Wei Dai-What Is His Influence in the Crypto Sector?

Wei Dai is a renowned cryptographer who is among the early pioneers of the crypto space. He is also a member of the Cypherpunk group, which is well known for its efforts and contribution to the innovation of modern cryptocurrencies. Wei’s legacy in the crypto space will stick due to his work on the crypto ++ cryptographic library and his joint effort with Satoshi Nakamoto during the inception of Bitcoin.

The crypto space’s success results from the work of different inventors and pioneers like Wei Dai. While it is true that the father of modern cryptocurrencies is Satoshi Nakamoto, it is accurate to claim that he did not achieve fate alone. Different cryptographers and developers helped him examine his code’s logic and provide suggestions. Also, he built BTC on the works of others like Wei Dai.

After Satoshi prepared his first BTC whitepaper, he contacted Wei Dai and Hal Finney to pass through the work and give him feedback. He chose the two as they were some of the best cryptographers. Satoshi also contacted Wei Dai and told him that his work on B-money was part of his inspiration for the invention of Bitcoin. 

Wei Dai is a computer scientist of Chinese origin whose life has been a mystery, something common to most crypto pioneers. Due to his tendency to be anonymous, some people think he could have been Satoshi Nakamoto. Dai is a graduate of computer science from the University of Washington and has a minor in Mathematics. 

The two fields of study have allowed him to innovate and influence the crypto space greatly. Below is more on Wei Dai and his influence on the crypto space.

The History of Wei Dai

Wei Dai is a Chinese computer scientist best known for his work on b-money, crypto ++ cryptographic library, and VMAC. He was a member of Cypherpunks, SL4 mailing lists, and Extropians. He used to exchange ideas with people like Robin Hanson, Eliezer Yudkowsky , Nick Bostrom, and other rationalists in the 1990s.

He has made many contributions to cryptography. Some of his work features the identification of critical Cipher Block Chaining vulnerabilities that affect SSH2. He also explored the browser exploit against SSL/TLS ( BEAST). 

His influence in the crypto space is tremendous and not to be looked down on. He worked with Satoshi Nakamoto during the inception of Bitcoin, and his impact on the crypto space also grew past Bitcoin. Wei, the smallest subunit of Ethereum, is named after him.

Some of Wei’s greatest projects include:

• Crypto++ cryptographic library
• VMAC
• b-money

Wei Dai’s Career in Cryptography

Wei Dai began his career as a programmer in Terra Sciences Acton, Massachusetts. During his time there, Dai worked on innovating security solutions and secure communication of control stations for industrial applications.

Later, he joined the Cryptography Research Group of Microsoft located in Redmond, Washington. At Microsoft, Dai was part of a group that focussed on the study, design, and implementation of encryption systems for special applications. 

At that time, Dai registered the patents 5724279 y 6081598 to optimize encryption systems in the Microsoft technology stack. Those patents proved helpful to Microsoft as it applied them in securing most of its softwares. The company mostly used innovation in the RSA encryption algorithms applications.

Development of Crypto ++ Cryptographic Library

Crypto++ is a library that Wei wrote using the C++ programming language. It has an open-source code used in academic, business, and open source projects. Some of the projects that have applied this technology include:

• Microsoft Office Groove
• Steam online gaming platform
• Lastpass- password manager
• Tripwire-computer security tool

The open-source code of the crypto ++ cryptographic library is available on GitHub. It supports various cryptographic systems, contributing to its usage across different projects. Its attributes like code cleanliness, portability, and good documentation have made it one of the most popular cryptographic libraries.

BEAST

Wei Dai was one of the people who discovered a significant vulnerability in the SSL/TLS protocol. This vulnerability affected the internet security and left room for secured communications to be intercepted.

Breaking SSL/ TLS (BEAST) involved an attacker tricking a browser into sending a known snippet of plain text over an SSL connection. Then a copy of the message being communicated could be decoded using plain text. Although gaining an encrypted message is not equivalent to having a key to the message, the trick gives the attacker the advantage of obtaining the actual message.

This method was used to break the security of SSL/TLS posing a threat to the organizations and agencies that used it for communication. 

SSH2 

Wei Dai also unearthed another vulnerability in the SSH2 protocol. He discovered that the Encryption Block Chaining mechanism had a vulnerability that put SSH2 at risk of exploitation. He published a report on the vulnerabilities and said:

“The SSH2 protocol, when used with block encryption in CBC mode, allows the attacker to look at the last encrypted text block in a packet, which is then used as the implicit in the next packet.“

He then reported the vulnerability under the code CVE-2008-5161. It affected all SSH implementations that relied on CBC, including OpenBSD. This discovery showed that not even the most secure operating system was free of vulnerabilities.

VMAC

Wei Dai and Ted Krovetz proposed the VMAC encryption-based Message Authentication Code algorithm. The Algorithm relies on a universal hash that the duo proposed in April 2007. It was designed to offer high-performance functionality through formal analysis. Wei published the specifications of their project later on in a detailed report.

He designed the Algorithm to run on a 64-bit system to allow fast data verification. The speed of data verification offered by the 64-bit systems is vital in reinforcing his algorithm’s perfection.

What Is B-Money?

Wei Dai first revealed b-Money in 1998 and explained that it was meant to be an anonymous and distributed electronic money system. The system sought to provide services akin to what modern cryptocurrencies offer.

Though digital currencies have risen and been developed to achieve futuristic performances over the past several years, it’s best to know that they have come a long way than just a decade. Most people know that Bitcoin was the first modern cryptocurrency to be adopted publicly. However, there is more to the story that many are yet to learn.

Satoshi Nakamoto built his work on previous projects like b-money, which formed some of the core features of the coin. While Bitcoin was launched to the public, Wei Dai never launched his b-money project.

The Development of B Money

Dai first published a paper on b-money in 1998 detailing the concept of the project. He outlined the general functionality of his currency in different ways that pre-date modern cryptos. 

He described b-money as “a scheme for a group of untraceable digital pseudonyms to pay each other with money and enforce contracts amongst themselves without outside help.”

His concept for the currency included several features that most modern cryptos exhibit. Some features include the need for computational work for the currency to work, and the computation would require a community. Every member of such a community would be rewarded for their work (similar to crypto mining). The records of the transactions would also be stored in a collective ledger (similar to a blockchain distributed ledger).

Dai introduced a system where a collective bookkeeping mechanism would fit to keep the records safe. He also introduced the use of cryptographic protocols to facilitate the authentication of the transactions. He further suggested using digital signatures/ public keys to authorize the authentication of transactions and enforce automated contracts (similar to smart contracts).

These developments match some of the fundamental features of modern cryptocurrencies like blockchains, public keys, smart contracts, and the mining process of the currency.

His concept for b-money also included two proposals, with the first seeming impractical as it relied on PoW to generate money. The second proposal was a network structure for keeping records similar to what modern cryptocurrencies are.

Even though the new technology behind cryptocurrencies overshadows Dai’s work, he remains one of the key pioneers of the industry. Currently, Vitalik Buterin’s Ethereum network uses the name Wei to refer to the smallest unit of Ether. The name is an honor to Wei Dai’s work and research on cryptocurrencies through the b-money project.

How would b-money work?

According to Wei Dai’s paper sent to the Cypherpunk mailing list, the currency would have two major protocols. The first protocol would keep the records of the amount owned by every holder. It would let the aggregate accounts define the ownership of the money. 

According to Dai, the protocol is “impractical because it makes heavy use of asynchronous and unjammable anonymous broadcast channels.”

However, it would pave the way for the second protocol. The second protocol keeps the money records by a subclass of participants rather than all users. The users are connected using a Usenet-style broadcast channel. The affected participants of each transaction are tasked with verifying that a transaction message has been received and successfully processed by a subset of record keepers. The system would pick the subset of the record keepers at random.

The currency’s creation system in the second protocol would follow four steps:

• Planning- Account keepers would use a consensus method to agree on how the money supply would increase over the following season.
• Bidding– All who would like to create b-money would broadcast a bid containing the amount they are willing to generate. The bid would also include a predetermined and unsolved problem class where each problem class would have a nominal cost that is publicly agreed upon.
• Computation– Those who bid would solve their selected problems and broadcast the solutions.
• Creation– Each account keeper would accept the highest bids and credit the accounts accordingly.

However, Wei Dai abandoned the project. According to him, the project was a personal endeavor and had no links to any funding or institution. He claimed that it was a result of personal interest in his comments.

“My motivation for b-money was to enable online economies that are purely voluntary… ones that couldn’t be taxed or regulated through the threat of force.”

What Were the Goals of B-Money?

While creating b-money, Wei Dai envisioned a community where the financial landscape would be free of discrimination regarding people’s status and other attributes like locality and identity. Since there would be no law-breaking and favoritism in such a system, there would be no need for a central oversight, and the system would be self-sufficient.

However, he knew that for the system to do away with the need for government intervention, the community would have to adopt P2P transactions.

Dai said, “Until now, it’s not clear, even theoretically, how such a community could operate. The cooperation of its participants defines a community, and efficient cooperation requires a medium of exchange (money) and a way to enforce contracts. Traditionally these services have been provided by the government or government-sponsored institutions and only to legal entities.”

How Did Dai Influence Modern Cryptocurrencies?

Wei Dai was a necessary force in the crypto space as he introduced some of the most common features. He brought the whole concept of digital currencies and decentralization to life at a time when technology was a limiting factor. 

Even though he did not launch his project publicly due to different factors like fear of government hostility and limited technology, his influence will never be forgotten. Below are some of the features and ideas he brought to life and how they affect the crypto space.

Digital Money

Wei Dai introduced digital currency in the 1990s, while many people did not even know what the internet was. The internet was initially at Web 1.0 thus very slow and limited options of international connectivity which points to the ingenuity of his project. Though he did not launch the project for reasons best known to him, he gave other inventors like Satoshi Nakamoto the idea that money could be digital. This idea cuts across the cryptocurrency sector as different assets can be digitized now.

Blockchain/ Distributed Ledger Technology

While Dai was developing the b-money project, he planned to apply a ledger that would be public to collect all data on the transactions. He envisioned a log that could only be written through consensus and without the need for governmental control. That sounds more like a blockchain-distributed ledger system. Even though it is not exactly it, at least Dai came up with the idea that reshaped the world by giving rise to the crypto space. 

Smart Contracts

In his project b-money, Dai talks about the project running on digital contracts to allow systematic operations. The contracts in question are programs with specific purposes whose pre-programmed functionality cannot be altered thus free from any form of bias. The contracts in question are referred to in the modern crypto sector as smart contracts. 

Smart contracts play a crucial role in the crypto sectors as many projects like Defi rely on them. They also automate most processes and enforce decentralization by eradicating the need for third parties. Therefore, Wei Dai’s idea on digital contracts will always be landmarking as smart contracts are set to automate even more processes in the future.

Crypto Mining Mechanism

According to Wei Dai, the b-money project would require a group of record keepers to serve as validators of transactions. These validators would be selected at random to solve some problems, and the process would validate a transaction. In return, the validators would be rewarded for their work.

Such a mechanism is already introduced in modern cryptocurrencies. Miners are paid for validating the transactions on the networks. Dai’s concept is mainly applicable to PoW networks like Bitcoin. 

PoW Money Generation Mechanism

Wei Dai planned to apply the PoW mechanism for b-money to be generated. However, he left the project behind since the available technology could not help him realize his dream.

While Dai could not incorporate the PoW mechanism of generating digital currencies, modern cryptos do. Major cryptos like Bitcoin are using PoW mechanisms to generate and control the mining of new coins. This is a feature that Dai introduced and has helped build the crypto sector.

Concept of Digital Signatures

In the b-money project, Wei Dai introduced a system where a public key would be used to authenticate major processes like the mass generation of coins. The core idea behind the key is a digital signature. 

Digital signatures are some of the most important security features in the crypto space. Even though some attackers manage to bypass or trick digital signature mechanisms, the signatures secure funds from unauthorized access. 

Peer-to-Peer Transactions

For b-money to function without the need for a government’s control, it had to apply the use of P2P transactions. Dai even explained that it was the only way that they would eradicate the need for the government to oversee the transactions.

Even though he never launched the b-money project to show how P2P transactions could remove centralization, current cryptosystems are using it. Some exchanges like Paxful focus solely on providing P2P transaction systems. It is also one of the major transaction methods in the crypto sector.

Is Wei Dai Satoshi Nakamoto?

Even though Wei Dai’s work is seemingly similar to Bitcoin, he may not be Satoshi Nakamoto. However, there is more to the claim than that. No one knows who Satoshi Nakamoto is. It is not evident whether he is an individual or a group of individuals.

Since Bitcoin came as a remix of different technologies and borrowed a lot from Wei Dai’s b-money, many ‘connect the dots’ and think Dai is Nakamoto. The other main reason people think that he is the real Nakamoto is that it’s not common for developers to leave life-changing projects behind. 

Also, Bitcoin premiered when technology was not a limiting factor. Web 2 had already launched and introduced digital systems, allowing more intuited systems to be built. That occurrence could have motivated Dai to recreate his project and give him more time to develop it fully.

If Satoshi Nakamoto is a pseudo name for a group of individuals, it could not be surprising to find out that Wei Dai is a member. Additionally, it could also not be surprising to learn that he is or is not Satoshi. However, there is not enough evidence to support any of the theories. Also, there are people with better claims to the ‘throne’ than him.

Final Word

Wei Dai is a perfect example of scientists who reshape the world. Whether his b-money project worked or not, his dream of introducing digital money and decentralization was realized. Others finished the work he started, and the world is a better place due to his efforts.

While some would view his B-money project as a failure, it is not. From a general point of view, a project has to become functional to be considered a success. But from a logical point of view, if a project introduces new ideas and they get satisfied in one way or another, it has succeeded in introducing new possibilities.

The ideas that Wei Dai introduced through the b-money project, like digital money, smart contracts, p2p transactions, digital signatures, etc., are some of the core features of the crypto space. The idea of blockchain technology has been developed to encompass technologies other than digital economies.

Currently, almost every sector that requires data securing can use blockchain technology. It also influences the innovation of other technologies like Web 3 and the metaverse. These technologies are also built on the already present ones, showing how important Dai’s work was to future technologies.

Away from b-money, Dai also worked on encryption algorithms, some of which are applied in the crypto space. Even though not many projects apply his algorithms in encryption, some of his ideas have been used elsewhere. 

Due to his contribution to the technology and crypto sectors, Dai will always be remembered as one of the key pioneers of the crypto space.