• Cryptography has saved us once already
  • What’s the link between Enigma and bitcoin?
  • Bitcoin saves lives

My step-grandfather took off from his Luftwaffe base aged 16. It was his first mission. They’d run out of trained pilots to send up, let alone experienced ones.

As the story goes, he was radioed a few hours into the patrol. The war had ended. Time to come back.

Had the war lasted any longer… well, I’d still be here today. Just even worse at chess.

What the Germans didn’t know was that the war had been a mug’s game for much longer than they realised.

As explained in the film Imitation Game, the Allies had cracked the Enigma code machine. Alan Turing had built the first computer to do it.

This shortened the war substantially. And may have saved my step-grandfather as a result.

But the film glosses over the most important part of the story. Having cracked the code, the war was practically won. Only a matter of time, and all that… right?


If the Allies had started winning the war too convincingly from the day they cracked the code, the Germans would’ve figured out what was going on.

Indeed, statisticians can calculate whether their codes have been broken based on how well the war effort is going. Too many coincidences favouring your enemy and something has gone very wrong.

So, having cracked Enigma, the next big challenge emerged. How much of the information could be used without alerting the Germans that their mail was being read by Churchill?

What are the chances?

If you’ve cracked your enemy’s codes, there are two ways to improve your odds of remaining undetected. The first is to limit the amount of information you use against your enemy. Only win the crucial battles, while sacrificing lives to keep the Germans in the dark. The game is rigged, but only slightly enough to keep the punters believing.

The second way is a lot more fun. You come up with plausible narratives for how the Allies got “lucky” each time. And sow evidence of this narrative for the Germans to find. The idea is to convince the Germans that something other than their precious code machine had been cracked.

For example, after reading the German navy’s decoded mail, you might learn that a particularly important ship is due to leave a particular harbour on a particular day. Using this information, you sink the ship successfully. But now the Germans are suspicious about how you came about the information.

What are the chances that the particular ship was sunk on that particular day?

How do you convince the Germans it wasn’t by reading their messages?

How to keep a war-winning secret

The fiction book Cryptonomicon is about that very topic. It follows a soldier who is assigned to the task force that deceives the Germans. They create plausible explanations for how the Allies could’ve come to know crucial information without having broken the Enigma code.

In one example, the task force builds a badly hidden observation post near a harbour. The idea is to create a plausible explanation for how the Allies knew to sink a particularly important ship on a particular day. It had been under observation for weeks!

The funny part is, they build this observation post after the ship is already sunk. And so they have to make it look like the observation post had been occupied for weeks.

You can imagine how this looks to the typical solider. Land on an enemy shore with a bunch of statisticians in charge. Build an observation post. Fill some newly dug latrines with last week’s excrement to make it look like the place had been occupied for a long time. And then leave.

It couldn’t be more absurd. Or appear less valuable to the war effort. And yet, it’s vital.

The Germans soon discover the makeshift camp and deep latrines. They conclude that the observation post is how the Allies knew to sink the ship. And discard the theory that their code has been cracked.

It’s just one example of what happens in Cryptonomicon. But it’s the other part of the book I want to draw your attention to today…

Cryptography and cryptocurrencies – what’s the link?

It may seem like cryptocurrencies came out of nowhere. Bitcoin wasn’t there one day… and existed the next. But the truth is that it was in development for decades.

Cryptronomicon doesn’t just discuss cryptography during the Second World War. It has a parallel story that takes place in modern times. And it’s about cryptocurrencies. This is no coincidence.

The underlying problems and solutions around cryptocurrencies are similar to those of the Enigma machine. Secret messages and currency systems face many of the same challenges. Cryptography – coding and decoding information – is a solution that works for both.

Whether you’re running a financial system or a secret messaging system, people need to send and receive something of immense value securely. They need to do it in a way that cannot be abused by others. And it needs to be done in a way that is verifiable. Both systems need trust as the crucial element.

Cryptography is just one way of going about all this. Our current financial system uses a different method. It assigns responsibility for managing the payments and currency systems to central institutions. They solve the challenges of a financial system by control.

The weakness is that this only transfers the question of trust. Do you trust the government and the bank to keep your money safe?

Cryptocurrencies are designed to create a system that doesn’t need such a central authority. Trust is established using cryptography instead.

Cryptonymicon uses the similarities to Enigma codebreaking to explain how cryptocurrencies work. Astonishing given it was published a decade before bitcoin was launched

Bitcoin saves lives

While cracking Enigma shortened the war and possibly saved my step-grandfather, I can’t help but wonder whether bitcoin is saving lives too.

We live in developed countries. And for most of us, our relations and dependents do too. It’s difficult to understand or imagine what sorts of challenges others less fortunate face from their governments and financial institutions.

I mean, their banks can fail… a bit like Northern Rock and Lehman Brothers did.

Their central banks can mismanage the currency, causing inflation… a bit like the Bank of England did.

Their banks can debank their customers over political disagreements… a bit like in the UK.


Cryptocurrencies’ purpose is to circumvent such constraints. To provide alternatives to your nation’s monetary system. That’s why people living in third-world countries have cottoned on to their use first, while the rest of us hold them as a speculative play.

A survey discovered 87% of bitcoin owners use it for international remittances. In 2022, Coinbase estimated remittances grew 900%. The usual suspects were top of the list: Argentina and Venezuela.

A lot of this money goes to friends and family left behind. People who need money because their governments are mismanaging the economy so badly. And those governments impose capital controls to ensure everyone sinks together.

Bitcoin saves people from this prison.

If you believe the British financial system is safe and sound, with no restrictions, inflation or bank failures on the horizon, perhaps you don’t need to own bitcoin.

So the real question is when you should invest. And this week is your last chance to enter the market at an opportune moment that only comes along every four years. Find out more here.

I wonder if your grandchildren might one day thank you.

Until next time,

Nick Hubble
Editor, Fortune & Freedom