Quantum-Resistant Tokenization: The Urgent Future Of Digital Assets
Trillions in tokenized assets will all need PQC!
HSBC with a non-technical paper that discusses two crucial concepts: asset tokenization and quantum resistance. These are two concepts that will become ever more important that you need to know about
I’ve written quite a bit about tokenization and how it will “change everything” in the not-too-distant future with a market estimated to be a $2-30 trillion market by 2030.
Part 1 of my three part series on tokenization:
Tokenization is now, not tomorrow, and has already begun to change our world.
One eye-catching example is HSBC tokenizing physical gold for sale to retail investors in Hong Kong.
This application is just the tip of the iceberg for tokenization, but there is a proverbial “fly in the tokenization ointment.”
The problem, or fly, is that tokenization needs to be secured against the threat of attack by quantum computers and right now it isn’t.
To protect against the threat tokenization must use Post Quantum Cryptography (PQC).
HSBC explains how they use a PQC VPN to carry messages between blockchains as a means of providing quantum resistance.
This may seem technical, but it is presented for non-technical people, which is why it’s a great read!
👉TAKEAWAYS
🔹 Cost-effectiveness: PQC VPNs offer a cost-effective solution for securing digital communications, particularly when compared to the direct implementation of PQC algorithms in core DLT systems. A PQC VPN can leverage existing network infrastructure, requiring only minimal adjustments.
🔹 Seamless integration with existing DLT systems: One of the most significant advantages of PQC VPNs is their ability to integrate seamlessly into existing DLT systems, without necessitating a redesign of the distributed ledger architecture or costly IT hardware upgrades. The PQC VPN operates as an overlay on the existing network, providing quantum-resistant encryption for data in transit without altering the underlying DLT structure.
🔹 Minimal changes required for deployment: PQC VPNs can be deployed on an existing production DLT infrastructure with minimal changes, which is a key factor in their practicality. DLT systems and cannot afford extended downtime or significant changes to their operational processes.
🔹 Low latency impact: One of the critical concerns when implementing PQC in DLT systems is the potential for increased latency in transaction processing and block validation. Using a PQC VPN approach mitigates this risk, as the encryption process occurs outside the core DLT system, thereby maintaining the speed and efficiency of transaction processing.
👊STRAIGHT TALK👊
Tokenization must be quantum resistant, meaning that its cryptographic algorithms are secure against a cryptanalytic attack by a quantum computer.
Just imagine for a moment a $2 trillion market that isn’t and comes under attack by quantum computers used by the equivalent of today’s ransomware hackers.
The solution designers were particularly thoughtful in their design, making all communication between blockchains PQC so that the underlying blockchains would not need to be rebuilt.
While HSBC acknowledges that this solution is only short—to mid-term in duration, it is a great first step toward making tokenization quantum proof.
The obvious long-term solution is for new PQC blockchains, but for now, solutions like this will have to suffice.
Get ready. If we want our solutions to last, we must start building a PQC world now, not later.
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