A Quantum Leap in Data Encryption

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Long-Distance Line

Secure as it is, Quantum Crypto is only being slowly adopted by governments and industry. MagiQ CEO Bob Gelfond, who founded the company in 1999, says it launched its first quantum key distribution device, the MagiQ QPN, with Verizon Communications (VZ).

The test results, announced in March, showed that MagiQ had succeeded in beating one of the problems with quantum crypto: distance. Keys are exchanged between two points and have to be connected by a fiber-optic line. And optical networks need repeaters between each span of cable—typically 80 kilometers (49 miles) long—to keep the signal going. Those repeaters present a fundamental problem, because like the eavesdropper, they have to observe the key in order to pass it down the line.

Using Verizon's optical network, MagiQ showed that it could successfully keep the key intact over a distance of 140 KM (about 87 miles). "We can gain additional distance by daisy-chaining our devices back-to-back," Gelfond says. "In North America the hops in the telco networks are less than that distance. You'd be able to cover the entire East Coast of the U.S., because all the hops you would need would be within that 140-kilometer limitation."

Bezos on Board

That has given Gelfond hope that MagiQ can sell its gear to telco providers. He says the company has both private and government customers, but he won't identify them, nor even say how much he has sold: "We're selling worldwide. And while the numbers aren't huge at this point, we think the customer interest that we have now will lead to more deployments in the future." He says the company isn't profitable yet.

Gelfond, a former hedge-fund trader on Wall Street, was also an early investor in Amazon.com (AMZN), whose founder Jeff Bezos has returned the favor—he's one of MagiQ's angel investors. Its corporate advisers include executives from RSA Security, a unit of EMC (EMC), and computer security concern McAfee (MCAF).

The plan, over the long term, Gelfond says, is to develop MagiQ's patent portfolio around quantum crypto, and also to build the technology into a small blade-style card (similar to the cards that computer makers use in blade servers) that can be inserted into telco-grade routers and switches.

For now, the commercial appeal is limited, says Greg Young, a Gartner analyst based in Ottowa, Ont. "There's not going to be much demand for it in the short term," he says. "But once we see conventional crypto systems start to break down, and that's not likely for some time, the demand could increase."

End Results

Breaking conventional crypto, Young says, is essentially a mathematical problem that involves factoring very large prime numbers. "It's a difficult problem that has no shortcuts," he says. "But quantum crypto would be a logical step forward if there's ever a major break in conventional crypto systems."

MagiQ already has competitors, including ID Quantique, a Swiss outfit, and Smart Quantum, a company in France. And Japanese companies including Toshiba (TOSBF), NEC (NIPNY), Fujitsu, and Nippon Telegraph & Telephone (NTT) are all said to be conducting their own research on the technology.

For all its promise, quantum crypto doesn't help if you're sloppy in handling the data on either end. "You don't want a titanium pipe with cardboard boxes on either end," says LaGasse. "This is really suited to organizations that have strong security policies and practices." Apparently it pays to be paranoid.

Hesseldahl is a reporter for BusinessWeek.com.