(Photo: 123RF)
THE KEYS TO CRYPTO is a section that patiently decodes the world of cryptocurrency and its stock market, industrial and media upheavals. François Remy's mission is to identify promising entrepreneurs, decode technical progress and anticipate the industrial and societal impacts of this digital currency.
(Illustration: Camille Charbonneau)
THE KEYS TO CRYPTO. Over the past decades, digital technology has transformed consumers' lives. And while, by comparison, large parts of the financial system seem stuck in the past, cryptographic and blockchain technologies have already enabled significant progress.
The technocratic opposition exhibited between traditional finance (TradFi) and decentralized finance (DeFi) blurs our vision of evolution: the classic financial sector has already largely exploited the developments in cryptography. In particular encryption to protect sensitive data and strengthen the integrity of financial communications.
Computer network security protocols such as SSL or TLS are generally used to protect data transmitted over the Internet, for example by preventing unauthorized access and data breaches.
Marked technical progress
Standards now exist, whose mission is to guarantee that the financial information retained remains confidential and inviolable. The Advanced Encryption Standard secures so-called data at rest, i.e. data on a storage medium that is neither moving nor awaiting modification.
Serving as the backbone for both encryption and integrity of digital documents, public key infrastructure (PKI) has played a critical role in protecting sensitive data in transit. This asymmetric system in which a public key is used for encryption and a private key for decryption further supports the authenticity of documents through digital signatures.
Facilitated verifications, enhanced confidence
A direct result of the public infrastructure cited just above, digital signatures facilitate the immutability of digital transactions and records by providing a secure means of verifying the identity of participants in exchanges. This identification process not only protects against arbitrary and/or unilateral modifications but also offers a means of non-repudiation: the signatory can no longer deny his action or the authenticity of the signed document.
These mechanisms contribute to the inviolability of digital transactions, as well as the verifiability of users or issuers. Professional certifications, credit score validations, all reliable evidence accessible on systems reducing the risk of fraud and improving the efficiency of digital ecosystems.
Adapt and plan other adaptations
It is essential to be aware of this, in order to channel this progress to better adapt it to the needs of our societies but also to prepare for future advances. Recent advances in identity data sharing, such as Self-Sovereign Identity (SSI), provide greater control over our personal data. However, better control allows for better management and better use.
Powered by developments in blockchain, technologies such as zero knowledge proofs (ZK), which allow one party to prove to another that a statement is true without revealing any information other than validity of the declaration itself, reinforce the protection of our privacy when sharing data.
Institutional recovery?
Concepts such as tokenization, programmability (we think of the disinflationary monetary policy of the Bitcoin network), automation (we think of Ethereum smart contracts) represent a profound transformation, not to say revolution, in the way in which trust is established.
These concepts enable “massive network effects and unlock new interactions in various sectors, thus redefining the dynamics of digital and economic exchanges”, even concedes the very conservative Bank for International Settlements (BIS).
This vibrant plea that you have just read in favor of cryptographic advances and decentralized ledger technologies comes from a BIS research article in which the institution proposes the concept of “Finternet”: an Internet of finance where multiple financial ecosystems would be interconnected with each other, designed to empower individuals and businesses by placing them at the center of their financial lives.
This would look very much like a takeover bid by the banking system in the popular Web3 era.
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