Robert Hettinga (rah@shipwright.com) writes: [Nice discussion of portfolio management elided]
It is also unlikely that faith of financial institutions in supposedly unbreakable mathematics has been enhanced by the recent one-line fix announced for the DSS.
I don't think this is really a problem. It's just as if somebody had figured out how to counterfeit money cheaper. Countermeasures are taken and it isn't cheap anymore. The neat thing about strong crypto is that it's strong in spite of public algorithms. People who crack those algorithms publish their results, or someone else will. The half-life of a hidden innovation in that kind of environment is pretty small.
Ordinary counterfeiting is analog. Close inspection will always reveal differences which can be used to distinguish fake money. Counterfeit anonymous DigiCash, on the other hand, is indistinguishable from the real thing. If a bank is signing blinded notes for customers and has underwritten to exchange for cash any note bearing a verifiable signature, a cracked signature algorithm is a very serious matter indeed. The half-life of such an innovation could be practically forever, as long as the discoverer does not get greedy and his siphoning off of value remains hidden in the daily float. By the time the bank realizes that there seems to be much more ecash in circulation than they have issued, the perpetrator is likely to be long gone and the bank is likely to be kaput. If I cracked such an algorithm, publishing would be just about the last thing on my mind. Worst case scenario: Chemical bank announces "ChemCash", anonymous untracable Internet currency. Within 5 years, billions are in circulation, and all good citizen-units buy everything through the Web Shopping Network. Chaum wins the Nobel Prize in Economics. Chemical Bank Auditors notice that the books are looking funny, or at the very least, statistically strange. It is estimated that there are several tens of billions of dollars more ecash around than the bank has issued. Bank is insolvent. Congressional hearings. Government bailouts. Ecash falls from grace. Chaum joins inventor of lobotomy in Nobel Prize "Hall of Shame". Billionaire hacker Emmanuel Goldstein publishes his long-awaited memoirs from his estate in Argentina. He titles the book "How I Proved NP=P and Kept My Mouth Shut". "Hey - It could happen!" -- Mike Duvos $ PGP 2.6 Public Key available $ mpd@netcom.com $ via Finger. $