Did The NSA Design Bitcoin? A Look At What’s Known

A common hypothesis submitted by members of the bitcoin community argues that the National Security Agency (NSA), or some other government alphabet agency, invented bitcoin. Many bitcoiners laugh this suggestion off as “impossible,” but, on the contrary, there is precedent for such an assertion. But, that doesn’t make it true…

It’s not as if the government or its agencies have never invented technology. In particular, the US defense industries, dubbed by Dwight D. Eisenhower as the “military-industrial complex.” Government research – generally conducted by the military or intelligence complexes and academia – has resulted in some of the most compelling technologies of our age, including the internet. The Tor project (the anonymous online network) was created by DARPA (Defense Advanced Research Projects Agency) and currently receives 80% of their funding from the US Government.

An NSA paper, written in 1996 and entitled “How To Make A Mint: The Cryptography of Anonymous Electronic Cash”, represents an interesting anecdote in the history of crypto-currencies and government agency. Here is the table of contents of the document:

CONTENTS

INTRODUCTION

1. WHAT IS ELECTRONIC CASH?

1.1 Electronic Payment

1.2 Security of Electronic Payments

1.3 Electronic Cash

1.4 Multiple Spending

2. A CRYPTOGRAPHIC DESCRIPTION

2.1 Public-Key Cryptographic Tools

2.2 A Simplified Electronic Cash Protocol

2.3 Untraceable Electronic Payments

2.4 A Basic Electronic Cash Protocol

3. PROPOSED OFF-LINE IMPLEMENTATIONS

3.1 Including Identifying Information

3.2 Authentication and Signature Techniques

3.3 Summary of Proposed Implementations

4. OPTIONAL FEATURES OF OFF-LINE CASH

4. 1 Transferability

4.2 Divisibility

5. SECURITY ISSUES

5.1 Multiple Spending Prevention

5.2 Wallet Observers

5.3 Security Failures

5.4 Restoring Traceability

CONCLUSION

REFERENCES

The report does not exactly describe bitcoin, with key differences in the NSA researchers envisaging, in 1996, how a crypto-currency would work, and what bitcoin is today. It does accurately pinpoint the abuse such a medium of exchange could endure, and which bitcoin solves; that is, double-spending.

Tatsuaki Okamoto, one of the referenced authors at the bottom of this report by the NSA’s cryptology division, has been of particular interest to bitcoiners investigating what’s possibly the newest age-old question: “Who is Satoshi Nakamoto?” Many bitcoiners have highlighted that this person’s name is very similar to that of Satoshi Nakamoto, the alleged inventor of bitcoin. Mr. Okamoto wrote a paper entitled “An Efficient Divisible Electronic Cash Scheme”, leading many people to suggest that perhaps this individual is Satoshi Nakamoto indeed. By the time this paper had been written, the general consensus that an “electronic currency” would enable a user to withdraw these coins from a bank or other centralized institution. Even the above-mentioned NSA paper makes the same assumption. Obviously, this is not how Bitcoin functions. At this point a direct connection between Okamoto, the NSA and bitcoin eludes any diligent researcher. But circumstantial evidence remains. For instance, the Wikipedia page for Sha-1, of which sha-256 is a function (the hash function used by bitcoin), explains the hash functions origin:

In cryptography, SHA-1 is a cryptographic hash function designed by the United States National Security Agency and published by the United States NIST as a U.S. Federal Information Processing Standard. SHA stands for “secure hash algorithm”. The four SHA algorithms are structured differently and are distinguished as SHA-0, SHA-1, SHA-2, and SHA-3. SHA-1 is very similar to SHA-0, but corrects an error in the original SHA hash specification that led to significant weaknesses. The SHA-0 algorithm was not adopted by many applications. SHA-2 on the other hand significantly differs from the SHA-1 hash function.

Other stories online seeking to connect bitcoin with intelligence agencies evokes In-Q-Tel. According to Wikipedia:

In-Q-Tel… is a not-for-profit venture capital firm that invests in high-tech companies for the sole purpose of keeping the Central Intelligence Agency, and other intelligence agencies, equipped with the latest in information technology in support of United States intelligence capability.
A basic premise of individuals holding the belief that bitcoin was created a government agency is that bitcoin was created as an pseudonymous currency, passed on as an anonymous currency, for the sole purpose of tracking criminals attempting to launder money. Towards this end of tracking criminals, In-Q-Tel exists, making it a prime suspect to invest in bitcoin related startups if indeed bitcoin were a law enforcement project.

But, the most in-depth connection between In-Q-Tel and bitcoin is via Google, a by-no-means-whatsoever concrete affiliation. Google’s connection to In-Q-Tel is not public. But, in 2006, ex-CIA officer Robert David Steele told Home Security Today that Google “has been taking money and direction for elements of the US Intelligence Community, including the Office of Research and Development at the Central Intelligence Agency, In-Q-Tel, and in all probability, both the National Security Agency (NSA) and the Army’s Intelligence and Security Command.”

The year before In-Q-Tel sold more than 5,000 shares of Google stock. In 2010 Google announced it was working directly with the National Security Agency so as to secure its electronic assets. Also in 2010 Wired reported that In-Q-Tel and Google had jointly provided venture capital funding to Recorded Future Inc, a temporal analytics search engine company that analyzes tens of thousands of web sources in order to predict trends and events.

But Google has itself not yet invested in bitcoin. The conglomerate does not accept bitcoin for any of its products or services. What’s more, it has invested in alternative digital currencies other than bitcoin.

Paltry is the evidence regarding the claim that a government agency is directly responsible for bitcoin. Instead, what’s more likely, is that government researchers and the possible player or players referred to as “Satoshi Nakamoto” attended similar gatherings and perhaps shared acquaintances. Before the arrival of bitcoin, at the very beginning of this new century, financial cryptology conferences were not well attended but by perhaps twenty people. Attendees at these conferences might give us an idea into the minds participating in a dialogue that ultimately led to bitcoin. With this said, it is entirely possible still that Satoshi Nakamoto’s experiences outside this clique saved him from many of the fallacies early researchers internalized, such as centralized banks for the “electronic currency.”