Wei Dai's "B-money" - An Early Proposal for Digital Cash

Wei Dai was member of the Cypherpunks, Extropians, and SL4 mailing lists in the 1990s

Hi Plebs,

In the early days of the Cypherpunk movement, several proposals emerged. They were for creating digital cash systems using cryptography. One such proposal was "b-money" by the pseudonymous Wei Dai. He posted it to the Cypherpunks mailing list shortly after Nick Szabo's "Bit Gold" proposal.

Like Bit Gold, b-money envisioned an electronic cash system. A public ledger of transactions would serve as the basis. Users would transfer funds by signing messages with their public keys. The messages would debit from their keys and credit others. The ledger would track account balances.

Dai agreed with Szabo. They both seen the need to remove trust. They wanted to avoid central control of transactions. And they wanted to prevent double-spends. So, he presented two different solutions to this challenge.

The first proposed a decentralised system. In that system, every user maintained their own copy of the ledger. New valid transactions would spread through the network. This would let all ledgers stay synchronized. But Dai realized this had the "Byzantine Generals Problem". It lacked a guarantee that all nodes got the same transactions in the same order.

The second solution was a hybrid with two types of participants. There were regular users and a set of semi-trusted "servers". The servers maintained the shared ledger. Users would need the approval of a quorum of servers. They would use it to confirm legitimate transactions.

Dai proposed the servers would have to put down monetary deposits as bonds. They would also have to publish their ledgers. They would face penalties for any proven misconduct. This included double-spending or fund theft. But, the proposal lacked concrete details on adjudication mechanisms.

Wei Dai's b-money did not provide a complete solution. But, it did showcase pioneering thought on key challenges. Deploying a decentralised digital currency system posed these challenges. This was at a time when the Cypherpunk movement was rallying around such ideas.

B-money is referenced in the Bitcoin whitepaper.

Cheers, and onwards with Bitcoin