephone lines, the invention of headphones and the Watergate eavesdropping scandal in the USA.

In India it takes until August 2017, that the Indian Supreme Court places privacy as a fundamental right on the same level as the right to life and personal freedom. Brandeis turns 360 degrees in his grave and cheers.

But let’s not dwell long in the achievements of privacy, because at the beginning of the 21st century people voluntarily and gladly renounce their right not to be seen. They wear health tracker, that show their health data to the Facebook community and transfer it to the app operator.

They hunt Pokemons and give the editor Nintendo their movement profile for free. They wear Google Glass and stream the walk into the shower on Snapchat or Twitch or Facebook. They don’t mind the nice sounding cookies and allow Google and its partners to measure and process each of their digital footprints.

Facebook writes: We will only use your (mobile) microphone if you have given permission to our app and you are actively using a feature that requires audio.”

Do you take a critical look at the installed app to see which rights you grant? And: Facebook can tap a cell phone microphone? Kelli Burns, a professor at the University of Florida, is convinced that Facebook shows relevant ads in her news feed that match the words she is speaking right now.

The question is no longer whether we are paranoid, but whether we are paranoid enough.

Nor is there any outcry from the online community when German citizens of Turkish origin are arrested at Istanbul airport for sharing president Erdogan-critical Facebook posts.

The argument against the protection of privacy is always:

“If you have nothing to hide, nothing will happen to you.”

That’s what the Turkish holidaymakers thought. They didn’t hide anything, on the contrary.

Privacy does not protect people from model democratic countries, but above all when states do not (any longer) have the welfare of their and foreign citizens in mind.

On the other hand, it is clear that it is your own fault if you make political statements on Facebook. But how do people know what can be interpreted as a political statement? An Austrian proudly posts that Conchita Wurst has won the song contest. In Russia, propaganda for homosexuality is a punishable offence.

What happens if our proud poster goes on a business trip to Russia? How do we know today which posting will bring us to court or prison tomorrow? Who can guarantee that Google won’t show our surfing pattern to a restrictive government just to continue doing business in this country? That would break the china.

Fight against the omniscient state: manifesto of a cypher point

From the “Manifesto of a Cypher Punk”:

“Privacy is necessary for an open society in the electronic age. Privacy is not secrecy. A private matter is something one doesn’t want the whole world to know, but a secret matter is something one doesn’t want anybody to know. Privacy is the power to selectively reveal oneself to the world. (…)

Since we desire privacy, we must ensure that each party to a transaction have knowledge only of that which is directly necessary for that transaction. Since any information can be spoken of, we must ensure that we reveal as little as possible. In most cases personal identity is not salient. When I purchase a magazine at a store and hand cash to the clerk, there is no need to know who I am.

When I ask my electronic mail provider to send and receive messages, my provider need not know to whom I am speaking or what I am saying or what others are saying to me; my provider only need know how to get the message there and how much I owe them in fees. When my identity is revealed by the underlying mechanism of the transaction, I have no privacy. I cannot here selectively reveal myself; I must always reveal myself.

Therefore, privacy in an open society requires anonymous transaction systems. Until now, cash has been the primary such system. (…)

Privacy in an open society also requires cryptography. If I say something, I want it heard only by those for whom I intend it. If the content of my speech is available to the world, I have no privacy.

To encrypt is to indicate the desire for privacy, and to encrypt with weak cryptography is to indicate not too much desire for privacy. Furthermore, to reveal one’s identity with assurance when the default is anonymity requires the cryptographic signature.

(…) We must defend our own privacy if we expect to have any. We must come together and create systems which allow anonymous transactions to take place. People have been defending their own privacy for centuries with whispers, darkness, envelopes, closed doors, secret handshakes, and couriers. The technologies of the past did not allow for strong privacy, but electronic technologies do.

We the Cypherpunks are dedicated to building anonymous systems. We are defending our privacy with cryptography, with anonymous mail forwarding systems, with digital signatures, and with electronic money.

Cypherpunks write code. We know that someone has to write software to defend privacy, and since we can’t get privacy unless we all do, we’re going to write it. We publish our code so that our fellow Cypherpunks may practice and play with it. (…)

The Cypherpunks are actively engaged in making the networks safer for privacy. Let us proceed together apace.”

9 March 1993.

Modern guardians of privacy

Eric Hughes, author of the “Manifesto of a Cypherpunk”, is not a communist planning the revolution, but a mathematician who makes two interesting statements at the beginning of the Internet age: Never in the history of mankind is it so easy for governments to monitor their citizens.

And never before in history can citizens protect themselves so well against it if they only want to.

The two proponents — governments and citizens — have been organizing a kind of crypto war for decades. Governments are trying to prohibit and prevent citizens’ access to encryption technology and thus to privacy. Citizens (you can call them activists, or even hackers) fight this restriction of civil rights by inventing their own, better encryption.

The hackers won the technological part of the war, not even the American organizations with 3-letter acronyms can get into an iphone. But citizens’ awareness of their privacy is constantly declining.

They don’t care if emails, Facebook posts, SMS, Whatsapp messages, tweets and Skype conversations are scanned, collected, processed, categorized and compiled into an incredibly precise profile of each person.

Why should I? There’s nothing to hide. Why do governments care if I post dirty jokes on Facebook? Anyone who evades surveillance has something to hide, is therefore automatically suspicious.

But Cypherpunks and other activists do not think that the desire for privacy is automatically criminal intent. Citizens also put curtains on their windows when they are not planning to commit a crime. Privacy is what it is.


There are a number of softwares and processes that provide privacy. Some of them are legal, some are used primarily for illegal purposes. Here is a selection of the better known:

TOR — is a browser that covers the traces of an internet user. Every website accessed and every file downloaded can be traced back (more or less) precisely to a physical device. The TOR browser developed by Jacob Applebaum prevents this. TOR is also the access point to the so-called Darknet. (Which, by the way, doesn’t look dark in most corners, but rather funny.)

PGP (Pretty Good Privacy) — is an encryption technique that sends e-mails as illegible code and only the sender and recipient have the key to convert the code into legible text. Actually, we should all use PGP. But we’re not.

SSL (Secure Socket Layer) — is an encryption technique that, among other things, creates encrypted security between a user’s browser and a website. This makes it very difficult to interfere between the buyer and the webshop and steal the credit card data. One can recognize such an encryption by the fact that the web page does not begin with http://, but with https://.

Bittorrent — is known as the software that can distribute illegally provided movies, music and programs. Similar to Bitcoin, it is also a decentralized system in which the files are not located on a central server but distributed in fragments on all computers on which Bittorrent runs. If you use Bittorrent to download files, you can make them available to others in the meantime. If this is prohibited by the copyright holder of the file, then this is a criminal offence.

Wikileaks — Julian Assange is a must. Wikileaks is a website where whistleblowers can safely store their secrets and make them accessible to the public. They in turn are protected from being detected by encryption. (Not always works, however, as some whistleblowers have already noticed.)

Bitcoin is cypherpunk

That was a long prelude to the question: what does Bitcoin have to do with encryption and privacy and why do I need to know? The popular 44th President of the USA provides us with an answer in a conversation with the TV station ABC:

Where would we be if not only the richest of the rich could have a tool like this to avoid their tax obligations, but every citizen? In the view of the US government, the reprehensible thing is not the existence of Swiss bank accounts, but democratic access to this type of fiscal anonymity. What we can take from all that:

Blockchain technology makes it possible to maintain a high degree of anonymity and privacy thanks to encryption in financial transactions. For better or for worse.

It thus has the characteristics of cash but is much easier to transfer. Bitcoin (or more private coins such as Monero, Zcash or Dash) means cashless money transfer without the monitoring previously possible. Bitcoin is therefore not just a money tool, but a political issue. Whoever uses developments in blockchain technology makes a political statement.

Supporters of security through surveillance should fear Bitcoin, like the devil the holy water or Barack Obama a democratized Swiss numbered account.


Created by

Marcell Nimfuehr







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