Cryptocurrency War 33 Years: Started by Biden, Ended by Biden

Author: Chao

In the deep autumn of 2024, Washington D.C. Golden maple leaves are slowly falling from the sycamore trees outside the White House. President Biden stands by the window of the Oval Office, gazing at the city he is about to bid farewell to.

Thirty-three years ago, not far away on Capitol Hill, he proposed the famous S.266 bill as a senator. At that time, he could never have imagined that this seemingly ordinary bill would become the fuse for a "crypto war" lasting over thirty years. Nor could he have foreseen that this war would ultimately conclude with the victory of the cypherpunks at the very end of his presidency.

This is a story about failure and victory, oppression and resistance, centralization and freedom—an epic that spans an entire generation. In this war that lasted over thirty years, a group of geeks, driven by mathematical ideals, ultimately changed the course of human civilization.

Part One: The Eve of War

The Embers of the Cold War

This story begins even earlier.

In 1975, at the IBM Research Lab, a group of scientists was developing a revolutionary encryption algorithm, which would later become the famous DES (Data Encryption Standard). The computer industry was at a critical juncture: personal computers were about to enter households, and encryption technology would determine the direction of this revolution.

But just as this work was nearing completion, the National Security Agency (NSA) suddenly intervened. Citing national security, they demanded that the key length be reduced from 128 bits to 56 bits. This seemingly technical change drastically reduced the algorithm's security by trillions of times.

In the shadow of the Cold War, no one dared to question this decision. Encryption technology was viewed as military equipment and had to be strictly controlled. However, as the personal computer revolution progressed, this Cold War mentality began to clash sharply with the needs of the new era.

The War Begins

In the spring of 1991, an internal NSA report stated: "With the proliferation of personal computers and the development of the internet, the spread of encryption technology will pose a significant threat to national security. We must take action before this issue spirals out of control."

This report eventually landed on Senator Joe Biden's desk. As a key member of the Judiciary Committee, he decided to take action. He proposed the S.266 bill, the "Comprehensive Anti-Crime Act of 1991." Section 1126 of the bill required: "Electronic communication service providers and device manufacturers are obligated to ensure that the government can obtain the plaintext content of encrypted communications."

On the surface, this was a bill aimed at crime. But in reality, it was the government's first attempt to control the keys to the entire digital world through legislation.

Chapter Two: Code as Weapon

Resistance in the Garage

While politicians in Washington debated this bill, in a garage in Colorado, programmer Phil Zimmermann was conducting a silent revolution. His developed PGP (Pretty Good Privacy) software allowed ordinary people to use military-grade encryption technology.

When Zimmermann heard about the S.266 bill, he realized he had to complete PGP before the bill passed. This turned into a race against time.

But completing the development was just the first step. The U.S. government classified encryption software as military goods, prohibiting its export. Faced with this obstacle, Zimmermann came up with a genius idea: to publish the source code of PGP as a book.

This led to the famous "Zimmermann Publishing" incident. According to the First Amendment of the U.S. Constitution, publications are protected by freedom of speech. The government could regulate software but could not prohibit the export of a mathematics book.

Soon, this seemingly obscure technical book circulated globally. Programmers around the world bought the book and re-entered the printed code into their computers. PGP flowed like an unstoppable undercurrent into every corner of the globe.

Voices from Academia

The academic community also voiced opposition. In early 1992, when Congress held a series of hearings on the regulation of encryption technology, many experts from academia stood up to clearly oppose the establishment of backdoor mechanisms. Their core argument was simple: encryption systems are either secure or insecure; there is no middle ground.

Amidst the strong opposition from the tech and academic communities, the S.266 bill ultimately failed to pass. This was the first victory for encryption freedom, but the government clearly would not give up easily.

Chapter Three: The Rise of the Cypherpunks

The Birth of a New Force

In 1992, Berkeley, California.

At the home of John Gilmore, the fifth employee of Sun Microsystems, a group of individuals concerned about privacy and encryption technology began to meet regularly. These gatherings attracted twenty to thirty tech experts from the Bay Area, including Intel scientist Timothy May and cryptographer Eric Hughes. Every month, this group would discuss cryptography, privacy rights, and civil liberties in the digital age in Gilmore's meeting room.

These gatherings quickly evolved into the birthplace of the cypherpunk movement. Participants realized that the emergence of the S.266 bill signified a long-term battle for civil liberties in the digital age. After several meetings, they decided not to let physical limitations become an obstacle, and thus created the cypherpunk mailing list. The name combined "cypher" and "punk." Soon, this mailing list attracted hundreds of members, including computer scientists, cryptographers, and libertarians.

The Digital Age Declaration of Independence

In March 1993, Eric Hughes published the "Cypherpunk Manifesto." This document, later regarded as the Declaration of Independence for the digital age, began with the following words:

"Privacy is necessary for an open society in order to maintain that openness. Privacy is not secrecy. A private matter is something that you do not want the whole world to know about, but not something that you do not want anyone to know about. Privacy is the ability to selectively reveal oneself to the world."

This passage quickly spread across the early internet. It accurately expressed the core belief of an emerging group: in the digital age, privacy is not a privilege but a fundamental human right. And the tool for protecting this right is encryption technology.

Government's Counterattack

The rise of the cypherpunks made the Clinton administration uneasy. In April 1993, the White House launched a new initiative: the Clipper Chip.

This was a carefully designed trap. The government claimed that this encryption chip would satisfy both privacy protection and law enforcement needs. They even persuaded AT&T to commit to purchasing one million chips.

But this plan quickly encountered a fatal blow. In June 1994, AT&T researcher Matt Blaze published a paper proving that the Clipper Chip's security was virtually nonexistent. This discovery embarrassed the government, and AT&T promptly abandoned its procurement plan.

More importantly, this incident made the public realize for the first time that government-controlled encryption systems were untrustworthy.

Beneath these public battles, deeper currents were also surging. In 1994, Amsterdam. A group of cypherpunks held secret meetings. They discussed a more disruptive idea: digital currency.

"The real reason the government wants to control encryption is to control money," one participant said, "If we can create an uncontrollable currency, that would be the real revolution."

Chapter Four: The Evolution of Institutions

The Netscape Dilemma

In 1995, Silicon Valley.

A company called Netscape was rewriting history. Founded by 24-year-old Marc Andreessen and seasoned Jim Clark, this company brought the internet into the lives of ordinary people. On August 9, Netscape went public. The opening price was $28, and it closed at $58.25, with the company's market value surpassing $2.9 billion overnight. This marked the beginning of the internet era.

During this critical period, the Netscape team developed the SSL encryption protocol. However, due to U.S. government export controls, they had to release two versions:

• U.S. version: uses 128-bit strong encryption

• International version: can only use 40-bit encryption

This double standard quickly proved disastrous. A French student cracked the 40-bit SSL in just eight days. This news shocked the business community. "This is the result of government regulation," the engineers at Netscape angrily stated, "They are not protecting security; they are creating vulnerabilities."

In 2009, Netscape co-founder Marc Andreessen and Ben Horowitz co-founded the a16z venture capital firm, which quickly became one of the most active investment institutions in the crypto space. As a business, Marc Andreessen had to yield to government demands. But as an investor, Marc Andreessen continued to support this crypto war.

The Rise of the Open Source Movement

In the crypto war, there was an unexpected ally: the open source movement.

In 1991, a Finnish student named Linus Torvalds released the first version of Linux. To evade U.S. export controls, he deliberately placed the encryption module outside the core. This seemingly compromising decision allowed Linux to spread freely around the world.

The open source movement changed the landscape of the entire tech world. The ideals of the cypherpunks, once seen as idealistic, began to bear fruit in reality:

• Code should be free

• Knowledge should be shared

• Decentralization is the future

Microsoft's Bill Gates referred to open source as a "computer virus," but he was wrong; open source became the future.

The crypto war also greatly supported the open source movement itself. In 1996, in the case of Bernstein v. U.S. government regarding the export controls on encryption software, the court ruled for the first time that computer code is a form of speech protected by the First Amendment. This landmark ruling cleared legal obstacles for the open source movement. Today, open source software has become the foundation of the internet.

The End of the First Phase of War

By 1999, the situation had become irreversible. The Clinton administration finally relaxed encryption technology export controls that had lasted for decades. At that time, The Economist magazine commented: "This is not just a war about technology; it is a war about freedom."

The fruits of the war were changing the world:

• PGP became the standard for email encryption

• SSL/TLS protected all online transactions

• Linux and open source software transformed the entire tech industry

• Encryption technology became the infrastructure of the digital age

But this was just the beginning. The cypherpunks had set their sights on a more ambitious goal: the monetary system itself.

Chapter Five: The Currency War

The Pioneer of Digital Currency

In 1990, cryptographer David Chaum founded DigiCash, pioneering the combination of cryptography and electronic payments. DigiCash created a system that protected privacy while preventing double spending through "blind signatures." Although the company ultimately declared bankruptcy in 1998, its impact was profound.

In the following decade, a series of groundbreaking concepts emerged:

In 1997, Adam Back invented Hashcash. This system, initially used to combat spam, was the first to practically implement the concept of "proof of work."

In 1998, Wei Dai published the B-money proposal. This was the first complete description of a distributed digital currency system, where participants created currency by solving computational problems, which we now know as PoW. Wei Dai's contribution was so significant that years later, Ethereum founder Vitalik Buterin named Ethereum's smallest currency unit "Wei" in honor of this pioneer.

Between 1998 and 2005, Nick Szabo proposed the BitGold concept. He not only cleverly combined proof of work with value storage but also introduced the revolutionary concept of "smart contracts."

The Birth of Bitcoin

These pioneers seemed to have touched the edge of their dreams but always lacked the final piece of the puzzle. How could all participants reach consensus on transactions without a centralized authority? This question troubled cryptographers for twenty years.

On October 31, 2008, a mysterious figure using the pseudonym Satoshi Nakamoto published the Bitcoin white paper on a cryptography mailing list. This proposal cleverly integrated several existing technologies:

• Utilized a proof of work system similar to Hashcash

• Borrowed the decentralized design concept from B-money

• Employed Merkle trees for transaction verification

• Innovatively proposed blockchain to solve the double spending problem

This new system solved the problems that all previous digital currency proposals had failed to address: how to achieve consensus in a completely decentralized manner.

More importantly, the timing of this proposal's release was very subtle. Just a month earlier, Lehman Brothers had collapsed, triggering a global financial crisis. People began to question the stability of the traditional financial system.

On January 3, 2009, the genesis block of Bitcoin was born. Satoshi Nakamoto wrote a phrase in the block: "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks."

This headline from The Times was not only a record of the block's creation time but also a silent indictment of the traditional financial system.

The recipient of the first Bitcoin transaction was Hal Finney, who had interned at DigiCash. When he received 10 Bitcoins from Satoshi Nakamoto in January 2009, he simply tweeted: "Running Bitcoin."

This ordinary tweet became one of the most famous records in the history of digital currency. From the DigiCash laboratory to the cypherpunk mailing list, and finally to the birth of Bitcoin, a revolution brewing for nearly twenty years had finally found its new form.

The First Conflict

In 2011, Bitcoin first caught the attention of Washington.

After WikiLeaks was blocked by credit card companies and banks, it began accepting Bitcoin donations. This allowed the world to see Bitcoin's true power for the first time: it was uncensorable and unblockable.

Senator Charles Schumer immediately issued a warning at a press conference, stating that Bitcoin was a "digital form of money laundering." This was the U.S. government's first public stance against Bitcoin.

The Storm Approaches

In 2013, an unexpected crisis gave Bitcoin new recognition.

The Cypriot banking crisis erupted, with the government directly confiscating deposits from account holders. This exposed the fragility of the traditional financial system to the world: your deposits do not truly belong to you.

Bitcoin's price first surpassed $1,000. But soon after, the government launched even harsher crackdowns. That same year, the FBI shut down the dark web market Silk Road and seized 144,000 Bitcoins. The government seemed to be proving that Bitcoin was a tool for criminals.

Institutional Counterattack

In 2014, cryptocurrencies faced their first major crisis. The world's largest Bitcoin exchange, Mt. Gox, suddenly shut down, and 850,000 Bitcoins vanished into thin air. This accounted for 7% of all Bitcoins in circulation at the time.

Governments around the world began to strengthen regulations under the guise of protecting investors. In 2015, New York State introduced the strict BitLicense regime, a regulatory framework dubbed the "litmus test for digital currency operators," which forced several cryptocurrency companies to leave New York.

However, each crisis made the industry stronger, and more importantly, these crises proved a key point: even if centralized exchanges might fail, the Bitcoin network itself remained rock-solid. This is the value of decentralized design.

Institutional Breakthrough

2017 marked an important turning point for cryptocurrencies. That year, Bitcoin skyrocketed from $1,000 to $20,000. But more importantly, there was an institutional breakthrough: the Chicago Mercantile Exchange (CME) and the Chicago Board Options Exchange (CBOE) launched Bitcoin futures contracts.

This signaled that Wall Street was officially accepting this once underground asset. The attitude of regulatory agencies also began to subtly shift from outright denial to attempts to understand and regulate.

But the real turning point occurred in 2020. The outbreak of the COVID-19 pandemic led countries to initiate unprecedented monetary expansion. Against this backdrop, institutional investors began to reassess Bitcoin's value.

In August, MicroStrategy CEO Michael Saylor announced that the company would convert its reserve funds into Bitcoin. This decision triggered a chain reaction in the business world. By February 2021, Tesla announced the purchase of $1.5 billion in Bitcoin, shaking the entire financial community.

Chapter Six: The Final Battle

In 2021, the Biden administration launched a comprehensive crackdown on the crypto industry. This time, the government's attacks were more organized and comprehensive than ever before. Thirty-three years after the failure of the S.266 bill, the government could no longer stop the development of encryption technology. Now, they were attempting to control cryptocurrencies through regulation.

But the situation had changed. Beneath the surface of regulatory storms, cryptocurrencies had deeply embedded themselves in every corner of modern society: over 50 million Americans held cryptocurrencies, mainstream payment companies were integrating crypto payments, Wall Street had established complete cryptocurrency business lines, and traditional financial institutions began offering cryptocurrency services to their clients.

More importantly, a new generation had fully embraced the ideals of the cypherpunks. For them, decentralization and digital sovereignty were not revolutionary concepts but rather taken for granted. This shift in mindset is more significant than any technological innovation.

In 2022, the crypto market experienced a severe crisis. The collapse of FTX plunged the entire industry into winter. In 2023, the crypto industry began to recover. Each crisis made the industry more mature and regulated. The attitude of regulatory agencies also began to change subtly, shifting from outright suppression to seeking reasonable regulatory frameworks.

A Historical Turning Point

In 2024, an ironically significant turning point emerged. Trump made supporting crypto innovation a key campaign policy, promising to create a more favorable regulatory environment for the crypto industry. His running mate, Ohio Senator J.D. Vance, was himself a Bitcoin holder and had stood at the forefront of crypto innovation for years. They swept to victory in the presidential election.

Thirty-three years ago, when Biden proposed the S.266 bill, he believed he was defending order. But history is always full of irony: it was this very bill that became the fuse for a revolution that changed human civilization. Now, he was about to hand over the presidency to a successor who supported crypto. This turn of events came so naturally: when a revolution ultimately succeeds, even former opponents must acknowledge its value.

But for the cypherpunks, gaining government recognition was never the ultimate goal. As Satoshi Nakamoto once said, Bitcoin is a tool that allows everyone to achieve financial sovereignty. The government's attitude is merely a signpost on the road, witnessing how encryption technology transitioned from an underground movement to mainstream life, and how it evolved from a technical experiment into a force that changes the world.

From the initial resistance of cryptographers and programmers to the present day, where hundreds of millions of people use cryptocurrencies; from the garage experiments of geeks to a force that shakes the global financial system; from being seen as utopian ideals to becoming the foundation of a new world. In this war that has lasted a generation, the cypherpunks have been underestimated time and again. They have been labeled idealists, extremists, and even criminals. But they stubbornly believe: the truth of mathematics will ultimately triumph over political power, and the freedom of decentralization will ultimately overcome centralized control.

Now, their dreams are becoming reality. Encryption technology is no longer a weapon hidden in the dark but a torch illuminating a new civilization. It is reconstructing every aspect of human society: when wallets become passwords, when contracts are executed by programs, when organizations are managed by code, and when trust is built on mathematics, this world stands at the threshold of a new civilization.

In the future's history books, 2024 may be recorded as the year of victory for the crypto revolution. But the true victory lies not in the recognition of any government, but in the awakening of countless ordinary people.

This is the gift of the cypherpunks, a new world built by code and protected by mathematics. In this world, freedom, privacy, and trust are no longer slogans but are embedded in every line of code, every block, and every peer-to-peer connection.