February 2005 - cypherpunks-legacy

[i2p] 0.5 is available (fwd from jrandom@i2p.net)
by Eugen Leitl 18 Feb '05

18 Feb '05

----- Forwarded message from jrandom <jrandom(a)i2p.net> -----

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Re: [p2p-hackers] SHA1 broken? (fwd from hal@finney.org)
by Eugen Leitl 18 Feb '05

18 Feb '05

----- Forwarded message from "\"Hal Finney\"" <hal(a)finney.org> -----

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Digital Water Marks Thieves
by R.A. Hettinga 18 Feb '05

18 Feb '05

Until, of course, people figure out that taggants on everything do nothing but confuse evidence and custody, not help it. Go ask the guys in the firearms labs about *that* one. Cheers, RAH ------- <http://www.wired.com/news/print/0,1294,66595,00.html> Wired News Digital Water Marks Thieves By Robert Andrews? Story location: http://www.wired.com/news/technology/0,1282,66595,00.html 02:00 AM Feb. 15, 2005 PT CARDIFF, Wales -- Crooked criminal hearts may have fluttered and skipped a beat Monday when some of Britain's most notorious thieves opened a valentine from an unwelcome secret admirer -- one of London's top female police chiefs. But the greeting -- in which Chief Superintendent Vicki Marr wrote "thinking of you and what you do" -- was not so much an amorous expression to the underworld as part of a sting designed to catch hard-core burglars using new chemical microdot crime-fighting technology. SmartWater is a clear liquid containing microscopic particles encoded with a unique forensic signature that, when found coated on stolen property, provides a precise trace back to the owner and, when detected on a suspect, can conclusively implicate a felon. Likened to giving household items and vehicles a DNA of their own, the fluid is credited with helping cut burglary in Britain to a 10-year low, with some cities reporting drops of up to 85 percent. A decade in the making, SmartWater is the name for a suite of forensic coding products. The first, Instant, is a property-marking fluid that, when brushed on items like office equipment or motorcycles, tags them with millions of tiny fragments, each etched with a unique SIN (SmartWater identification number) that is registered with the owner's details on a national police database and is invisible until illuminated by police officers using ultraviolet light. A second product, the Tracer, achieves a similar goal by varying the blend of chemical agents used in the liquid to produce one of a claimed 10 billion one-off binary sequences, encoded in fluid combinations themselves. SmartWater CEO Phil Cleary, a retired senior detective, hit upon the idea after watching burglars he had apprehended walk free from court due to lack of evidence. "It was born out of my frustration at arresting villains you knew full well had stolen property, but not being able to prove it," he said. "Just catching someone with hot goods, or a police officer's gut belief a suspect is guilty, are not enough to secure a conviction -- so we turned to science." Cleary is reluctant to discuss "trade secret" details of a product he has patented, but he concedes that, together with chemist brother Mike, he has developed "a mathematical model that allows us to generate millions of chemical signatures" -- an identifier he boasts is "better than DNA." But more than property can get tagged. In spray form, the fluid marks intruders with a similarly unique code that, when viewed under UV in a police cell, makes a red-faced burglar glow with fluorescent green and yellow blotches. The resemblance to Swamp Thing and the forensic signature found on his body are telltale signs the suspect has been up to no good at a coded property. "It's practically impossible for a criminal to remove; it stays on skin and clothing for months," Cleary added. "If a villain had stolen a watch, they might try to scrape off the fluid -- but they would have to remove every last speck, which is unlikely. "Sometimes burglars who know they are tagged with the liquid scrub themselves so hard behind the ears to get it off, police arresting them end up having to take them into hospital for skin complaints. But we don't have much sympathy for them." Law enforcers are confident SmartWater can help improve Britain's mixed fortunes on combating burglary. Nationwide, instances of the crime have fallen by 42 percent since 1997, but the proportion of those resulting in convictions has also halved, from 27 percent to just 13 percent. So, while SmartWater is available commercially with a monthly subscription, many police forces are issuing free kits to vulnerable households in crime hot spots, hoping it can help put away more perps. The microdot tech could prove invaluable in a courtroom, but it is also an effective deterrent. Most burglaries happen because criminals know there is little chance of being arrested during a break-in, according to U.K. government data (.pdf). But posters and stickers displayed in SmartWater-coded cities and homes warn off would-be crooks. Word on the criminal grapevine, say police, is that anyone stealing from a coded home is likely to leave the crime scene having pilfered an indelible binary sequence that will lead only to jail time; it's not worth the risk. Marr sent her valentine -- reading "roses are red, violets are blue, when SmartWater's activated, it's over for you" -- to known criminals in Croydon, London, reinforcing the message in what Cleary said amounts to "psychological warfare" against burglars. "Since we started using it in Croydon, burglaries are down by 27 percent," said Sgt. Phil Webb of the Metropolitan Police, which started testing the product in the region in late 2003 and has given 2,000 packs to citizens. "It puts the fear back into the criminal -- we know who they are, and we will use every new tool and technology at our disposal to bring them to book." Other forces using SmartWater have reported burglary reductions of up to 65 percent, while Cleary said England's West Yorkshire force was due to announce a decrease of 85 percent after testing the product in the northern town of Halifax. Graham Gooch, a criminal investigations tutor at the University of Central Lancashire and a former detective of 30 years, said the product is the market leader, advancing crime-fighting efforts. "Now, if a suspect caught with a stolen VCR turns green, they can't claim they got it from some bloke down the pub," he said. -- ----------------- R. A. Hettinga <mailto: rah(a)ibuc.com> The Internet Bearer Underwriting Corporation <http://www.ibuc.com/> 44 Farquhar Street, Boston, MA 02131 USA "... however it may deserve respect for its usefulness and antiquity, [predicting the end of the world] has not been found agreeable to experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'

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RE: SHA1 broken?
by Trei, Peter 18 Feb '05

18 Feb '05

Actually, the final challenge was solved in 23 hours, about 1/3 Deep Crack, and 2/3 Distributed.net. They were lucky, finding the key after only 24% of the keyspace had been searched. More recently, RC5-64 was solved about a year ago. It took d.net 4 *years*. 2^69 remains non-trivial. Peter -----Original Message----- From: owner-cypherpunks(a)minder.net on behalf of Dave Howe Sent: Thu 2/17/2005 5:49 AM To: Cypherpunks; Cryptography Subject: Re: SHA1 broken? Joseph Ashwood wrote: > I believe you are incorrect in this statement. It is a matter of public > record that RSA Security's DES Challenge II was broken in 72 hours by > $250,000 worth of semi-custom machine, for the sake of solidity let's > assume they used 2^55 work to break it. Now moving to a completely > custom design, bumping up the cost to $500,000, and moving forward 7 > years, delivers ~2^70 work in 72 hours (give or take a couple orders of > magnitude). This puts the 2^69 work well within the realm of realizable > breaks, assuming your attackers are smallish businesses, and if your > attackers are large businesses with substantial resources the break can > be assumed in minutes if not seconds. > > 2^69 is completely breakable. > Joe Its fine assuming that moore's law will hold forever, but without that you can't really extrapolate a future tech curve. with *todays* technology, you would have to spend an appreciable fraction of the national budget to get a one-per-year "break", not that anything that has been hashed with sha-1 can be considered breakable (but that would allow you to (for example) forge a digital signature given an example) This of course assumes that the "break" doesn't match the criteria from the previous breaks by the same team - ie, that you *can* create a collision, but you have little or no control over the plaintext for the colliding elements - there is no way to know as the paper hasn't been published yet.

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Re: [p2p-hackers] SHA1 broken?
by R.A. Hettinga 18 Feb '05

18 Feb '05

--- begin forwarded text

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Re: [CYBERIA] a story that might be of interest to cyberians
by SK 18 Feb '05

18 Feb '05

Saw a posting on a blog on this - http://silenteloquence.blogspot.com/2005/02/future-of-future-teller.html Reproduced below: Background: Rednova recently publised an article, 'Can This Black Box See Into the Future' about a new machine developed by the scientists at Princeton that can predict future events. It relies on two main things : random number generation and the power of the collective human conciousness to 'influence' that random number generation. This is not your usual conspiracy theory kind of stuff, about 75 respected scientists from 41 different nations have thrown their weight behind this idea.I dont want to go into more details on what is already given in the article, but heres my two cents to the noise that the article has already generated: (1)My own future: One of the main criticisms about the Global Conciousness Project and the use of the Black box to predict a world event is that there are so many events happening in the world at any given time - so it must be easy to relate a set of data points to some event. Now this is a very valid argument. Moreover, the definition of a 'world event' or an 'event', for that matter, is very subjective. What maybe eventful to me may not be eventful to someone living in Africa. I may not even come to know about a major political turmoil that happened, say in South America. So who is to decide what is an event? However, if the researchers at Princeton want to argue that the human subconcious can predict the future of the world, they should also be able to reproduce it at an individual level. Along the same lines of logic they have used, can I train my subconcious to predict my own future? In this case, there is no ambiguity in the definition of an event. I 'influence' the egg. I decide what an event is. And if the egg can read my thoughts (about the future) and show it to me now, the egg works! Feels kinda sad that I need an egg to read my own mind! Hmm.. we have a new strain of shrinks? I am not a sceptic, but just couldn't resist the dig. (2) One global conciousness is not a new concept: The central theme of the global conciousness is not a new concept. This was exactly what was propounded centuries ago in the Bhagavad Gita, which is a very revered book that many Hindus, including me, still hold on to. The Gita is quite clear on what it wants to say (my simplified interpretation): At the beginning of the world, all beings are created from one central source. At the end of it, they go back to that one source. If you die and you had understood the true meaning during your lifetime, you attain nirvana and become one with the one global conciousness. If you dont, you are reborn again and again, till you eventually 'get it, duh'. But the point is, you share one conciousness with everyone else around you. You are just one small figment of the great collectivity ( as I write this I, am beginning to wonder if the Gita had anything to do with the rise of communism). (3) Data can lie, often very convincingly: I am not a sceptic to this theory. As much as I am a logical person, I intuitively believe that it is possible to predict the future. I have had a few, very clear ( god forbid, I never want to experience them ever again) deja vu's. Several astrologers (like a good Indian, I have visited a fair share of astrologers, admittedly more because of intellectual curiosity about the paranormal) have predicted events in my life with amazing accuracy. And more importantly, they have generally been accurate in predicting my state of mind, which has never failed to surprise me. And from a physics perspective, if time is the fourth dimension, shouldn't you be able to travel back and forth like we can in the other three dimensions. It seems more difficult to believe that the fourth dimension is different from the other three, than to believe that it is similar. So, I dont have problems believing the results per se. But I am a sceptic when it comes to the methodology. A random number generator with 1s and 0s over years - that is a lot of data points over a very small range. It seems to me like data that is difficult to read - and data that can be easily manipulated. Mind you, I am not accusing anyone of anything. I have full faith in the integrity of all involved. But I used to work as an analyst and one of the first things that I learned was that you can always make the data say what you want it to. If you dont believe me, read the book 'How to Lie with Statistics' by Darrell Huff. And sometimes it is not a matter of intentional effort. When you want to see a particular result, it is possible that your mind subconciously picks on that trend and only that trend. This is nobody's fault - it is just an extension of the saying 'The eyes can only see what the mind wants it to'. I would be hard-pressed to believe that the people who want to make us believe about the powers of human subconcious to predict the future cannot believe that the same subconcious is powerful enough to cloud an individual's and possibly several individuals' judgement. And another issue is just how random is this random number generator? Isnt it mathematically impossible to achieve perfect randomness, in which case doesnt this methodology rely on pseudo random numbers? So, this is one set of data I would be very careful in analysing and interpreting and drawing conslusions from. (4) The future of the future teller: I think the future of the future teller depends on how open the human race can be to new ideas. To a person who lived thousands of years ago, travelling to the moon must have sounded as impossible, if not more improbable, than predicting the future. But we humans have achieved that land mark. So, why are our scientists still afraid of being ridiculed? 'To make matters even more intriguing, Prof Bierman says that other mainstream labs have now produced similar results but are yet to go public. 'They don't want to be ridiculed so they won't release their findings,' he says.' Now that I think is sad. I like to believe that we have moved past the age of Coppernicus. Or havent we? Human beings are sceptics by nature. But lets forget that for the moment. May be the ideas are wrong. But lets not brand it that, till we have proven so. So, lets be optimistic. Open minded. Ready to listen. And slow to ridicule. And who knows, we may just be able to read the future enough to know whether we will be able to read the future in the future. On Thu, 17 Feb 2005 09:36:28 -0500, R.A. Hettinga <rah(a)shipwright.com> wrote: > --- begin forwarded text > > User-Agent: Mozilla Thunderbird 0.8 (Windows/20040913) > Date: Thu, 17 Feb 2005 01:08:28 -0500 > Reply-To: Law & Policy of Computer Communications <CYBERIA-L(a)LISTSERV.AOL.COM> > Sender: Law & Policy of Computer Communications <CYBERIA-L(a)LISTSERV.AOL.COM> > From: Inna Barmash <ibarmash(a)ALUMNI.PRINCETON.EDU> > Subject: Re: [CYBERIA] a story that might be of interest to cyberians > To: CYBERIA-L(a)LISTSERV.AOL.COM > > This is a really interesting project at Princeton, and it's been going > on for decades. (see the book "Margins of Reality" - > http://www.amazon.com/exec/obidos/tg/detail/-/015657246X/qid=1108619801/sr=…) > > I've taken the tour of the laboratory and participated in a couple of > the experiments (as a guinea pig, that is). The feeling there is quite > surreal, and they have dramatized the setting in the lab itself quite > well. The random number generator is a huge machine with a downstream > of little balls, which the subjects - through the power of immense > consciuos concentration - make go one way or the other. They also have > a wave-simulating machine, which supposedly echoes the patterns of the > Jersey shore waves. > For at least some of the machines, the researchers have found a > significant effect not only with people in the same room, but subjects > as far as Australia, AND even in the future - influencing the "random" > outcome of the past ... > > It'll be interesting to see if the significant effects are amplified > with more and more subjects pitching in through this international project. > > --Inna > > Paul Gowder wrote: > > >Check out this article re: random number generators > >apparently influenced by consciousness: > >http://www.rednova.com/news/display/?id=126649#121 > > > >the Princeton project that this is connected with: > >http://noosphere.princeton.edu/ > > > >This is fascinating, and potentially groundbreakingly > >huge stuff. > > > >God, how I want to go back to school and study math > >and physics. Maybe in a few years I will.

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Time to regulate the software industry?
by R.A. Hettinga 17 Feb '05

17 Feb '05

<http://news.com.com/2102-7348_3-5579963.html?tag=st.util.print> CNET News Time to regulate the software industry? By Dawn Kawamoto Story last modified Wed Feb 16 20:20:00 PST 2005 SAN FRANCISCO--A panel of security experts on Wednesday debated the merits of regulating the software industry to curtail software flaws--and hence reduce the volume of virus attacks. With software flaws serving as the open door to viruses and worms, a panel of industry experts at the RSA Conference here debated whether it's time to regulate software companies. The experts were mixed on the effectiveness of such a plan and whether it could be undertaken without curtailing innovation. "The issue is not to regulate or not," said Harris Miller, president of the Information Technology Association of America. "Our industry is all about innovation, and my concern with regulation is it's often the enemy of innovation." In that same vein, Rick White, chief executive of technology advocacy group TechNet, said the industry should come together and develop guidelines for best practices on developing software with minimal flaws, rather than imposing regulations. "Congress will never solve the problem as well as the people who work in the industry," said White, a former congressman from Washington state. But other panelists were not as sure. Dick Clarke, chairman of Good Harbor Consulting and former presidential special advisor on cybersecurity, noted efforts to have industries develop guidelines and follow through have failed in the past. He pointed to a deal Michael Powell, outgoing Federal Communications Commission chairman, struck with Internet service providers (ISPs). Powell held a meeting with ISPs, where in they developed guidelines. And although Powell threatened to regulate their industry if they did not abide by those guidelines, the ISPs did not adhere to those self-imposed practices, Clarke said. "Powell bluffed them. They knew it, and now he is leaving office," Clarke said. Other panelists, such as encryption expert and author Bruce Schneier, also called for more action in prompting software vendors to vet through their code before releasing it to the market. "If we make it in their best interest to do this, then it will happen. You need to find a set of financial incentives," Schneier said. "Regulations would increase the cost of not doing security, and that would increase security (testing)." He noted companies that currently take the time to test the security of their software before releasing it to the markets are at a disadvantage--higher costs and potential late arrival to the market. Additional financial incentives may come from customers demanding a certain level of security testing from a vendor, before agreeing to sign a contract to purchase their products, Schneier said. In offering a post Sept. 11, 2001, warning, Clarke said: "Regulation is neither good nor bad...but the industry should bear this in mind. After we have an incident, regulations will be much worse." -- ----------------- R. A. Hettinga <mailto: rah(a)ibuc.com> The Internet Bearer Underwriting Corporation <http://www.ibuc.com/> 44 Farquhar Street, Boston, MA 02131 USA "... however it may deserve respect for its usefulness and antiquity, [predicting the end of the world] has not been found agreeable to experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'

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Malware, spam prompts mass net turn off
by R.A. Hettinga 17 Feb '05

17 Feb '05

<http://www.theregister.co.uk/2005/01/14/malware_mass_net_turn_off/print.html> The Register Biting the hand that feeds IT The Register ; Internet and Law ; eCommerce ; Original URL: http://www.theregister.co.uk/2005/01/14/malware_mass_net_turn_off/ Malware, spam prompts mass net turn off By Andrew Orlowski in San Francisco (andrew.orlowski at theregister.co.uk) Published Friday 14th January 2005 10:12 GMT Both beginners and veterans are finding the Interweb experience so repellent that they're disconnecting in droves, blaming malware and spam. Despite an overall increase in numbers of humans connected to the internet, the mass turn-off is beginning to hit ecommerce in the United States. "Instead of making life easier - the essential promise of technologies since the steam engine - the home PC of late has made some users feel stupid, endangered or just hassled beyond reason," writes Joe Menn, who penned the definitive book on the Napster phenomenon, in a must-read feature (http://www.latimes.com/business/la-fi-fedup14jan14,0,111456.story?coll=la-h…) for the Los AngelesTimes. Gee. And we thought everyone was joining the 'blogosphere' - melding into one enormous global hive mind. Clearly, something is spoiling this happy picture. Although overall internet usage is increasing, ecommerce has felt the brunt of the mass turn-off, as newcomers find the net is less than they expected, and veterans decide that being connected is no longer tolerable. The Times cites a survey in which almost a third of online shoppers are buying less than they used to because of security worries. Despite the US broadband boom, the number of online shoppers rose only one per cent last year. Menn also suggests why. A recent survey reckoned 80 per cent of PCs are infected by malware. The speed with which an unprotected labs was infected - just four minutes (http://www.theregister.co.uk/2004/12/01/honeypot_test/) - bears that out. And there's little sign of respite. Malware authors are creating 150 zombies a week (http://www.theregister.co.uk/2005/01/05/mcafee_avert_report/) Now comes the hard part. Mired deep in New Age gloop, California's internet evangelists can't even see the problem, let alone suggest a solution. Into this intellectual vacuum, draconian solutions - almost all of which involve compromising the end-to-end principles that have allowed so much malware to flourish - seem likely to find favor with fed-up net users. Over two years ago we speculated that lock-down solutions such as Palladium and TCPA, or safe, private nets may one day be welcomed as a solution to the internet's tragedy of the commons. This looks more likely than ever. Self-healing, it ain't. . -- ----------------- R. A. Hettinga <mailto: rah(a)ibuc.com> The Internet Bearer Underwriting Corporation <http://www.ibuc.com/> 44 Farquhar Street, Boston, MA 02131 USA "... however it may deserve respect for its usefulness and antiquity, [predicting the end of the world] has not been found agreeable to experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'

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Re: [CYBERIA] a story that might be of interest to cyberians
by R.A. Hettinga 17 Feb '05

17 Feb '05

--- begin forwarded text User-Agent: Mozilla Thunderbird 0.8 (Windows/20040913) Date: Thu, 17 Feb 2005 01:08:28 -0500 Reply-To: Law & Policy of Computer Communications <CYBERIA-L(a)LISTSERV.AOL.COM> Sender: Law & Policy of Computer Communications <CYBERIA-L(a)LISTSERV.AOL.COM> From: Inna Barmash <ibarmash(a)ALUMNI.PRINCETON.EDU> Subject: Re: [CYBERIA] a story that might be of interest to cyberians To: CYBERIA-L(a)LISTSERV.AOL.COM This is a really interesting project at Princeton, and it's been going on for decades. (see the book "Margins of Reality" - http://www.amazon.com/exec/obidos/tg/detail/-/015657246X/qid=1108619801/sr=…) I've taken the tour of the laboratory and participated in a couple of the experiments (as a guinea pig, that is). The feeling there is quite surreal, and they have dramatized the setting in the lab itself quite well. The random number generator is a huge machine with a downstream of little balls, which the subjects - through the power of immense consciuos concentration - make go one way or the other. They also have a wave-simulating machine, which supposedly echoes the patterns of the Jersey shore waves. For at least some of the machines, the researchers have found a significant effect not only with people in the same room, but subjects as far as Australia, AND even in the future - influencing the "random" outcome of the past ... It'll be interesting to see if the significant effects are amplified with more and more subjects pitching in through this international project. --Inna Paul Gowder wrote: >Check out this article re: random number generators >apparently influenced by consciousness: >http://www.rednova.com/news/display/?id=126649#121 > >the Princeton project that this is connected with: >http://noosphere.princeton.edu/ > >This is fascinating, and potentially groundbreakingly >huge stuff. > >God, how I want to go back to school and study math >and physics. Maybe in a few years I will. > > > >__________________________________ >Do you Yahoo!? >Yahoo! Mail - Find what you need with new enhanced search. >http://info.mail.yahoo.com/mail_250 > > >********************************************************************** >For Listserv Instructions, see http://www.lawlists.net/cyberia >Off-Topic threads: http://www.lawlists.net/mailman/listinfo/cyberia-ot >Need more help? Send mail to: Cyberia-L-Request(a)listserv.aol.com >********************************************************************** > > > ********************************************************************** For Listserv Instructions, see http://www.lawlists.net/cyberia Off-Topic threads: http://www.lawlists.net/mailman/listinfo/cyberia-ot Need more help? Send mail to: Cyberia-L-Request(a)listserv.aol.com ********************************************************************** --- end forwarded text -- ----------------- R. A. Hettinga <mailto: rah(a)ibuc.com> The Internet Bearer Underwriting Corporation <http://www.ibuc.com/> 44 Farquhar Street, Boston, MA 02131 USA "... however it may deserve respect for its usefulness and antiquity, [predicting the end of the world] has not been found agreeable to experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'

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Cybercash on Vacation
by R.A. Hettinga 17 Feb '05

17 Feb '05

<http://www.technologyreview.com/articles/05/03/issue/forward_cybercash.asp?…> Technology Review TechnologyReview.com Print | Forums Cybercash on Vacation By Peter Wayner March 2005 Back in 1996, a small handful of cryptographers, bankers, and blue-sky thinkers were debating, on Internet mailing lists, the future of money, when one of them came up with a brilliant idea. If they formed an organization, booked a Caribbean hotel in the dead of winter, and put a few papers through the peer review process, they could get their bosses to pay them to hang out in person. They could sit in the sun and dream about what it would take to move cash, settle debts, sell things, sign contracts, and extend credit in the virtual world. Bob Hettinga, an organizer of the resulting Financial Cryptography Conference, sounds a bit maudlin when he looks back at that first meeting, which took place in February 1997 on the island of Anguilla: "It was like all the net-dot-gods descended on Anguilla. Geeks, financial, cryptographic, and otherwise. Cypherpunks. Bankpunks, pseudonymous individuals, guys who would go on to become senior administration officials, and even people who were paying the $1,000 conference fee in cash because their corporate-sponsored lawyers told them to stay out of the papers after various previous escapades." This year's conference, taking place in February and March in the Commonwealth of Dominica, doesn't have the same luster. The program is jammed with papers about "privacy-preserving protocols" and "probabilistic escrow" but contains little from the nonacademic world. The people who work at actual financial institutions just aren't as interested in financial cryptography as they were in 1997. It wasn't supposed to be this way. In 1997, the bankers, lawyers, and accountants were fascinated by what the digital magicians could do with a few equations. Even though it's easy to make perfect copies of digital files, for instance, mathematicians found a way to produce a digital $50 bill that would stymie counterfeiters. They didn't stop there. They imagined transactions that avoided the overhead of a central clearing house, digital currency that paid interest, and even complicated digital rights management tools that locked up music, art, and writing with the same equations used to protect money. Some talked about minting just 500 digital baseball cards for each player and letting the values rise and fall with batting averages. In short, they imagined a world where wealth was not frozen in gold and locked in vaults, but rather held in digital mechanisms that could adapt to whatever people wanted. Some mechanisms could even be as anonymous as paper cash, and transactions wouldn't require much more than the click of a mouse. But while the mathematics is still fascinating, the emergence of any system based on it is receding into the nebulous future. Today, credit card companies dominate the Web with a system that, at its heart, is little different from the one that employed carbon-paper chits. One of the few companies to find some success in financial cryptography, PayPal, gets most of its revenue from eBay auctions, where it serves, in essence, as a well-designed front end for the credit card system. Adam Shostack, another of the original organizers, thinks that the reason for the failure of financial cryptography is simple. "People are conservative in how they pay for things," he says. Indeed, the problem for financial cryptography's would-be pioneers is that the old credit card system seems to be good enough for the new online world. If Amazon, Wal-Mart, and other e-commerce sites can keep customers happy with plastic cards, there's little demand for any of the more exciting ideas. Joseph Nocera, author of A Piece of the Action, a history of the credit card industry, says digital currency is facing "a chicken-and-egg question" but points out that credit cards encountered the same problem, and that their acceptance took decades. In fact, 2003 was the first year credit cards and other electronic systems carried more payments than bank checks. As they come to appreciate just how long the road ahead will likely be, some financial cryptographers are searching for niches where they can flourish in the short term. Take, for example, Waltham, MA-based startup Peppercoin, the brainchild of MIT computer scientists Sylvio Micali and Ron Rivest. Peppercoin is attempting to specialize in very small sums (see "The Web's New Currency," December 2003).One of its bigger initiatives is developing a cryptographic system that would enable people to use their credit cards at parking meters, an application that would be prohibitively expensive for the traditional credit card network, which has a minimum transaction fee of about a quarter. If Peppercoin's technology can cut transaction costs enough, it can capture this market and also make it possible for people to spend small amounts online. The inability to handle small change isn't the only weakness of the credit card system that calls out for cryptographic innovation. Fraud and identity theft cost society billions of dollars every year. Paul Syverson, a researcher at the U.S. Naval Research Laboratory, believes this leaves the door open for some of the new equations from this year's Financial Cryptography Conference. The privacy-protecting mechanisms imagined by some mathematicians also have the advantage of not relying on identity verification to guarantee transactions. If the flow of money is anonymous, there's no identity to be stolen. Ultimately, Nocera believes, the high costs and fraud rate in the credit card industry could give new life to the dreams of the original Financial Cryptography Conference. "I actually happen to believe fairly strongly that if someone could ever figure out how to get critical mass for a form of cybercash that is not backed by a credit card," he says, "it would be a transformative event for the Web." -- ----------------- R. A. Hettinga <mailto: rah(a)ibuc.com> The Internet Bearer Underwriting Corporation <http://www.ibuc.com/> 44 Farquhar Street, Boston, MA 02131 USA "... however it may deserve respect for its usefulness and antiquity, [predicting the end of the world] has not been found agreeable to experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'

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