Cypherpunks Write Code: David D. Friedman & the Machinery of Freedom

Not all cypherpunks were on the 90s mailing list led by Tim May, Eric Hughes, and John Gilmore. Per common definition, they’re activists dedicated to defending digital privacy and freedom, who have created or paved the way for the creation of new tools to defend it. The physicist, economist, and legal scholar David D. Friedman fits the bill very well —besides ‘stealing’ ideas from Tim May, and vice versa.

David Director Friedman was born in February 1945, in the United States, to Rose Director and Milton Friedman. They were both free-market economists, and the latter was awarded the Nobel Memorial Prize in Economic Sciences in 1976 for his work on consumption analysis, monetary history and theory, and the intricacies of stabilization policy. As it would be evident later, his son would inherit a lot of his interests.

Funny enough, being considered an economist and a legal scholar, David D. Friedman didn’t study either of them in college. Instead, he completed his undergraduate studies at Harvard University in 1965 with high honors, earning a bachelor's degree in chemistry and physics. Then, he obtained a master's degree in 1967 and a PhD in 1971 in theoretical physics from the University of Chicago.

Afterward, he ended up as a professor (mostly of economics and law) in different American universities, including Virginia Polytechnic Institute, University of California, Cornell University, University of Chicago, and, finally, Santa Clara University, from which he retired as Emeritus in 2017. In the middle of all the teaching, he was also a prolific writer of fiction and non-fiction. That’s where his cypherpunk ideas are shown to everyone.

The Machinery of Freedom

Friedman has published at least eleven books, including three science fiction novels and a long list of economics and law reflections. One of them, specifically the one that earned him the title of ‘anarcho-capitalist theorist’ is The Machinery of Freedom, first released in 1971, and then reprinted in 1978, 1989, and 2014. He might not be the one who coined and first described the term anarcho-capitalism, but he’s considered an important source on the topic.

To recap, Anarcho-capitalism (also known as “Ancap”) is a political and economic philosophy that advocates for the abolition of the state and the establishment of a purely voluntary society based on private property, free markets, and individual liberty. That’s quite similar to the crypto-anarchism described by Tim May, with some cryptographic tweaks. That concept, as May confessed, took inspiration from Friedman’s book. Friedman also commented on it in a presentation to the Independent Institute in 2001:

“The basic history of these ideas is that I stole them from a bunch of people called ‘Cypherpunks,’ of whom the leading light is Tim May, who stole some of them from me… and then I stole the ideas back from him.”

The Machinery of Freedom ponders on how a society like the one mentioned above would be possible. It defends private property as the groundwork from which everything else would thrive, including, especially, individual freedom. It describes as well how anarchy isn’t a synonym of chaos, and how laws and rules would work in a world like this.

The book also has a section on how anarcho-capitalist money should be, and what’s the main issue with traditional money. As it turns out, it’s something in which cryptocurrencies are a perfect match: “…instead of arguing about whether our government should return to the gold standard we should instead be thinking about whether the government should produce money at all.” Just like most cypherpunks, Friedman is against centralized money.

Future Ecash

Back in 1982, the American computer scientist David Chaum designed Ecash, an electronic cash system coated in cryptography to be sort of anonymous. It was likely the first, or one of the first attempts at creating a cryptocurrency, long before Bitcoin. It failed, likely because it was handled (centralized) by the company Digicash, which had to mind US strict regulations about money. Ecash wasn’t decentralized, not yet.

Despite its come and go, Friedman found it quite interesting as a candidate for the money of the future, or at least, the money an anarcho-capitalist society would find useful. He has a chapter about this topic in his book Future Imperfect: Technology and Freedom in an Uncertain World, published in late 2008 and dedicated to Tim May “and all the other friends whose ideas I have shamelessly, but selectively, appropriated.”

Another fun fact here. Friedman was talking there about the double spending problem, private and public keys, and electronic money, coming to this conclusion: “While pieces of his [Chaum’s] vision have become real in other contexts, there is as yet nothing close to a fully anonymous Ecash available for general use” —at the same time Satoshi Nakamoto was around writing the Bitcoin whitepaper. The Bitcoin Genesis block would be released mere months after that affirmation, bringing with it a brewing storm for finances worldwide.

Friedman was positive that the control of money shouldn’t fall on governments only, and he had some suggestions to create a new kind of private money controlled by corporations or groups, whose value would come from a bundle of commodities. He didn’t guess cryptography-based decentralized coins would be coming to fit as the last puzzle piece in his own idea of society. But then, here we are, with numerous crypto tools available for everyone.

Evolution of Electronic Cash

Bitcoin was likely a crucial moment in the path to building a more anarcho-capitalist and free society, but it can be considered only the first step. Despite the decentralized inclination of cryptocurrencies like Bitcoin and Ethereum, they still exhibit some level of centralization due to their reliance on miners and powerful “validators”. These entities play a crucial role in processing transactions but can inadvertently introduce points of control and censorship.

Miners, who have an important role in transaction approval, can potentially prioritize or exclude certain transactions. Similarly, “validators”, being middlemen in systems like Ethereum can wield significant influence and be at the mercy of regulators, which may compromise the principles of decentralization and openness.

In contrast, Obyte offers a truly decentralized and censorship-resistant alternative. Unlike blockchain-based cryptocurrencies, Obyte utilizes a Directed Acyclic Graph (DAG) system, which eliminates the need for middlemen, miners, or so-called “validators”. Transactions on Obyte are both created and added solely by users, ensuring that no single entity can block or manipulate them.

This architecture aligns closely with the ideals of the anarcho-capitalist money that Friedman suggested, providing a higher level of online freedom and privacy, far from governments and external dominance. Obyte and its tokens represent a forward-thinking approach to electronic, decentralized money, paving the way for a future where financial transactions are truly free from centralized control.