I first wrote about the idea of strong privacy in an article published in 1996, almost twenty years ago, and have returned to the subject several times since. The basic idea, inspired by the work of members of the Cyperpunk mailing list, in particular Tim May, was that public key encryption made possible a world where individuals could make their transactions invisible to third parties. In such a world it would be possible to combine anonymity and reputation by linking the reputation to an online identity but making it difficult or impossible to identify the corresponding realspace identity.

A key element of such a world is anonymous digital cash, some way of making payments, including payments to strangers, without identifying payer or payee to either third party observers or the other party. What I was imagining was something along the lines worked out by David Chaum, a Dutch cryptographer. Chaumian digital cash is issued by a realspace bank but, just as with ordinary paper currency, transactions are anonymous. The bank does not know who has made transfers to whom, and neither party to a transfer needs to know the identity of the other.

Read the full blog post here.