Startup MagiQ Technologies Inc. yesterday announced it's shipping what appears to be the first security system based on quantum cryptography (see MagiQ Ships Quantum Crypto).

Quantum cryptography goes a step further than electronic cryptography through its employment of a stream of photons, the quantum properties of which determine the key. The fun part is that if an intruder observes or intercepts the transmission, those properties get changed -- an unavoidable principle of quantum mechanics -- meaning the sender and receiver can tell if anyone is eavesdropping. Perhaps more important, the key can't be copied or faked (see Optical Science Gets Spookier and Quantum Cipher Sent by Fiber).

It's a potential breaththrough, though working with photons has never been easy, and, as the optical networking bubble has shown, it can be an expensive way to build technology.

MagiQ's Navajo system, a box made to fit in a standard telecom rack, was unveiled in February and began beta trials in March (see MagiQ Demos Quantum Cryptography).

MagiQ says Navajo performs the usual triple-DES and AES encryption standards. What's special is the transmission of the key, a string of random bits used to decipher messages. Computers normally use a random number for the key, producing encryption schemes that could be broken if enough computing power were made available.

"There's a big vulnerability people see, because optical fiber is very easy to tap," says Bob Gelfond, MagiQ CEO, citing one carrier that was finding taps in its Manhattan office "several times a week."

Using a quantum crypto scheme can defend against such taps. In addition to the obvious government and military customers, quantum cryptography is finding interest in the financial sector, for protecting backups or real-time traffic. Another target market would be any industry needing to protect intellectual property -- not just high-tech firms, but businesses such as automotive firms or tire manufacturers, Gelfond says.

But the real market may be the carriers themselves, he notes, simply because they're looking for revenue sources. Quantum cryptography could become a premium service for them. With that in mind, MagiQ is aiming for a price -- around $50,000 to $100,000, depending on features -- that's comparable to other add-ons such as VPN boxes.

Several other companies are working on quantum cryptography, but few appear to be interested in selling a complete system. Swiss firm ID Quantique is trying to commercialize quantum cryptography but so far offers only components such as a photon detector. ID Quantique recently partnered with other Swiss firms to expand its work into a quantum cryptography infrastructure (see Partners Promote Quantum Cryptography).

Elsewhere, large companies, including IBM Corp. (NYSE: IBM), Mitsubishi Electric Corp., NEC Corp. (Nasdaq: NIPNY; Tokyo: 6701), and Toshiba Corp. (Tokyo: 6502), are investigating the area more as a research project, with promising results but no products planned for the near future. "The big guys doing the research are not coming out with anything for a least a couple of years, as far as we know," Geldfond says. (See NEC Transmits Quanta, Japanese Claim Transmission Record, and Mitsubishi Creates Quantum Crypto.)

So, while MagiQ isn't alone in pursuing quantum cryptography, the company's taken a different approach. "Where we started to break new ground was in putting the engineers into the mix, guys who had substantial experience -- Sycamore guys, Tektronix guys," Gelfond says.

MagiQ employs 22, with offices based in New York. Founded in 1999, the company has been powered by roughly $6.9 million in angel funding (see Quantum Crypto Company Launches).In addition to Navajo, MagiQ is offering a box that only generates the quantum keys, intended as a tool for research outfits and universities.

— Craig Matsumoto, Senior Editor, Light Reading