“This is very fulfilling because when you thought the subject [of privacy and cryptography] must have run its course, it flares up again.”

Those words, from cryptography legend Whitfield Diffie, perhaps captured the essence of the first day of CoinDesk’s Consensus 2018 conference. Diffie famously co-authored a landmark paper in 1976 that laid the foundations for public key cryptography, a key element of modern internet security and of cryptocurrencies.

During a freewheeling, jovial fireside chat with zcash founder Zooko Wilcox, Diffie praised blockchains and cryptocurrencies, saying the technology represents a “resurgence” of the work he helped start in the 1970s to empower individuals and strengthen privacy.

The current era, he said, reminds him of the time around 1997, when attendance at cryptographers’ conferences suddenly jumped from the hundreds to the thousands.

Diffie remarked:

“These last few years have been another resurgence of cryptographic technology, and blockchain is now a huge refocus on the cryptographic aspects of these things.”

Wilcox echoed that sentiment and credited Satoshi Nakamoto for triggering this renaissance – causing Diffie to joke that they should “get another chair” on stage for bitcoin’s unknown, pseudonymous creator. Still, Diffie – whose work has focused more on securing communications than financial transactions – similarly gave props to Nakamoto for accomplishing what many before in his field could not.

“There were a good 10 years when privacy and cryptography were almost embarrassing to talk about in public,” Wilcox said.

He cited the famous (or infamous) 1999 quote from Sun Microsystems co-founder Scott McNealy, who remarked: “You have zero privacy anyway, get over it.”

“In the ensuing 10 years, everyone sort of fell in line on that – until Satoshi,” Wilcox said.

Diffie echoed that, saying: “For years many people [in cryptography] thought about how to develop money techniques, and nobody succeeded before that.”

That solicited a deadpan response from Wilcox – “Yeah, I know” – alluding to his own work in the 1990s at Digicash, a storied but unsuccessful digital currency venture.

‘Bulletproof or useless’?

On a related subject, Diffie said he was not worried that the financial fortunes of the cryptocurrency market would compromise its cypherpunk ethos.

“In some sense, you can’t be a revolutionary force without eventually taking over the establishment,” he said, drawing laughter from the audience. “So I don’t see a conflict between business development and political development.”

In fact, Diffie said that introducing market forces into protocols (as cryptocurrencies do) can be a powerful catalyst for the advancement of privacy-enhancing technology since battle-tested systems are likely to earn higher valuations than vulnerable ones.

“I like that phrase ‘introduce market forces,'” Diffie said in response to a question from the moderator and CoinDesk research director Nolan Bauerle. “The market force view of the development of cryptography may be the best single one we have, because so few things depend on this balance … of offensive techniques and defensive techniques.”

Wilcox agreed in theory, though he cautioned that in the case of cryptocurrencies, market forces don’t tend to distinguish between different coins at present.

Cryptocurrency prices tend to go up and down in unison, he said, “regardless of whether the coin has proven to be bulletproof or useless.” In the long term, though, “I assume they eventually will because I think the markets do that,” Wilcox said.

Looking back on the breakthrough he helped bring about decades ago – which is widely hailed for breaking governments’ monopoly on cryptography, thereby giving private companies and citizens access to encryption tools – Diffie said it had a similar decentralizing effect compared to today’s blockchain projects.

“If you don’t have public-key [cryptography], it’s not that you have to know the people you talk to, but you have to be connected to them by an administrative authority,” he said, adding:

“That works wonderfully for the U.S. military, it has lots of employees, a million or more and has a key management structure that follows. That just plain won’t work for an internet of commerce.”

From left: Nolan Bauerle, Whitfield Diffie and Zooko Wilcox image via Annaliese Milano for CoinDesk