It’s not uncommon to see explanations of the cryptocurrency Bitcoin or tutorials about blockchain featuring characters named Alice and Bob. Why Alice and Bob? What is the significance of those names in particular? These characters go back to the early crypto technology days of the 1970s, when they were used to explain scenarios of public key cryptography—also a critical aspect of cryptocurrency and its underlying technology, blockchain. Alice and Bob are not considerably developed characters, but over the years, the convention of using these names has become an effective narrative device.
Decoding Alice and Bob
In 1978, Alice and Bob were introduced in the paper “A Method for Obtaining Digital Signatures and Public-key Cryptosystems,” which described a way to encrypt and authenticate data. The authors explained public key encryption and assigned the placeholder names, Alice and Bob, to machines “A” and “B.”1 They didn’t have any notable personality traits—they were simply intended to be anthropomorphic representations of machines.
Encryption is a method of encoding a message or any type of content so that only authorized parties can understand it. With public key cryptography, the content is encrypted using what is called a public key, which is comprised of a unique combination of an alphanumeric set of characters. Every public key has a unique mathematically associated private key, which is also a unique alphanumeric set of characters. Just as their names imply, the public key can be public, but the private key is intended to be kept private. The only way content encrypted with a public key may be accessed is by decrypting it with its private key.
As the internet has evolved, the potential for data vulnerabilities has increased, and it has become even more vital to secure data. Public key cryptography has become a common security standard used for encryption and identity verification. Encryption is used to obfuscate credit cards stored on databases. Data transferred over HTTPS is encrypted so it may travel from one location to another without being understood or stolen by anyone in between. Bitcoin and other cryptocurrencies use public key cryptography as part of their coin exchange and to prove ownership.
Using Alice and Bob to explain public key cryptography establishes characters who play roles in a narrative that make this challenging subject easier to understand. For instance, a common narrative explains that Alice would like to send a secret message to Bob. She uses Bob’s public key to encrypt her message and then sends it to him. Bob can read the secret message because he can use his private key to decrypt it. No one else can read Alice’s message because they don’t have Bob’s private key.
Over the years, technology communities have had their fun with Alice and Bob. Jokes, songs and memes have been created to foster what has become an industry inside joke. Alice and Bob weren’t alone in their secret universe for very long. A cast of characters has joined them, including Eve, an eavesdropper trying to peek into secret discussions, and Mallory, the malicious actor who tries to interject or delete messages.2 As each of these characters has been introduced, the use of first letter initials in relation to their intent has become an integral part of the nomenclature of crypto discussions.
Alice and Bob Meet Bitcoin
As Bitcoin has gained traction, Alice and Bob have become even more popular. Cryptocurrency, which was initially favorable to the libertarian technology types, started attracting the attention of the broader public—especially the curious, early-adopting investors. Because critical aspects of cryptocurrency and its foundational technology architecture (blockchain) use public key cryptography, an understanding of why that is and how it works is arguably required knowledge for the crypto-coin speculators. A lack of clarity on the necessity of public and private keys in cryptocurrency puts investments at real risk.
Bitcoin, the first cryptocurrency, was introduced in a white paper by Satoshi Nakamoto that explained a peer-to-peer payment system that didn’t require banks.3 This system is considered “trustless” because no one involved needs to know and trust one another for it to function. A core element of the system is public key cryptography, which is used to prove control of coins. It is also used to populate the ledger, also referred to as the blockchain, the permanently recorded history of each transaction that keeps the system faithful.
The blockchain ledger lists every transaction since the beginning of that blockchain. Each transaction record contains a transaction ID, the amount, optional descriptive content and the public keys involved. There are no names or directly identifiable information, although
public keys can sometimes be traced to identities.
Ownership of cryptocurrency is a loose concept and refers to the control of the private key associated with the public key that purchased or earned the coins. Coins are digital assets that are stored in software or hardware components called wallets. More than merely storage devices, wallets are often limited to particular coins, calculate current worth and are associated with the public and private key of the entity that controls the assets.
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If the private key associated with one’s coins is lost, the coins are inaccessible in the wallet. Like any other type of digital asset or file, private keys can be misplaced and accidentally deleted. Computer hard drives can fail, and computers can be stolen and hacked. Private keys cannot be replaced. It is estimated that nearly 4 million Bitcoins are considered lost.4 During a recent Bitcoin boom in late 2017 into early 2018, it was dreadfully revealed that many lost millions in potential dollars because they lost their private keys.
Because of the boom and the desire to learn more about understanding and protecting private keys, Alice and Bob started appearing in more explanations and tutorials that targeted nontechnical folks who, unlike the crypto community, had no idea what these names meant and why they were seeing them nearly every time a crypto coin was mentioned.
Tutorials about Bitcoin featuring Alice and Bob are similarly structured like this: Alice would like to buy pizza from Bob that costs 0.004 BTC (Bitcoin), which at the time of this writing is approximately US$15. Alice doesn’t know Bob, but she does know his public key. She enters a transaction request on a Bitcoin exchange for 0.004 BTC and enters Bob’s public key. The transaction is processed, and once it is verified that Alice has enough BTC to pay Bob, it is complete. The BTC is transferred from Alice’s wallet to Bob’s wallet by assigning the coins to Bob’s public key instead of Alice’s. The transaction is logged on the ledger and distributed throughout the system. Because Bob has the private key associated with the public key that now has the Bitcoins, Bob now controls the BTC instead of Alice.
This story serves as an example of an introduction to purchasing with Bitcoin. The narrative excludes the roles of the miners, how blocks are created, why the ledger is distributed or even what cryptography is, but it does contain the necessary information that explains how the Bitcoins are related to the public and private keys. Using Alice and Bob to tell the story humanizes the technology and makes it relatable.
Storytelling is the oldest form of education and a natural way for humans to teach and learn.5 From a cognitive perspective, the human brain has evolved to learn and make meaning through narratives.6 We learn from stories, are entertained by them, and use them to make sense of our daily existence and as part of our decision-making processes.
A good story will engage receivers, convey meaning, be remembered and self-propagate.7 Part of why this is true is that good stories fit within a realm of meaning that we are able to understand. As psychologist Donald Polkinghorne notes, “Narrative meaning is a cognitive process that organizes human experiences into temporally meaningful episodes.”8 For the brain to sort and remember, it is theorized that we organize thoughts and experiences into schemas that then may become semantic memories containing factual knowledge, general knowledge and language. The new thoughts and experiences that relate to stored thoughts and experiences will have more meaning and therefore a better chance of being retained.
The Actuarial Connection
Blockchain, as Marshall McLuhan would agree, is more important as a technology than the cryptocurrency it supports. It can improve data and processes for many insurance applications, including actuarial analyses. Actuaries can employ Alice and Bob as characters to help explain the complexity of their models.
Narratives can help make sense of the unknown. Stories that are well-structured, relatable and engaging can help receivers understand and learn. Technology, which can be intimidating to many, may be easier to grasp if the narrative is more relatable. It can be compared to the usefulness of skeuomorphism in user experience. For example, word processing software was successful early on because it looked like a typewriter. A trash can on a computer’s desktop is also a skeuomorphism—it resembles a trash can, is named that, and functions similarly enough that people know to use it. A cryptocurrency wallet is also a skeuomorphic element that allows people to relate their common understandings to a new one. Effective narratives about technology do this as well.
Alice and Bob narratives about public key cryptography and cryptocurrency can be effective educational tools. Using the same character-based framework fortifies an understanding through repetition and adds a dimension of meaning that goes beyond simple instructions or explanations. Alice and Bob—and even Eve, Mallory and the growing list of crypto characters—have become narrative tropes. Tropes add unexpected meanings to words and phrases such as metaphors and puns. Tropes are memorable advertising and propaganda tools because they are often entertaining with underlying meaning. Toncar and Munch note, “Presenting arguments as tropes may not only successfully deliver the argument, but may also elicit a favorable affective response as well.”9 Additionally, research suggests that positivity contributes to persuasion.10
Alice and Bob were not intentionally created to be persuasive or memorable elements. They were simple mechanisms used to illustrate scenarios of cryptography systems that can have complex patterns and implementations. Cryptocurrencies and blockchain are nascent and not widely understood. Using narrative elements like Alice and Bob facilitates understanding and may spur adoption and continued innovation.
- 1. Rivest, Ronald L., Adi Shamir, and Leonard Adleman. 1977. A Method for Obtaining Digital Signatures and Public-key Cryptosystems. September, (accessed January 28, 2019). ↩
- 2. DuPont, Quinn, and Alana Cattapan. Alice & Bob. (accessed January 28, 2019). ↩
- 3. Nakamoto, Satoshi. Bitcoin: A Peer-to-Peer Electronic Cash System. Bitcoin.org, October 3, 2008, (accessed January 28, 2019). ↩
- 4. Roberts, Jeff John, and Nicolas Rapp. Exclusive: Nearly 4 Million Bitcoins Lost Forever, New Study Says. Fortune, November 25, 2017, (accessed January 28, 2019). ↩
- 5. Ohler, Jason. 2013. Digital Storytelling in the Classroom: New Media Pathways to Literacy, Learning, and Creativity. Thousand Oaks, California: Corwin Press. ↩
- 6. Neal, Michael. 2014. Group Constructed Narratives in Twitter (unpublished doctoral dissertation). ↩
- 7. Snowden, David. 1999. Story Telling: An Old Skill in a New Context. Business Information Review 16, no 1:30–37. ↩
- 8. Polkinghorne, Donald. 1988. Narrative Knowing and the Human Sciences, 1. Albany, New York: State University of New York Press. ↩
- 9. Toncar, Mark, and James Munch. 2003. The Influence of Simple and Complex Tropes on Believability, Importance and Memory. Journal of Marketing Theory and Practice 11, no. 4:39–53. ↩
- 10. Ibid. ↩
Copyright © 2019 by the Society of Actuaries, Schaumburg, Illinois.