Cypherpunks Write Code: Hal Finney, RPOW, and Bitcoinby@obyte
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Cypherpunks Write Code: Hal Finney, RPOW, and Bitcoin

by ObyteMarch 22nd, 2024
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Hal Finney, a key figure in Bitcoin's early days and a pioneer in cryptography, received the first Bitcoin transaction from Satoshi Nakamoto. He contributed to Bitcoin's development, introduced Reusable Proof-of-Work (RPOW), and raised concerns about privacy and environmental impact. Platforms like Obyte carry forward his vision for secure, eco-friendly, and private cryptocurrency systems.
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One might think that the very first lucky bitcoiner is quite happy these days, but the truth is that, sadly, he left us early. Harold Thomas Finney II, better known as Hal Finney, was a talented American programmer, a remarkable cypherpunk, and the first person to receive Bitcoin ever, from Satoshi Nakamoto himself. He was the first one to run a Bitcoin node and the first miner (besides Satoshi), while greatly helping to spot bugs and exploits in the early days of the cryptocurrency.

He was born in California (US) in 1956 and got an engineering bachelor's degree from the California Institute of Technology (CalTech) in 1979. He didn’t always show interest in privacy and cryptography, instead starting his career in games development. He programmed several popular games for Mattel and Atari, including Adventures of Tron, Armor Ambush, Astroblast, and Space Attack.

He would later shift to privacy developments, being one of the first hires in the PGP Corporation, founded in 2002. This was the company that owned and sold the Pretty Good Privacy (PGP) software created by another cypherpunk programmer, Phil Zimmerman. The open version of PGP is now considered the most widely used email encryption standard. Finney would stay working with them until his forced retirement in 2011, due to his Amyotrophic Lateral Sclerosis (ALS) showing symptoms — the same rare disease the famous astrophysicist Stephen Hawking suffered from.

Besides this career path, Finney was a dedicated cypherpunk and, along with Eric Hughes, helped to create and run the first anonymous remailer. This is a service that deletes the identifying information in emails. Then, in 2004, he would release another development very close to Bitcoin.

Reusable Proof-of-Work (RPOW)

In 1997, Adam Back (another cypherpunk) created one of the first versions of a Proof-of-Work (PoW) system, called Hashcash. It was designed to avoid email spam by offering a small “work token” to every message. Finney was inspired by it to create its own PoW system, called Reusable Proof-of-Work (RPOW).

While both systems utilize Proof of Work tokens, RPOW introduced the notion of creating RSA-signed tokens in exchange for Hashcash tokens. These RPOW tokens could then be transferred between users and exchanged for new RPOWs at each transaction, effectively enabling reuse. This stands in contrast to Hashcash, where each token could only be used once before becoming invalid.

In other words, RPOW could be used to create digital currencies, where it served as a method for mitigating spam, preventing denial-of-service attacks, and ensuring the authenticity of transactions. Some years before Bitcoin, RPOW presented itself as one of the first attempts to create a P2P electronic cash system. That’s likely why Finney was so interested in Bitcoin from the very beginning when Nakamoto shared his whitepaper in the cypherpunk mailing list.

Bitcoin and Satoshi Nakamoto

While other cypherpunks and cryptographers in the list were skeptical at first, Finney described himself as “fascinated” with Bitcoin. So much so that he was among the first individuals to engage with Nakamoto, providing feedback and assistance in debugging the Bitcoin software during its initial stages. Finney's active involvement in the early days of Bitcoin's development underscores his contribution to its foundational phase.

He was the first one to run a Bitcoin node, the first miner, and the recipient of the very first Bitcoin transaction —10 BTC from Satoshi Nakamoto. Finney didn’t keep his mining for long though, leaving it “because it made my computer run hot, and the fan noise bothered me.” He expressed a bit of regret for it. However, he was able to recover his wallet when Bitcoin started to show a real market price in 2010.

After that, he stayed involved in the cryptocurrency world as a programmer for as long as he could. In 2013, he was already paralyzed due to the sickness and used special software and hardware to communicate and code. In his final coding endeavors, Finney focused on enhancing the security features of Bitcoin wallets by leveraging the capabilities of modern processors designed to support "Trusted Computing."

He died in 2014 due to the same disease, and his body is cryopreserved at the Alcor Life Extension Foundation. His wife, Fran, still runs his social media and organizes charity events in his memory.

Environmental and Privacy Concerns

Despite Finney’s support of Bitcoin, there were certain things that he wanted to change in the system. He commented on Twitter (X) about it during the initial phases of this cryptocurrency. He wanted to increase Bitcoin anonymity, and also reduce potentially harmful CO2 emissions from Bitcoin mining. The more energy taken to mine coins the more CO2 released to the atmosphere.

He had the foresight to bring this up in 2009 when nobody thought that Bitcoin would grow enough for this to be a problem. And now it is, indeed. According to the Cambridge Bitcoin Electricity Consumption Index (CBECI), Bitcoin is taking around 167.7 TWh yearly. That’s more annual energy than countries like Poland, Malaysia, or Norway consume; and produces around 84.9 MtCO2 in annual emissions. Still much less than big industries, but more than entire countries.

Bitcoin vs countries annual energy consumption by CBECI (March 2024)

The Next Step

Sadly, Hal Finney didn’t get to see other new advancements in the crypto industry, but more eco-friendly and also anonymous networks would come over the years. One of them is Obyte, which distinguishes itself as an eco-friendly and censorship-proof crypto ecosystem primarily due to its implementation of Directed Acyclic Graph (DAG) technology.

Unlike blockchain-based cryptocurrencies like Bitcoin, which rely on energy-intensive Proof-of-Work (PoW) consensus mechanisms, Obyte operates on a DAG ledger structure that eliminates the need for mining. This architectural choice drastically reduces energy consumption, making Obyte's network far more sustainable and environmentally friendly compared to PoW-based cryptocurrencies.

Furthermore, Obyte's ecosystem offers unique features that align with Hal Finney's vision for Bitcoin, particularly in terms of privacy and customization. Through its untraceable cryptocurrency, Blackbytes, users can conduct fully anonymous transactions, fulfilling Finney's interest in cryptographic payment schemes that prioritize privacy. Additionally, Obyte empowers users to create customized private tokens, enabling a wide range of applications tailored to specific needs and preferences.

This emphasis on privacy and flexibility mirrors Finney's desire to explore cryptographic solutions that enhance user autonomy and security within the digital economy, positioning Obyte as a promising platform that embodies his vision for Bitcoin's evolution.

Read more from Cypherpunks Write Code series:

Tim May & Crypto-anarchism

Wei Dai & B-money

Nick Szabo & Smart Contracts

Adam Back & Hashcash

Eric Hughes & Remailer

St Jude & Community Memory

Featured Vector Image by Garry Killian / Freepik