Crypto-Agility in the Age of Quantum

Transcript

Hey everybody, it's a pleasure to be here back in Singapore for another Token 2049. And yeah, I'm going to be talking about a couple different things today, the convergence of a few different trends. And also we're going to be telling you a little bit about Project 11 and our marquee product that we're announcing today, StrongPoint. Um So, uh there's We live in an amazing time in my and really I think the history of block not only blockchains but cryptography. There's a number of converging trends that are all happening at once. I think everyone in here should be pretty familiar with the fact that blockchain adoption is growing up into the right year over year and that's reshaping finance.

I think, you know, zooming out a little bit and thinking about the cryptography that is underneath that blockchain or those blockchains, you know, that cryptography is being transformed by two things. One, by the impending arrival of quantum computers and we'll talk about why that matters in a second. But two, you know, this like the advent of AI and its impact on cryptoanalysis and basically cybersecurity, right? The TLDR there is that, you know, it's going to radically reshape how cybersecurity and cryptography underneath these blockchains, you know, exist and and it's going to reshape the paradigm for the future. I think it's easy Some people I think find this, you know, relatively pessimistic or depressing around, hey, you know, with all these evolving cyber threats enabled

by quantum or cyber secure by AI, you know, how like do blockchains have a future? And we at Project 11 emphatically believe that they do and if anything, I think this moment that we're all living through right now is an opportunity to rebuild from the ground up these new foundations to really seize, you know, or or like turn, you know, create the infrastructure that will ultimately be future proof. And that's what StrongPoint's all about. That's what Project 11's all about. So, uh Uh, okay. Uh I guess kind of starting point blockchains, right? So, I think folks have been in the space for a while. I'm sure check token prices every day for their various, you know, investments or you know, their favorite crypto asset.

You know, and obviously the market cap of cryptocurrency as an asset class has grown and grown massively over the last decade and a half or two decades. Um, but there's a bigger story here, too, which is not just that blockchains enable cryptocurrencies, which are things for people to invest in and speculate on. Blockchains are also increasingly becoming the foundation of digital finance. Now, I I like these I pulled these two charts specifically to show that. Um, you know, to to to to demonstrate the trends of tokenization and stablecoins for payments, right? and so, up into the right here. And this is I think even though prices over the last year for Bitcoin, etc., have been kind of flat, I think it's only a growth story here. And I think I I just came from Morgan Stanley Tech Week last week.

And you know, banks like Morgan Stanley and others are leaning into like the whole, you know, world of digital assets and and blockchains as the foundation of of what their future product offerings will look like. Um, and so, like I said, this is this is just an up into the right story here. Um, okay. So, now that's all good, but what does quantum mean for blockchains? The The very simple TLDR is that a quantum computer is a special kind of computer that can break the underlying cryptography that secures and enables ownership of digital assets on blockchains. Like, when I send a Bitcoin transaction, I'm right I'm creating a digital signature. That signature is basically my proof of ownership, right?

The digital signature part, which is you which is universal across all blockchains, is universally vulnerable to a quantum computer that could run an algorithm called Shor's algorithm. Um, and you know, there's kind of different ways to slice and dice the vulnerability across chains, but the bulk the headline is at the kind of the bottom of the slide. Every blockchain uses digital signatures for authorization and authentication. Private blockchains, public blockchains, Bitcoin, Ethereum, Solana, name your blockchain, they all rely on this underlying cryptographic primitive, right? Now, you know, different ecosystems kind of have, you know, do different things to prevent some address public keys from being exposed, and so there's there's kind of some nuance around what's vulnerable, but the upshot is that everything is vulnerable. Everything will have to change. And again, like I

said in my intro slide, we could view that as a bad thing, but I ultimately view this as a good thing, right? This is a chance for us to evolve and make these systems even stronger. Um okay, so what's the status of quantum computing? Um first off, global regulators, you know, who are connected to governments that probably have the closest pulse on the R&D on the quantum side, are already setting the standards and the regulations that the financial institutions that increasingly are issuing tokenized assets, stablecoins, et cetera, already have to comply with, right? So, there's kind of a question around when does a quantum computer happen versus when does the industry need to comply with basically the government regulations around the world?

This is a few of these dates that are relevant, but I guess the highlight reel, you know, NIST Donald Trump signing executive order over the past couple months announcing basically a new timeline for the US government. France has outlined some standards. Governments around the world are outlining standards, but not just governments, tech companies like Google, Microsoft, et cetera, are basically outlining standards or timelines by which they want their companies to migrate. Um and on the actual technical development side, I think it's been an and it's been an incredible story to watch how quantum computers kind of turned from a fantasy into a a potential reality in the near term uh just over the last year. This chart is based on some research that we did um and we have a research report which

you can find on report.projectq.com, and it just basically takes and aggregates all of the resource estimates for what it would take for a quantum computer to break the cryptography underlying Bitcoin. And you can just see here that the Y axis of the chart, by the way, is log scale. So, this is like, you know, multiple orders of magnitude of decrease in a relatively short time. You can see the end of the chart in particular since the end of 2024, you know, it's dropped off precipitously, right? And I I have this quote up here. This quote came from a Google product announcement for Argon, which is one of their new models from last week, right?

And they without implicitly referring to Shor's algorithm cryptanalysis, they more or less said that, "Hey, we can use AI to accelerate this quantum computing research progress." And uh and I think, you know, that's that's a key part of why these resource estimates have collapsed so much and why it's becoming relevant now. Speaking of AI, AI itself, forgetting quantum, is putting pressure on not only cryptography, but cybersecurity across the board, right? I think uh not a week goes by where we don't see some kind of hack or some kind of security break or something happen in the industry that was somehow AI-enabled or affects, you know, it was was was enabled was uh you know, was made possible by AI. Um I'm going to talk about mostly the cryptography side here

cuz to me that's part of the interesting story about what the future looks like. quantum computers are breaking the existing cryptography that blockchains rely on today. In addition, AI is kind of breaking or is putting under pressure the post-quantum algorithms that we're all supposed to migrate to. And I want to linger on this point cuz it's incredibly important to understand. The elliptic curve cryptography that blockchains today rely on has been resilient over decades of cryptanalysis. All of the new post-quantum algorithms, for the most part, rely on different assumptions that have been less tested.

And unfortunately, now with AI, it's never been easier to test them and potentially break them. And so, there's an example, Hawk, which is a NIST standard that um that was or a NIST candidate that was potentially going to be next to be standardized over the next year, but just got broken. It survived years of cryptanalysis. And that was that was via AI-assisted, you know, using AI algorithms. Um there's a bunch of examples about how AI is basically just reducing the security margins for all this new cryptography that again, we are the industry is all going to rely upon.

Right? So, the other piece here that's relevant to blockchain specifically is that an answer to, "Hey, what are we going to do about post-quantum cryptography?" is different for every ecosystem basically. So, Project Alchemist, our whole, you know, MO is basically post-quantum cryptography and security for blockchain networks. We work with all of many of the leading layer ones. And uh, you know, look, everyone is going all different directions. This has an impact on, you know, on the ultimate user experience and end user security because, you know, institutions and infrastructure providers ultimately have to integrate now what will end up being multiple, disparate, not mutually compatible schemes, right? And so, we

have this Balkanization happening within our industry around the cryptography that people are choosing to adopt. Uh, this is true not going back to the standardization and regulation side. This is true nationally, too. We kind of are leaving, you know, the, you know, the kind of era of everything being easy because NIST is setting the standards for the world and we just adopt those standards. Nation states across around the world, be they China, be they Russia, even South Korea, which is a relatively, you know, stalwart US ally, they're all creating their own cryptography standards, right? That they're going to expect financial institutions that operate in those in their countries to comply with. So, this is going to turn into a big nightmare for existing incumbent institutions that, you know,

have to and infrastructure providers that have to ultimately figure out how to fit their existing product schemes and cryptography schemes inside of these So, this is where StrongPoint comes in. uh, the answer, hopefully I've you can tell where I'm going, where I've set all this up, is that the future is going to be uncertain, okay? We don't know how quickly a quantum computer will arrive. We don't know what the impact of AI will be on post-quantum cryptography. So, the answer is we have to be ready and our infrastructure and the security infrastructure that secures our keys, most importantly, has to be ready for anything in the future. This is called crypto agility. And StrongPoint is our marquee product we're announcing today is our crypto agile digital asset custody product for the post-quantum and

post-AI era. How's it different? Very much just by being flexible, right? At the basic layer of really any wallet scheme or digital asset infrastructure provider, key management solution, custodian, they all bake in at the lowest possible level the cryptography, right? The elliptic curve cryptography that everything is based on. And that decision is easy to make today because really every blockchain under the hood uses elliptic curve cryptography. All the, you know, which is more or less the same across every every ecosystem with some different tweaks. The future, like I said, is not going to look like that.

And quantum is going to change things, going to make some algorithms vulnerable. AI is going to make some algorithms vulnerable. It's going to necessitate migration to new schemes to keep your assets safe. So, this is where StrongPoint differs. It's the policies around how do we want to secure these assets? That is the foundation. The cryptography is built on top and is meant to be modular, right? So, this modularity piece is really what crypto agility means. We can't put all our eggs in one basket, right? So, folks here, if anyone's ever used a multi-sig, it's the same idea conceptually, which is like, "Hey, I don't want to be the only signer. I need to have one other fallback point so it's not just we don't lose all our funds." It's the

same idea here, but just applied at a deeper level, at the cryptographic level. Who's this for? Everybody. Literally any institution that's holding digital assets in the future needs to figure out how are they are going to manage their keys, how they are going to keep their assets safe, how they are going to migrate away from threats, right? Stablecoin issuers, asset issuers of all kinds, protocol foundations. We're going to talk about some folks we're working with already on that domain. But, you know, like I showed that slide earlier of all the stablecoin transactions happening over the last few years, this is going to be a growing part of payments, a growing part of finance, and any institution that touches or holds digital assets needs to have an institutional key management solution that is built for the future, not for the past.

Um and then the last thing I'll say is, like I think another area that that that we see, you know, to highlight a trend that I've talked about here is quantum. You know, quantum so far in this talk, and I think in a lot of the discourse, he's kind of invoked as the boogeyman. It's the thing that's going to break everything we rely on, and oh, this is all doom and gloom. I don't think that's true at all. I think quantum mechanics can actually be the foundation for a future forms of cryptography. There are already examples of this for quantum random number generation, things like called quantum uh key distribution, and Project 11 and Strongpoint specifically will integrate those quantum-based cryptographic schemes as they become production-ready as part of this broader crypto-agile solution.

Um who are we What are we doing? Who who are we working with? We're working with Zcash Foundation in particular. Uh Zcash has been an incredible uh you know, asset class or asset to watch over the last year. Uh prior to Project 11, I worked in the privacy space, and it's really been amazing to see the growth of that ecosystem. I also think Zcash, if you guys have followed the news, has, you know, done a lot of great work on preparing for the post-quantum era. Around, you know, the new Ironwood pool has a post-quantum uh recovery mechanism, and so we're very proud to have the Zcash Foundation as design partners for Strongpoint. And we've worked with other folks in the ecosystem as well, as you can see up here. Um and overall, every every blockchain that will be relevant

in the future, must have post-quantum cryptography. Cryptography in general must be post-quantum. Like, 5 years from now, I hope we're never even saying the word post-quantum cryptography. It's all just going to be cryptography. Um couple other highlights before I conclude here. Um this is an actively evolving area. And we are leaders in the R&D and in researching and developing solutions for this problem specifically. And I just I'm going to use this to kind of talk about uh just make a couple points that I think a lot of people miss when talking about the post-quantum transition. It's not just the cryptography. I've said cryptography cryptography cryptography the whole time I've been up on the stage. But look, at the end of the day, a wallet, a custody solution, a payments platform is more

than the cryptography. It's the UX. It's how do I create multiple wallets off of the same seed phrase? Um you know, it's how do I set up a threshold scheme? And how do I do a multi-sig with this new different cryptographic scheme? And how do all these things fit together? The all of this stuff has to ultimately transform in the post-quantum era. And so, we are trying to build solutions that are not just research papers, but ultimately end-to-end solutions to secure your clients' assets from the point where they're at now, secured by classical cryptography, into the post-quantum future. Uh and like I said, we aim to be we we believe fundamentally that quantum computers are a good thing and will ultimately help secure um digital assets and payment or excuse me, financial and

you know, other types of information but by, you know, far into the future. So, that concludes my talk. Thank you guys for uh for being here. And again, StrongPoint, post-quantum digital asset custody, that is fundamentally crypto agile at the core. Um you know, ultimately finance is built on trust. That trust in blockchains is enabled by cryptography. And with StrongPoint, we're building what we believe is what the future of cryptography will look like with quantum computers coming, with AI rapidly accelerating and changing the cybersecurity landscape, trust is the most important thing we have to preserve. Thank you very much.