Genesis Document: Hal Finney’s Digital Cash Quest Results RPOW

Hal Finney saw the need for untraceable digital cash and is credited with driving the creation of Bitcoin.

Hal Finney (1956) was a notorious optimist, once hailed by Phil Zimmerman, creator of the PGP (excellent confidentiality agreement), as “the Rogers of cryptography. “1 Even though amyotrophic lateral sclerosis (ALS, also known as Even though ALS (also known as “acromegaly”) left him paralyzed, he laughed at life and passed away on August 28, 2014.

In the 1980s, Finney, a graduate of the California Institute of Technology, entered the burgeoning video game industry. His optimism naturally led him to associate with the Negentropists. Extropianism is a movement started by California techno-libertarians, drawing much inspiration from Austrian economists and libertarian writers, advocating the use of future technologies such as nanotechnology, artificial intelligence, and space travel as tools to propel humanity into the next phase of development. Negentropists believe that if science and innovation can develop freely without government intervention, then immortality and other transhumanist goals will be achieved.

Finney is also a technology trendsetter. When the Internet was first made available to the general public in the early 1990s, Finney immediately began exploring the World Wide Web and other aspects of this new information superhighway, quickly recognizing the transformative power it contained. The advent of the World Wide Web allowed humanity to break free from geographic distances, cultural differences and borders and connect on a global scale for the first time.

But there is another side to everything. Finney understands the design trade-offs of the Internet and knows that while cyberspace creates new possibilities, it also poses risks. Because of the digitization of communications, anyone’s conversations are at risk of being monitored. The web also has the potential to become a tool for invading people’s privacy and posing a threat to human freedom.

Finney realizes that not only everyday communication but also financial transactions face the same threats. In a digital world, it is inevitable that money will also go digital. This meant that anonymous payments could become history.

In his 1993 article, Finney explains: “In the future, our data will be built into profiles to track the spending patterns of each of us. When I order something over the phone or pay with my Visa card, it will be recorded how much money I spend where. Over time, as the number of electronic transactions increases, people’s privacy could be seriously violated.”

Finney argues that the Internet needs an untraceable form of currency to enable anonymous transactions, just like physical cash (the bills and coins you carry around with you). The Internet needs digital cash.

The birth of digital cash
Fortunately, digital cash was already in development at the time.

Finney later wrote, “I had become acutely aware that we were facing privacy leaks, the spread of computerization, the rise of large databases, and increased centralization. David Chaum has pointed us in a completely different direction, one that puts power in the hands of individuals rather than governments and corporations. Computers can be a tool to liberate and protect people, not a yoke to control them.”

Cryptographer David Chom also foresaw these problems and came up with a digital cash design called eCash, and founded the DigiCash company to implement the system. Jom designed eCash as a privacy layer for fiat currencies such as the U.S. dollar, euro and yen, with the intention of selling the technology to banks.

Finney soon recommended Jom’s project to other negentropists in his circle, and wrote a seven-page introduction to the project in Entropy, the mainstream magazine of the negentropist community.

Touting digital cash to techno-libertarians, Finney wrote: “Cryptography allows people to control their information, and their control is not granted by the government, but because only they have the cryptographic key to access their information. That’s the world we’re trying to create.”

It was in 1992 that Finney received an invitation from Tim May, another negentropist. May and some of his tech-savvy, privacy-minded friends in the San Francisco Bay Area [including Eric Hughes, a former DigiCash employee] assembled a group of hackers, computer scientists and cryptographers to use cryptography to defend online privacy.

The group was the Cryptopunks, who used self-developed software as a weapon and chanted the slogan “Cryptopunks have to be able to write code.

Finney did write code, helping the Cryptopunk group achieve some early success. Together with Hughes, he developed and ran the first mail forwarder: a server that forwarded mail anonymously to help people communicate in privacy. When Philip Zimmermann released PGP, Finney became a major contributor to the project. To increase the organization’s influence, he also held a contest to break Netscape’s SSL encryption (a weakened version), which was eventually successfully broken by a cryptopunk.

Finney is still most interested in digital cash. Whenever other e-cash proposals (such as Magic Cash, Brands Cash and TrustBucks) appear on the Cryptopunk mailing list, Finney is always eager to comment. He is particularly concerned about the privacy features of e-cash and will often explain to other CryptoPunks how different systems work to help them understand the possibilities and limitations of different digital cash solutions. Whenever the topic comes up, Finney always provides his own unique insights.

Hashcash and Proof of Workload
In 1997, Adam Back, a young British computer scientist and cryptopunk, came up with a particularly interesting design for digital cash called Hashcash. as the name suggests, this solution uses a “proof of workload” system to generate something like a postage stamp as an anti-spam solution. Let’s say that before sending an email, a Hashcash user needs to generate a hash (a string of seemingly random numbers) using part of the email and some additional data, and send this hash to the recipient along with the email. The recipient will only accept messages that contain a “valid” hash, otherwise the message will be returned.

The key here is that only some of the hashes of all email-based messages will be considered valid. This means that the user must spend some arithmetic power (essentially energy) to generate the hashcash, which for the average user sending a simple message is insignificant and may only take a few seconds to compute. However, if someone wants to send millions of spam emails at a time, the sum of the energy required to find a valid hash for each email would cost him money.

Buck’s proposed scheme could be used to pay for postage, but not enough to serve as a full-fledged currency. Most importantly, each proof of workload has a unique mail corresponding to it, meaning that the Hashcash recipient cannot take an already used proof of workload and use it elsewhere.

In any case, cryptopunks soon realized that Hashcash offered something very interesting. Workload proofs introduce a digital representation of a scarce resource (energy) in the real world. Since scarcity is a fundamental property of money, Barker and other cryptopunks realized that they could build an entirely new kind of currency based on proof of workload: a digital cash that did not require a bank endorsement at all.

In the years that followed, two of the most notable proof-of-work-based digital cash proposals were Nick Szabo’s Bit Gold and Wei Dai’s B-Money. while both proposals were interesting designs, they still had some weaknesses and the corresponding solution proposals were complex and not The corresponding solution proposals are complex and not well thought out. Probably because of these reasons, neither proposal was actually implemented.

Meanwhile, DigiCash failed to implement eCash. Jom’s company (much sought after by the 1990s Internet pioneers) filed for bankruptcy in the late 20th century.

By the early 21st century, the crypto-punk movement was waning and the dream of digital cash was a fading memory.

RPOW and Remote Witness
But Hal Finney, an unwavering optimist, wasn’t about to give up.

In 2004, some 10 years after Finney first promoted electronic cash in negentropist circles, Finney came up with his own digital currency system: reusable proof of work (RPOW). Although somewhat simplified, Finney took inspiration from Bit Gold and used Hashcash’s proof-of-work system to generate the currency.

On his RPOW website, Finney explains, “Security researcher Nick Szabo has proposed a similar token concept, Bit Gold, and argues that tokens are essentially workloads up to a certain level. Sabo’s proposed concept is more complex than the simple RPOW system, but his insight is precise: RPOW tokens have the properties of rare substances like gold. Mining gold and minting gold coins requires human and financial resources, thus conferring scarcity on gold.”

Both Szabo and Wei Dai stopped short by failing to write their digital cash ideas into software. Finney, on the other hand, actually wrote an RPOW prototype. He invited people to try out the system and promoted e-cash on a minimalist Web page in blue and green with a comic book-style RPOW logo. (Imagine that as the “POW” letters paired with Batman’s uppercut to the villain’s jaw.)

Genesis Document: Hal Finney's Digital Cash Quest Results RPOW


To implement this prototype, Finney set up an RPOW server to run the open source software. This server not only acts as a mint for issuing new RPOW tokens, but also verifies that the same user is spending the same token multiple times (“double spending”).

Let’s take a concrete example to understand how RPOW works: Suppose Alice wants to generate an RPOW token. First, she wants to connect to Finney’s server, most likely via Tor for optimal privacy. Next, Alice would take the data unique to the server and herself and hash it until she finds a valid proof of workload. She then sends this proof of workload to the server, which checks its validity. If it is valid, the server creates a unique RPOW token (which is actually a string of data) and sends it to Alice, who also stores a copy of the token in a local database.

When Alice wants to spend the RPOW token, she simply sends it to a recipient, such as Bob, and downloads the MP3 file from Bob. From a technical point of view, it does not matter to the RPOW system how Alice sends the token to Bob, as long as she makes sure that the token is not intercepted on its way. (This is possible with messages encrypted with Bob’s public key.

Once Bob receives the RPOW token, he needs to check its validity and make sure it has not been spent more than once. To do this, he immediately sends the token to the RPOW server, which uses software to verify that the token is contained in the internal database and that it has not been spent. If it passes, the RPOW server confirms it to Bob, who then sends the MP3 file to Alice, and then the server marks the RPOW token as spent and no longer available. Finally, the server generates a new RPOW token, sends it to Bob and includes it in the internal database. Bob can then use the new token at …… and so on and so forth. In this way, these tokens, which represent a single proof of work, can circulate forever. This is a reusable proof of workload.

So far, this system has worked — but it requires the user to trust the operator of the RPOW server (in this case, the operator is Finney). Finney could tamper with the RPOW software, either by minting RPOW tokens without generating any proofs of work, or by unwittingly launching a double-spend attack.

However, Finney does not want to force users to trust the operator of the RPOW server, even if that operator is himself. Therefore, the RPOW server needs to have a special attribute. As the main innovation of this system, the RPOW server runs on the secure hardware component IBM 4758. IBM 4758 supports “trusted computing”.

In short, this tamper-resistant hardware contains a private key embedded by IBM, so that no one (including the owner of this secure hardware component, which is Finney himself) can tamper with or steal it. Thanks to remote witnessing technology, this private key can generate a certificate to indicate that a piece of software is running on the secure hardware component. With this certificate, anyone connecting to the RPOW server can verify that the RPOW open source code is running on a secure hardware component without any backdoors or other tweaks.

Finney explains on its RPOW website, “The primary goal of building the RPOW system is to make it impossible for everyone, including the owners of RPOW servers and developers of RPOW software, to violate the system rules and forge RPOW tokens. Without this unforgeability, RPOW tokens cannot credibly represent the work that people put into creating them. Forgeable tokens are more like paper money than Bit Gold.”

The Fate of RPOW
Although RPOW is available, Finney knows that this simplified version of Bit Gld still has limitations.

For one thing, the prototype relied on a centralized server. Open-source code and trusted computing constrained Finney’s power over the system, but there was still the possibility that IBM employees could maliciously compromise it. A more realistic concern, however, is that Finney may be voluntarily or forced to take the RPOW server offline. This would cause all RPOW tokens to become unavailable.

A more serious concern, however, is that tokens are subject to inflation. As the price of arithmetic power gradually decreases, it becomes easier to generate valid proofs of work with each passing year.

On RPOW’s website, Finney writes, “If Moore’s Law holds, the cost of generating POW tokens will steadily and exponentially decline.” Finney notes that the hardest proofs of work will remain difficult to generate in the distant future, and that the growth in computational performance will slow over time. However, he tells readers, “Remember that a proof of workload is neither a currency nor a stable store of value, but an easily tradable representation of computer work.”

In Finney’s view, his proposed RPOW system is more like the Hashcash scheme originally proposed by Barker. While proofs of work can be “reused,” RPOW tokens are intended to be a form of digital postage — not a fully fledged currency in the true sense of the word. Users can use the RPOW system to defend against spam, as an incentive in file-sharing networks, and even as chips in peer-to-peer poker games, but RPOW tokens are not suitable for savings.

While Saab and Dai tried to add complexity to solve the inflation problem, Finney chose to accept inflation. This makes RPOW much simpler by design, but it may also be the reason why RPOW has fallen short of success. Lacking the financial incentive to attract people to hold RPOW tokens, there is no reason for people to accept RPOW tokens as a payment method per se. RPOW faces a causal dilemma of whether the chicken comes first or the egg comes first.

For an electronic cash system to be successful, this causal dilemma must be resolved in some way.

Finney’s belief
In October 2008, Finney received an email through his subscription to the Cryptography mailing list (widely considered to be a spiritual continuation of the Cypherpunks mailing list). In this email, Satoshi Nakamoto (later believed to be a pseudonym) proposed a new type of electronic cash: Bitcoin. Like RPOW, Bitcoin is built on the same proof-of-work system as Hashcash, with the difference that Bitcoin does not rely on any central server.

While innovative, Bitcoin was not immediately well received, and most of the cryptopunks on the Cryptography mailing list have been sent and received too many experimental e-cash projects to see any of them actually succeed. And there are some legitimate concerns about the Bitcoin solution: Bitcoin transactions are not instantaneous, the vast majority of computing power is available to control the entire system, and the solution seems difficult to scale.

However, the optimistic Finney decided to look on the positive side.

Finney responded on the mailing list, “Bitcoin looks very promising. I like that he bases the security of the system on the assumption that honest participants are going to control more arithmetic power than attackers …… I also see potential value in such an unforgeable form of token with predictable yield and immunity from any evil doers.”

Finney realizes that Bitcoin solves an important problem. Satoshi Nakamoto had found a way to limit the amount of new currency issued. RPOW tokens become easier to generate as the price of arithmetic decreases. In contrast, Bitcoin has a fixed issuance schedule, and it still uses proof-of-work to generate new tokens, but cleverly uses a difficulty adjustment algorithm to ensure that increasing arithmetic power makes it harder to generate new tokens. (Conversely, a decrease in arithmetic power makes it less difficult to generate new tokens.)

Only a few short months after the mass mailing of Bitcoin offers via the Cryptography mailing list, Satoshi Nakamoto, the anonymous author of the Bitcoin white paper, published the code and release schedule. Over time, the number of bitcoin issues will gradually decrease until the supply ceiling is reached: there will never be more than 21 million bitcoins.

Finney is quick to point out the importance of a fixed supply.

“Whenever a new currency is created, the primary question is how to measure its value. Even if we discount the practical problem that it won’t be accepted by people, it’s hard to come up with reasonable arguments that it’s valuable. Let’s have a fun thought experiment and imagine that Bitcoin succeeds and becomes the dominant payment system in the world. The total value of bitcoin is then the sum of global wealth. It is estimated that the current sum of global household wealth is between $100 and $300 trillion. There are over 20 million bitcoins in total, each worth about $10 million.”

And concludes.

“So for now, it seems possible to generate bitcoins for a few cents of computing power, and that might be a good try, with the potential for a 100 million times return! Even if the chances of Bitcoin being such a huge success are slim, can it really grow 100 million times in value? That’s a question to ponder ……”

Finney believes that tokens can have value, even if they start out with speculative value. This can incentivize people to participate in mining, hold tokens, and accept tokens as a form of payment. Bitcoin solves the causal dilemma that RPOW failed to address. When Bitcoin officially launched in early 2009, Finney was one of the first miners and also made a technical contribution to Satoshi Nakamoto, becoming the first person in the world to receive a Bitcoin transfer, payable to Satoshi Nakamoto himself.

Exactly that year, Finney was diagnosed with acromegaly. But he was not crushed by the disease. During the last part of his life, Finney was paralyzed, confined to a wheelchair, and relying on a ventilator to assist his breathing. Even so, he continued to write code for Bitcoin using eye-tracking software. I still love programming, it’s what gives me purpose,” Finney told BitcoinTalk forum users. It’s taken a little adjustment, but my life isn’t too bad.”

To this day, Finney’s optimism hasn’t dissipated with his passing. In the tradition of the Negentropists, Finney did not choose burial or cremation. His remains were preserved by the Alcor Life Extension Foundation in subzero cryopreservation. Perhaps, as negentropists predict, a cure for acromegaly will one day be found, and technological advances will eventually bring Finney back from the dead.

Admittedly, with the disdain of most mainstream scientists, the odds of Bitcoin’s success are slim to none. But without optimistic “gamblers” like Finney, Satoshi Nakamoto might as well have been relegated to obscurity.

This is the fifth installment in Bitcoin Magazine’s “Genesis Docs” series. The first four were about Dr. David Chaum’s eCash, Dr. Adam Back’s Hashcash, Wei Dai’s b-money, and Nick Szabo’s Bit Gold. For more information on RPOW, visit For more information on RPOW, visit the RPOW web archive on The Nakamoto Institute.


  1. Fred Rogers is the host of an American children’s show, “Mister Rogers’ Left and Right,” affectionately known to viewers as “American Dad.

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