Digital Transactions Authoritative, insightful and timely information for payments professionals
A typical textbook enumerates the three main attributes of money: store of value, unit of account, and medium of exchange. Overlooked is one other attribute: a social lifeline, owing to two other, undermentioned attributes—money is universally desirable, and money creates a bond between two strangers. In this column, I focus on that bonding aspect.
I remember as a kid I would toss a coin into the peddler’s basket and grab the daily newspaper from the pile. The peddler and I were, and remained, strangers to each other. But this tossed coin created a momentary bond. As we migrate further into cyberspace, this aspect of payment between strangers should be a prime factor to keep in mind.
No sooner did money’s manifestation extend to non-cash instruments than this bond abated. Writing a check was not the same thing, and commerce became full of friction. Then came a brilliant innovation pioneered by Dee Hock, who solved the strangers’ dilemma by establishing a strangeness-broker, the Visa credit card enterprise.
While payor and payee were, and remained, strangers to each other, they were no strangers to Visa, which facilitated the transaction. This simple notion of a strangeness-broker gave rise to a trillion-dollar industry. And it is still working. Alas, unlike cash, card payment is Internet-dependent. It robs its users of their sense of privacy and inconspicuousness.
About a decade ago, Hock’s strangeness-brokerage idea was re-invented, not as a corporate entity but rather as a public ledger, with which all cryptocurrency traders are familiar. Visa’s code and regulations were replaced with a complex algorithm. Human management was removed, as Bitcoin runs on autopilot. There you have it. Two strangers exercise a financial transaction, and no privacy is lost (so it is claimed).
Alas, time is running out on Bitcoin and its ilk. A big black bear is pounding its way through the financial jungle: quantum computing. It’s a 40-year-old technology that violates the core notion of cryptocurrency, which says: computers are not fast enough to harm our protective algorithm.
But quantum computers are fast enough. So now what, are we going back to the Stone Age, reverse-migrating out of cyberspace? No. We re-invoke the quintessential human weapon: innovation.
BitMint*LeVeL, among other proposals, prepares today for the looming battle royal between quantum and crypto. This is the battle to preserve the achievement of digital currency: frictionless transactions, ease of storage, and the tethering of money to its intended purpose—all while safeguarding privacy and re-establishing the social bond between two strangers participating in a monetary exchange.
The inspiration for this new weapon in the crypto arsenal comes from a very unlikely source: Covid-19. It is amazing how this tiny virus wrestles with the full body of human science and technology. How? By invoking Darwinian evolution. Had Covid remained a stationary target, it would be dead by now. Alas, Covid outpaces its hunters. And so should crypto vis-a-vis quantum.
Bitcoin and most of its imitators rely on the mathematical strength of an algorithm known as ECDSA. ECDSA has been in the crosshair of cryptanalytic shops for a long time. Some might have already cracked it, and hide this fact. Quantum computers already crack it in theory, with practice to follow soon.
The Covid-inspired solution is to replace ECDSA with a mutation-powered, evolving algorithm, keeping a step ahead of the quantum juggernauts. The details are fascinating and will be presented in coming columns. The objective, though, is clear: to safeguard the many benefits of digital money, and in particular to re-establish the core aspect of money—a bond between strangers.
—Gideon Samid, gideon@bitmint.com
