Slava Gomzin's Blog: PayAppSec
March 3, 2025
Why Mainstream Retail Crypto Payments Still Don’t Exist
This essay originally appeared in the RSA Conference Blog
Bitcoin recently celebrated its 16th anniversary with an all-time high price. One of its big promises among others was revolutionizing the way we pay for day-to-day purchases such as groceries. Crypto enthusiasts actively promoted moving away from plastic cards—which were conceived in the 1950s and increased consumer dependency on banks—to modern, cyber-friendly methods that allow independence from centralized financial institutions. But when you approach the checkout lane in your local grocery store, you won’t see a “pay with crypto” sign.
Merchant Challenges
It’s often argued that merchants are conservative about adopting new technology, and this is partly true. The main reason for that is low net profit margins that don’t leave a lot of room for experimentation and investments in costly hardware and software. But that’s not the reason, or at least not the only reason for mainstream merchants not offering crypto payments. If we look at other new tech such as artificial intelligence (AI), which is younger than Bitcoin, we will see that AI tools are being enthusiastically embraced by many retail chains. So why isn’t crypto so fortunate?
Merchants follow the technological trends for one of two reasons: operational cost reduction or demand from customers. The ideal situation is when a new tech provides for both, but this would be rather a rare, lucky case. Examples of technologies that represent both cases and a combination of them are self-checkout lanes, Apple Pay feature, and automatic product recognition respectively.
Self-checkout lanes dramatically reduce retailer costs by requiring only one attendant to oversee multiple stations instead of employing several cashiers. Apple Pay, on the other hand, came as a trend from buyers requesting wider support for their favorite gadgets. AI-based systems like automated product recognition are both convenient for the buyers and reduce the average checkout time for merchants.
Customer Incentives
Unfortunately, crypto payments still can’t find their place balancing between the merchant cost efficiency and customer demand. For retailers, they introduce hurdles like regulatory compliance uncertainties and require investments in implementation, maintenance, and security. From the consumer side, the overall demand is low as the percentage of mainstream buyers who want to pay with crypto is still relatively small, but there is an even more important factor that prevents customers from actively lobbying for retail crypto payments: lack of financial incentive.
Over a third of transactions at brick-and-mortar retailers--don’t cost the buyer anything, as merchants cover the processor fees for credit card payments. Moreover, most credit card users benefit from paying by credit card as they get cashback from the bank that issued their card--up to 5% of the total transaction amount. In contrast, crypto payments often require the sender to pay network fees, which can fluctuate widely depending on network congestion. And even if a merchant decides to cover that fee, which will significantly increase its transaction cost while making it unpredictable because crypto fees are fluctuating, they will never be able to compete with cashback incentives.
The banks have a huge resource to pay out those cashbacks not just using the transaction processing fees paid by merchants but with endless late fees and interests on credit card balances paid by the cardholders themselves. Merchants and crypto payment processors can’t compete with banks in this area. They don’t offer credit to customers and, therefore, can’t offset costs through interest and late fees to fund large incentives. Nevertheless, from the point of view of the average consumer, credit card payments still look financially more attractive than crypto payments.
The Privacy Advantage
If there is a light at the end of the tunnel, it should come in the form of a unique benefit that crypto payments can provide to consumers that banks can’t. Could privacy be the key to unlocking widespread crypto adoption?
Formally, credit card transactions are considered private, but in reality, it is courtesy of several companies such as payment processing bank--the one that works on the merchant side --and an issuer bank--the one that gives you the cards and sends you the monthly statements. These corporations are heavily regulated and their databases are vulnerable to cyberattacks. So, information about your transactions can either be subpoenaed by government organizations or stolen by hackers.
Crypto transactions offer enhanced privacy because they are processed on decentralized networks, removing the risk of centralized data breaches and possibility of disclosures to any third parties. There are also privacy-focused cryptocurrencies such as Monero that, unlike Bitcoin or Ethereum, completely protect transaction history from anyone except for the wallet owner.
While freedom from interference is still not a big concern for many people, as our lives shift into cyberspace, we become more aware of the importance of privacy and, the benefits of crypto payments may become evident to a critical mass of consumers, justifying any cost differences. This shift could occur sooner than we expect.
Bitcoin recently celebrated its 16th anniversary with an all-time high price. One of its big promises among others was revolutionizing the way we pay for day-to-day purchases such as groceries. Crypto enthusiasts actively promoted moving away from plastic cards—which were conceived in the 1950s and increased consumer dependency on banks—to modern, cyber-friendly methods that allow independence from centralized financial institutions. But when you approach the checkout lane in your local grocery store, you won’t see a “pay with crypto” sign.
Merchant Challenges
It’s often argued that merchants are conservative about adopting new technology, and this is partly true. The main reason for that is low net profit margins that don’t leave a lot of room for experimentation and investments in costly hardware and software. But that’s not the reason, or at least not the only reason for mainstream merchants not offering crypto payments. If we look at other new tech such as artificial intelligence (AI), which is younger than Bitcoin, we will see that AI tools are being enthusiastically embraced by many retail chains. So why isn’t crypto so fortunate?
Merchants follow the technological trends for one of two reasons: operational cost reduction or demand from customers. The ideal situation is when a new tech provides for both, but this would be rather a rare, lucky case. Examples of technologies that represent both cases and a combination of them are self-checkout lanes, Apple Pay feature, and automatic product recognition respectively.
Self-checkout lanes dramatically reduce retailer costs by requiring only one attendant to oversee multiple stations instead of employing several cashiers. Apple Pay, on the other hand, came as a trend from buyers requesting wider support for their favorite gadgets. AI-based systems like automated product recognition are both convenient for the buyers and reduce the average checkout time for merchants.
Customer Incentives
Unfortunately, crypto payments still can’t find their place balancing between the merchant cost efficiency and customer demand. For retailers, they introduce hurdles like regulatory compliance uncertainties and require investments in implementation, maintenance, and security. From the consumer side, the overall demand is low as the percentage of mainstream buyers who want to pay with crypto is still relatively small, but there is an even more important factor that prevents customers from actively lobbying for retail crypto payments: lack of financial incentive.
Over a third of transactions at brick-and-mortar retailers--don’t cost the buyer anything, as merchants cover the processor fees for credit card payments. Moreover, most credit card users benefit from paying by credit card as they get cashback from the bank that issued their card--up to 5% of the total transaction amount. In contrast, crypto payments often require the sender to pay network fees, which can fluctuate widely depending on network congestion. And even if a merchant decides to cover that fee, which will significantly increase its transaction cost while making it unpredictable because crypto fees are fluctuating, they will never be able to compete with cashback incentives.
The banks have a huge resource to pay out those cashbacks not just using the transaction processing fees paid by merchants but with endless late fees and interests on credit card balances paid by the cardholders themselves. Merchants and crypto payment processors can’t compete with banks in this area. They don’t offer credit to customers and, therefore, can’t offset costs through interest and late fees to fund large incentives. Nevertheless, from the point of view of the average consumer, credit card payments still look financially more attractive than crypto payments.
The Privacy Advantage
If there is a light at the end of the tunnel, it should come in the form of a unique benefit that crypto payments can provide to consumers that banks can’t. Could privacy be the key to unlocking widespread crypto adoption?
Formally, credit card transactions are considered private, but in reality, it is courtesy of several companies such as payment processing bank--the one that works on the merchant side --and an issuer bank--the one that gives you the cards and sends you the monthly statements. These corporations are heavily regulated and their databases are vulnerable to cyberattacks. So, information about your transactions can either be subpoenaed by government organizations or stolen by hackers.
Crypto transactions offer enhanced privacy because they are processed on decentralized networks, removing the risk of centralized data breaches and possibility of disclosures to any third parties. There are also privacy-focused cryptocurrencies such as Monero that, unlike Bitcoin or Ethereum, completely protect transaction history from anyone except for the wallet owner.
While freedom from interference is still not a big concern for many people, as our lives shift into cyberspace, we become more aware of the importance of privacy and, the benefits of crypto payments may become evident to a critical mass of consumers, justifying any cost differences. This shift could occur sooner than we expect.
February 21, 2025
Is the Crypto Space Dominated by a Small Group?
Is the Crypto Space Dominated by a Small Group? In many ways, yes – especially on the investment side. Venture capital firms like Andreessen Horowitz, Polychain, Pantera, and a few others repeatedly appear as key early investors in numerous top projects, indicating a concentration of influence in the funding layer of crypto. This means the same funds often have significant token holdings and board influence across projects. For example, a16z not only funded Layer-1 chains (Solana, Avalanche, Sui, etc.) but also DeFi (Uniswap, Maker) and Web3 startups, giving it a broad sway over the industry’s direction . Similarly, exchanges (Binance, Coinbase) by listing and investing, have shaped which projects gained prominence – their venture arms act as kingmakers, and in the case of Binance, it literally controls its own smart chain ecosystem’s tokens.
On the founder/creator side, the landscape is a bit more diverse than it might appear, but still with notable repeats. There are thousands of cryptocurrencies, yet many top projects trace back to a few influential founders or communities. The fact that Ethereum’s alumni (Buterin, Wood, Hoskinson) went on to create other top blockchains shows a form of “talent concentration” – the expertise and credibility from one successful project can spawn multiple others. Web3 Foundation’s Gavin Wood and Input Output’s Charles Hoskinson are examples of individuals whose visions now power multiple major networks. In the stablecoin realm, the Tether team (iFinex) used their formula to launch other tokens (like LEO) – again a small group driving multiple assets.
That said, the market is ultimately decentralized in ownership – Bitcoin and Ethereum, the top two, are widely held by millions with no controlling owner. And new innovations can and do emerge from outside this circle.
It’s also true that crypto remains open for new entrants – for example, memecoin phenomena like Shiba or Pepe came out of nowhere without backing from known elites, showing that outsiders can still break in. Yet, those are often the exception or short-lived in top rankings. Sustained top projects often eventually get support from or integration into the networks of those big players.
In summary, the crypto space has a pattern of recurring players at the top: a handful of venture funds finance a large share of top projects, and certain founders have disproportionate influence by being behind multiple major coins. This doesn’t mean there’s a single cabal controlling everything – far from it, there’s healthy competition and even rivalries (for example, different L1 teams compete despite sharing investors). But in terms of capital and expertise, the circle is relatively small. Crypto is “dominated” to an extent by these recurring players, in the sense that early-stage decisions (who gets funding, which ideas get resources) are often made by the same groups of people and companies.
On the founder/creator side, the landscape is a bit more diverse than it might appear, but still with notable repeats. There are thousands of cryptocurrencies, yet many top projects trace back to a few influential founders or communities. The fact that Ethereum’s alumni (Buterin, Wood, Hoskinson) went on to create other top blockchains shows a form of “talent concentration” – the expertise and credibility from one successful project can spawn multiple others. Web3 Foundation’s Gavin Wood and Input Output’s Charles Hoskinson are examples of individuals whose visions now power multiple major networks. In the stablecoin realm, the Tether team (iFinex) used their formula to launch other tokens (like LEO) – again a small group driving multiple assets.
That said, the market is ultimately decentralized in ownership – Bitcoin and Ethereum, the top two, are widely held by millions with no controlling owner. And new innovations can and do emerge from outside this circle.
It’s also true that crypto remains open for new entrants – for example, memecoin phenomena like Shiba or Pepe came out of nowhere without backing from known elites, showing that outsiders can still break in. Yet, those are often the exception or short-lived in top rankings. Sustained top projects often eventually get support from or integration into the networks of those big players.
In summary, the crypto space has a pattern of recurring players at the top: a handful of venture funds finance a large share of top projects, and certain founders have disproportionate influence by being behind multiple major coins. This doesn’t mean there’s a single cabal controlling everything – far from it, there’s healthy competition and even rivalries (for example, different L1 teams compete despite sharing investors). But in terms of capital and expertise, the circle is relatively small. Crypto is “dominated” to an extent by these recurring players, in the sense that early-stage decisions (who gets funding, which ideas get resources) are often made by the same groups of people and companies.
January 24, 2025
The Trouble With Telegram: The Platform May Not Be As Secure As It Claims To Be
This essay originally appeared in the IEEE Spectrum magazine
Pavel Durov, the founder of the chat app Telegram, was arrested in late August in France on charges that the company hasn’t done enough to prevent malicious and illegal activity on the app.
One might be tempted to think that Telegram’s high level of data protection would prevent it from effectively addressing malicious activity on the platform: If Telegram can’t read their users’ messages, they can’t spot lawbreakers. Founded in 2013, Telegram has positioned itself as a privacy-focused, secure messaging platform that prioritizes user freedom and data protection. Durov has emphasized his strong commitment to privacy and free speech. In a tweet about the arrest, Durov wrote “Our experience is shaped by our mission to protect our users in authoritarian regimes.”
However, a closer look at the platform’s technology shows that privacy on Telegram is, at best, fragile.
First, while the Telegram’s client-side code was made open source, the server-side code was never opened to the public. This violates a widely embraced idea in cryptography known as Kerckhoffs’s principle, which states that everything in a cryptosystem should be public knowledge, except for the secret keys themselves.
Because the server code is closed source, there is no guarantee that Telegram does not just retain information forever.
While client code, which runs on users’ devices, is responsible for implementing private chats through end-to-end encryption, the server code, which runs on Telegram’s proprietary data centers, could do a lot of things that privacy-focused software is not supposed to do—for example, it can collect metadata, which includes statistics on user activities and geolocations, monitor and even eavesdrop on non-encrypted conversations, and report the information to third parties such as intelligence services or commercial corporations that could misuse it. Because the server code is closed source, there is no guarantee that Telegram does not just retain this information forever. If Telegram does, they could report that information when officially requested by someone, or even worse, provide an opportunity for hackers to leak it, even after you think you’ve deleted it.
Second, even Telegram’s approach to encryption on the client side is not optimal for privacy-focused software: Telegram’s communication is not encrypted end-to-end by default.
Most online communication these days is encrypted, which means that the text you send from your browser to some website is not going through the Internet as clear text, as cryptographers call it, but encrypted—typically by the encryption standard called Transport Layer Security (TLS). While there are benefits to TLS—it encrypts network messages to prevent listeners to the Internet traffic from eavesdropping on the data being transmitted—there is also a downside. The data is encrypted only when it is transmitted over Internet routers, but it is decrypted by intermediate servers—for example, by the Telegram servers. This means that Telegram can read and retain all your conversations.
Telegram inexplicably claims to be “way more secure” than WhatsApp, without offering any proof or reasonable justification.
Unlike TLS, end-to-end encryption ensures that the data is encrypted and decrypted using unique encryption keys that are known only to the sender and the recipient. For example, your chat message is encrypted inside your device, a mobile phone or laptop, and sent in its encrypted form through all the servers, including Telegram’s servers, and decrypted only at the other end—inside the recipient’s device.
End-to-end encryption by default would guarantee that Telegram cannot read your messages under any circumstances. In the case of end-to-end encryption, even the fact that the server source code remains proprietary should not affect the security of the encryption because the servers don’t know the encryption keys.
Yet because Telegram’s end-to-end encryption is not enabled by default, many users may overlook this fact, leaving their communications vulnerable to interception or eavesdropping by Telegram personnel, intelligence services, or hackers. In contrast, another popular messaging service, WhatsApp, not only has end-to-end encryption enabled by default but also extends it to group chats—something Telegram lacks entirely. Despite this crucial difference, Telegram inexplicably claims to be “way more secure” than WhatsApp, without offering any proof or reasonable justification.
It is also important to note that even end-to-end encryption does not prevent Telegram from collecting metadata, meaning that even though the text of your messages cannot be read, one can still see when you sent the message and who the recipient is.
Since the server code is not open source, we don’t know how Telegram manages metadata. Even with end-to-end encryption protecting the content of messages, metadata such as the time, geolocation, and identities of users can still be collected and analyzed, revealing patterns and relationships. This means that metadata can compromise privacy by exposing who is communicating, when, and where—even if the messages themselves remain encrypted and unreadable to outsiders.
Third, for both end-to-end encrypted and standard chats, Telegram uses a proprietary protocol, called MTProto. Because MTProto is proprietary, the full implementation is not publicly available for scrutiny. Proprietary protocols may contain undisclosed vulnerabilities. MTProto has not undergone comprehensive independent security audits comparable to those performed on open-source protocols like the Signal Protocol (which WhatsApp also uses). So, even for so-called secret chats, there is no guarantee that the implementation is secure.
These technical shortcomings have real-life consequences.
Freedom of speech and privacy are fundamental human rights, but we should be careful about how we use the tools that promise to preserve them.
Telegram was blocked in Russia in April 2018 after the company refused to comply with a court order to provide Russian authorities with access to encryption keys, which would have allowed them to decrypt user messages. Despite the ban, Telegram remained accessible to many users in Russia through the use of VPNs and other circumvention tools. In June 2020, Russian authorities suddenly lifted the ban on Telegram. Russia stated that the decision was made in light of Telegram’s willingness to assist in the fight against terrorism by blocking certain channels associated with terrorist activities, although Telegram continued to maintain its stance on user privacy.
But in 2023, Russian opposition activists reported that their messages, although sent through secret chats, had been monitored and read by special forces, which led to their arrests. Telegram suggested that Russian authorities could have gotten access to the chats through a phone-hacking tool like Cellebrite, but the holes in Telegram’s security make it impossible to know for sure.
The struggle between privacy and governmental control is ongoing, and the balance between safeguarding human rights and national security remains a contentious issue. Freedom of speech and privacy are fundamental human rights, but we should be careful about how we use the tools that promise to preserve them. Signal and WhatsApp, unlike Telegram, both have end-to-end encryption enabled by default. In addition, Signal open-sources both the client- and server-side code. This allows security researchers to review the code and confirm that the software is secure and does not conduct surveillance on its users. A full open-source approach would also ensure that private chats are designed in such a way that they cannot be compromised.
Telegram does not offer significantly better privacy or security than average communication services, like Facebook Messenger. When it comes to the niche of truly privacy-centric products—where Telegram is trying hard to position itself—it’s doubtful that Telegram can compete with Signal or even WhatsApp. While even those two aren’t perfect in terms of privacy, they both have a leg up on that self-professed privacy stronghold Telegram.
Pavel Durov, the founder of the chat app Telegram, was arrested in late August in France on charges that the company hasn’t done enough to prevent malicious and illegal activity on the app.
One might be tempted to think that Telegram’s high level of data protection would prevent it from effectively addressing malicious activity on the platform: If Telegram can’t read their users’ messages, they can’t spot lawbreakers. Founded in 2013, Telegram has positioned itself as a privacy-focused, secure messaging platform that prioritizes user freedom and data protection. Durov has emphasized his strong commitment to privacy and free speech. In a tweet about the arrest, Durov wrote “Our experience is shaped by our mission to protect our users in authoritarian regimes.”
However, a closer look at the platform’s technology shows that privacy on Telegram is, at best, fragile.
First, while the Telegram’s client-side code was made open source, the server-side code was never opened to the public. This violates a widely embraced idea in cryptography known as Kerckhoffs’s principle, which states that everything in a cryptosystem should be public knowledge, except for the secret keys themselves.
Because the server code is closed source, there is no guarantee that Telegram does not just retain information forever.
While client code, which runs on users’ devices, is responsible for implementing private chats through end-to-end encryption, the server code, which runs on Telegram’s proprietary data centers, could do a lot of things that privacy-focused software is not supposed to do—for example, it can collect metadata, which includes statistics on user activities and geolocations, monitor and even eavesdrop on non-encrypted conversations, and report the information to third parties such as intelligence services or commercial corporations that could misuse it. Because the server code is closed source, there is no guarantee that Telegram does not just retain this information forever. If Telegram does, they could report that information when officially requested by someone, or even worse, provide an opportunity for hackers to leak it, even after you think you’ve deleted it.
Second, even Telegram’s approach to encryption on the client side is not optimal for privacy-focused software: Telegram’s communication is not encrypted end-to-end by default.
Most online communication these days is encrypted, which means that the text you send from your browser to some website is not going through the Internet as clear text, as cryptographers call it, but encrypted—typically by the encryption standard called Transport Layer Security (TLS). While there are benefits to TLS—it encrypts network messages to prevent listeners to the Internet traffic from eavesdropping on the data being transmitted—there is also a downside. The data is encrypted only when it is transmitted over Internet routers, but it is decrypted by intermediate servers—for example, by the Telegram servers. This means that Telegram can read and retain all your conversations.
Telegram inexplicably claims to be “way more secure” than WhatsApp, without offering any proof or reasonable justification.
Unlike TLS, end-to-end encryption ensures that the data is encrypted and decrypted using unique encryption keys that are known only to the sender and the recipient. For example, your chat message is encrypted inside your device, a mobile phone or laptop, and sent in its encrypted form through all the servers, including Telegram’s servers, and decrypted only at the other end—inside the recipient’s device.
End-to-end encryption by default would guarantee that Telegram cannot read your messages under any circumstances. In the case of end-to-end encryption, even the fact that the server source code remains proprietary should not affect the security of the encryption because the servers don’t know the encryption keys.
Yet because Telegram’s end-to-end encryption is not enabled by default, many users may overlook this fact, leaving their communications vulnerable to interception or eavesdropping by Telegram personnel, intelligence services, or hackers. In contrast, another popular messaging service, WhatsApp, not only has end-to-end encryption enabled by default but also extends it to group chats—something Telegram lacks entirely. Despite this crucial difference, Telegram inexplicably claims to be “way more secure” than WhatsApp, without offering any proof or reasonable justification.
It is also important to note that even end-to-end encryption does not prevent Telegram from collecting metadata, meaning that even though the text of your messages cannot be read, one can still see when you sent the message and who the recipient is.
Since the server code is not open source, we don’t know how Telegram manages metadata. Even with end-to-end encryption protecting the content of messages, metadata such as the time, geolocation, and identities of users can still be collected and analyzed, revealing patterns and relationships. This means that metadata can compromise privacy by exposing who is communicating, when, and where—even if the messages themselves remain encrypted and unreadable to outsiders.
Third, for both end-to-end encrypted and standard chats, Telegram uses a proprietary protocol, called MTProto. Because MTProto is proprietary, the full implementation is not publicly available for scrutiny. Proprietary protocols may contain undisclosed vulnerabilities. MTProto has not undergone comprehensive independent security audits comparable to those performed on open-source protocols like the Signal Protocol (which WhatsApp also uses). So, even for so-called secret chats, there is no guarantee that the implementation is secure.
These technical shortcomings have real-life consequences.
Freedom of speech and privacy are fundamental human rights, but we should be careful about how we use the tools that promise to preserve them.
Telegram was blocked in Russia in April 2018 after the company refused to comply with a court order to provide Russian authorities with access to encryption keys, which would have allowed them to decrypt user messages. Despite the ban, Telegram remained accessible to many users in Russia through the use of VPNs and other circumvention tools. In June 2020, Russian authorities suddenly lifted the ban on Telegram. Russia stated that the decision was made in light of Telegram’s willingness to assist in the fight against terrorism by blocking certain channels associated with terrorist activities, although Telegram continued to maintain its stance on user privacy.
But in 2023, Russian opposition activists reported that their messages, although sent through secret chats, had been monitored and read by special forces, which led to their arrests. Telegram suggested that Russian authorities could have gotten access to the chats through a phone-hacking tool like Cellebrite, but the holes in Telegram’s security make it impossible to know for sure.
The struggle between privacy and governmental control is ongoing, and the balance between safeguarding human rights and national security remains a contentious issue. Freedom of speech and privacy are fundamental human rights, but we should be careful about how we use the tools that promise to preserve them. Signal and WhatsApp, unlike Telegram, both have end-to-end encryption enabled by default. In addition, Signal open-sources both the client- and server-side code. This allows security researchers to review the code and confirm that the software is secure and does not conduct surveillance on its users. A full open-source approach would also ensure that private chats are designed in such a way that they cannot be compromised.
Telegram does not offer significantly better privacy or security than average communication services, like Facebook Messenger. When it comes to the niche of truly privacy-centric products—where Telegram is trying hard to position itself—it’s doubtful that Telegram can compete with Signal or even WhatsApp. While even those two aren’t perfect in terms of privacy, they both have a leg up on that self-professed privacy stronghold Telegram.
November 12, 2024
Why Mainstream Retail Crypto Payments Still Don’t Exist
My latest article published by the RSA Conference Blog: “Why Mainstream Retail Crypto Payments Still Don’t Exist.” I delve into the security, privacy, and regulatory challenges preventing widespread adoption of crypto payments in mainstream retail.
As cryptocurrencies gain popularity and their valuations soar, it’s essential for the cybersecurity community to understand why their adoption in everyday transactions remains limited. The article delves into factors such as regulatory uncertainties, high implementation costs for merchants, lack of consumer demand, and the stronger financial incentives offered by traditional payment methods like credit cards.
Importantly, the article also discusses how the unique privacy benefits of cryptocurrencies could drive future adoption. As concerns over digital privacy grow, these advantages may become significant enough to prompt a shift in consumer preferences and merchant offerings.
#Cryptocurrency #CryptoPayments #Bitcoin #Blockchain #RetailTech #Cybersecurity #Privacy #DigitalPayments #FinTech #RSAConference #CryptoAdoption #PaymentSolutions #DataSecurity #TechTrends #Security
As cryptocurrencies gain popularity and their valuations soar, it’s essential for the cybersecurity community to understand why their adoption in everyday transactions remains limited. The article delves into factors such as regulatory uncertainties, high implementation costs for merchants, lack of consumer demand, and the stronger financial incentives offered by traditional payment methods like credit cards.
Importantly, the article also discusses how the unique privacy benefits of cryptocurrencies could drive future adoption. As concerns over digital privacy grow, these advantages may become significant enough to prompt a shift in consumer preferences and merchant offerings.
#Cryptocurrency #CryptoPayments #Bitcoin #Blockchain #RetailTech #Cybersecurity #Privacy #DigitalPayments #FinTech #RSAConference #CryptoAdoption #PaymentSolutions #DataSecurity #TechTrends #Security
November 11, 2024
Post-Quantum Payments: Is the Apocalypse Closer Than We Think?
This essay originally appeared in the RSA Conference Blog
This article was inspired by my recent experience at the Black Hat and Defcon cybersecurity conferences. Quantum computing and post-quantum cryptography emerged as major topics, more prominently than ever before. One can say that this is because of the anticipated release of the NIST standard for post-quantum cryptographic algorithms which officially happened immediately after the conferences concluded. However, this release might be just the tip of the iceberg, with significant developments likely hidden from public view. Now, let’s start from the beginning and define what quantum computing is and why we should pay attention to it when it comes to a conversation about payments.
Unlike traditional computers, which use bits with value 0 or 1 as their elementary building blocks, quantum computing uses so-called qubits, which in addition to regular zeros and ones can enter a special state called superposition. There are special algorithms that use superposition to dramatically speed up calculations which can take forever for regular computers, even supercomputers. One such algorithm, Shor’s, claims the ability to crack public key encryption by solving the problems of factoring large integers and discrete logarithms, which are foundational to Rivest Shamir Adleman (RSA) and Elliptic Curve Cryptography (ECC). I say “claims” because Shor’s algorithm has been theoretically proven and experimentally demonstrated on small quantum systems, but it has not yet been fully realized on large-scale quantum hardware capable of challenging current classical cryptographic systems.
Unfortunately for mathematicians, and fortunately for all of us, quantum computers are not powerful enough yet to execute Shor’s on a full scale sufficient to crack real RSA or ECC keys. But the threat is that such a development could happen at any moment. Remember what happened just less than two years ago with the first release of ChatGPT by OpenAI? Everyone was talking about AI, but no one was expecting a real-life application that can do much more than just chatting. That moment was rather a revolution than evolution. Why should we assume that the same cannot happen with quantum computing?
There is one important difference however between quantum and AI. Companies such as OpenAI are motivated to do a fast release of their work to the public as this means more investment and revenue for them. Quantum computers, however, are not as directly tied to public engagement. National governments and their intelligence services may be even more interested in developing quantum computers than private corporations, and if they do such development and get good results, they will not necessarily publicize their achievements. Instead, they might try to exploit first and crack public communications, cryptocurrencies, and other technologies.
How Is This Applied to Digital Payments?
The first concern is cryptocurrencies, which rely entirely on public key encryption algorithms for security. If Elliptic Curves were cracked today, this would be an immediate crash of Bitcoin, Ethereum, Monero, and hundreds other crypto. All three aforementioned crypto networks, and their numerous forks and mimickers, are based on different flavors of the same ECC. The moment Shor’s algorithm is successfully executed on real keys, the value of most cryptocurrencies could plummet to zero. But if the crackers decide to not make the discovery available to the public, they might first benefit from the ability to crack particular crypto wallets with large amounts.
But what about traditional payment technologies, like plastic cards, which still account for the majority of processed payments? The plastic payment card industry relatively recently made a full transition to EMV, also known as chip and pin, standard, which means that every payment card has a chip that is supposed to protect cardholder information and transactional data. Guess what is used to protect that data - correct, public key encryption. In EMV, public key encryption algorithms such as RSA and ECC are employed to secure the data exchange between the card and the payment terminal. This ensures that even if the data were intercepted, it would be virtually impossible to decipher without the corresponding private key. One might assume that old magnetic stripe payment cards, with unencrypted data, are safe from cryptographic attacks. While magnetic stripe cards lack encryption, many legacy payment applications and online payment systems still rely on Transport Layer Security (TLS) to secure communications. These applications would be inherently vulnerable to quantum attacks.
However, there is some good news too. Many modern payment systems use a technology called point-to-point encryption (P2PE), when the sensitive cardholder data is encrypted within the card reader device and decrypted only at the payment processor (bank). The most prevalent encryption scheme in P2PE is called DUKPT (Derived Unique Key Per Transaction) which uses symmetric ciphers such as AES (Advanced Encryption Standard). Symmetric algorithms are much more resilient to quantum attacks compared to public key encryption. There is an algorithm called Glover’s that speeds up the brute-forcing of AES ciphers and reduces its security by two times. So, if AES uses a key with 256-bit length, its actual security will be reduced to 128-bit, which is still considered fairly secure today.
In conclusion, the advent of quantum computing poses a looming threat to the security foundations of both modern and traditional payment systems. While we may not yet be at the precipice of a cryptographic apocalypse, the potential for a sudden quantum leap in computational power demands immediate attention and preparation. Cryptocurrencies, as well as the broader financial industry, must begin transitioning to quantum-resistant algorithms to ensure the continued security and trust of digital and traditional payment systems alike. The time to act is now, before the quantum future becomes our quantum present.
This article was inspired by my recent experience at the Black Hat and Defcon cybersecurity conferences. Quantum computing and post-quantum cryptography emerged as major topics, more prominently than ever before. One can say that this is because of the anticipated release of the NIST standard for post-quantum cryptographic algorithms which officially happened immediately after the conferences concluded. However, this release might be just the tip of the iceberg, with significant developments likely hidden from public view. Now, let’s start from the beginning and define what quantum computing is and why we should pay attention to it when it comes to a conversation about payments.
Unlike traditional computers, which use bits with value 0 or 1 as their elementary building blocks, quantum computing uses so-called qubits, which in addition to regular zeros and ones can enter a special state called superposition. There are special algorithms that use superposition to dramatically speed up calculations which can take forever for regular computers, even supercomputers. One such algorithm, Shor’s, claims the ability to crack public key encryption by solving the problems of factoring large integers and discrete logarithms, which are foundational to Rivest Shamir Adleman (RSA) and Elliptic Curve Cryptography (ECC). I say “claims” because Shor’s algorithm has been theoretically proven and experimentally demonstrated on small quantum systems, but it has not yet been fully realized on large-scale quantum hardware capable of challenging current classical cryptographic systems.
Unfortunately for mathematicians, and fortunately for all of us, quantum computers are not powerful enough yet to execute Shor’s on a full scale sufficient to crack real RSA or ECC keys. But the threat is that such a development could happen at any moment. Remember what happened just less than two years ago with the first release of ChatGPT by OpenAI? Everyone was talking about AI, but no one was expecting a real-life application that can do much more than just chatting. That moment was rather a revolution than evolution. Why should we assume that the same cannot happen with quantum computing?
There is one important difference however between quantum and AI. Companies such as OpenAI are motivated to do a fast release of their work to the public as this means more investment and revenue for them. Quantum computers, however, are not as directly tied to public engagement. National governments and their intelligence services may be even more interested in developing quantum computers than private corporations, and if they do such development and get good results, they will not necessarily publicize their achievements. Instead, they might try to exploit first and crack public communications, cryptocurrencies, and other technologies.
How Is This Applied to Digital Payments?
The first concern is cryptocurrencies, which rely entirely on public key encryption algorithms for security. If Elliptic Curves were cracked today, this would be an immediate crash of Bitcoin, Ethereum, Monero, and hundreds other crypto. All three aforementioned crypto networks, and their numerous forks and mimickers, are based on different flavors of the same ECC. The moment Shor’s algorithm is successfully executed on real keys, the value of most cryptocurrencies could plummet to zero. But if the crackers decide to not make the discovery available to the public, they might first benefit from the ability to crack particular crypto wallets with large amounts.
But what about traditional payment technologies, like plastic cards, which still account for the majority of processed payments? The plastic payment card industry relatively recently made a full transition to EMV, also known as chip and pin, standard, which means that every payment card has a chip that is supposed to protect cardholder information and transactional data. Guess what is used to protect that data - correct, public key encryption. In EMV, public key encryption algorithms such as RSA and ECC are employed to secure the data exchange between the card and the payment terminal. This ensures that even if the data were intercepted, it would be virtually impossible to decipher without the corresponding private key. One might assume that old magnetic stripe payment cards, with unencrypted data, are safe from cryptographic attacks. While magnetic stripe cards lack encryption, many legacy payment applications and online payment systems still rely on Transport Layer Security (TLS) to secure communications. These applications would be inherently vulnerable to quantum attacks.
However, there is some good news too. Many modern payment systems use a technology called point-to-point encryption (P2PE), when the sensitive cardholder data is encrypted within the card reader device and decrypted only at the payment processor (bank). The most prevalent encryption scheme in P2PE is called DUKPT (Derived Unique Key Per Transaction) which uses symmetric ciphers such as AES (Advanced Encryption Standard). Symmetric algorithms are much more resilient to quantum attacks compared to public key encryption. There is an algorithm called Glover’s that speeds up the brute-forcing of AES ciphers and reduces its security by two times. So, if AES uses a key with 256-bit length, its actual security will be reduced to 128-bit, which is still considered fairly secure today.
In conclusion, the advent of quantum computing poses a looming threat to the security foundations of both modern and traditional payment systems. While we may not yet be at the precipice of a cryptographic apocalypse, the potential for a sudden quantum leap in computational power demands immediate attention and preparation. Cryptocurrencies, as well as the broader financial industry, must begin transitioning to quantum-resistant algorithms to ensure the continued security and trust of digital and traditional payment systems alike. The time to act is now, before the quantum future becomes our quantum present.
October 14, 2024
The Trouble With Telegram: The platform may not be as secure as it claims to be
Excited to share that my article on Telegram’s security just got published in IEEE Spectrum magazine!
I dive into the encryption methods Telegram uses and what it means for user privacy.
Check it out here:
spectrum.ieee.org/telegram-security
Also available on Apple News:
https://apple.news/AZbr4b1SmQPSZWzEXg6ZDeg
#Cybersecurity #Privacy #Encryption #Telegram #IEEESpectrum
I dive into the encryption methods Telegram uses and what it means for user privacy.
Check it out here:
spectrum.ieee.org/telegram-security
Also available on Apple News:
https://apple.news/AZbr4b1SmQPSZWzEXg6ZDeg
#Cybersecurity #Privacy #Encryption #Telegram #IEEESpectrum
September 30, 2024
My Participation at the 15th NextGen Payments & RegTech Forum: Blockchain and Cryptocurrency Panel
’m pleased to announce my participation as a speaker at the 15th NextGen Payments & RegTech Forum on December 10-11, 2024, in Austin, Texas. I will be part of a panel discussion on “Blockchain and Cryptocurrency Adoption,” where we will discuss the current and future impacts of blockchain technology on financial systems.
During the panel, I’ll share insights from my experience in developing blockchain-based payment solutions and my work in payment security. The discussion will focus on both the challenges and opportunities businesses encounter when adopting these technologies.
During the panel, I’ll share insights from my experience in developing blockchain-based payment solutions and my work in payment security. The discussion will focus on both the challenges and opportunities businesses encounter when adopting these technologies.
September 5, 2024
Post-Quantum Payments: Is the Apocalypse Closer Than We Think?
RSA Conference Blog just published my essay about post-quantum payments. The article explores the potential threats quantum computing poses to both cryptocurrencies and traditional payment systems, highlighting that while quantum computers aren’t yet capable of breaking current encryption, a breakthrough could destabilize systems relying on public key encryption like RSA and ECC.
September 3, 2024
Unpacking Telegram’s Privacy Claims: How Secure Is the Popular Messaging App?
Many people in the West might not be familiar with Telegram, a messaging app and social networking platform that’s hugely popular in Russia, Ukraine, Eastern Europe, and Asia. It’s known for its focus on privacy and security, at least that’s how they position themselves, but how much of that is true? I’ve been looking into the details, and soon, I’ll be sharing what I’ve found. If you’re curious about digital privacy and secure communication, this might interest you. Stay tuned.
August 25, 2024
Quantum cracking machine
NIST release of the post quantum cryptographic algorithms is an evidence of possible exponential change in quantum computing. We may face a situation similar to what happened with AI, when no one was expecting the release of ChatGPT with its capabilities. But unlike AI, the first release of quantum cracking machine might me silent, with limited groups trying to break TLS, cryptocurrencies, etc. to get some benefits before the crypto and the private Internet communications are crashing.
