> Folks on this list and its progenitors have long noted that
cryptography is a matter of economics.

Agreed, but using an insecure technology doesn't make sense from even an
economic perspective.  They spent enough money that they could have
implemented a secure system, but instead, made two fundamental errors:

1.) The cost of fraud is probably much less than the cost of the system
- 2 billion.  So, even if the system were completely secure, they still
might have been better off using paper tickets and the honor system.
>From all indications, there were no cost controls on this project, so it
seems likely that the technology was not chosen because of technical
reasons or economic reasons, but rather, because someone was familiar
with it.  Perhaps it was suggested by a politician, and his cronies made
it their mission to make it happen.  Perhaps someone thought that it
would impress visitors; maybe it was a matter of national pride.

2.) The implementation was insecure.  Yes, there were probably technical
factors involved, but for the cost of the project, they could have
implemented a secure system, using other means if necessary.  The
problem, as I see it, was not an economic one, but rather, that the
developers relied on the secrecy of the algorithm for security, rather
than the size of the key.  Even unpaid, open-source developers have
produced secure systems for far less than the Dutch spent simply because
they followed good cryptographic design guidelines.

The question about mag strip versus RFID versus physical-contact readers
is a valid one.  For 2 billion, the cost/convenience difference between
radio and contact cards would have to be rather large to justify
implementing an insecure system.  Even a swipe time of 100 ms is enough
to implement a secure solution.  I find it very unlikely that a
competent engineering firm could not implement this in a reliable,
secure, and fast manner given this project's budget.

If the assertions are correct - that the subway is used 1,000,000 times
(or by 1,000,000 people?) a year, spending 2 billion on the fare system
means approximately 2,000 per user/time.  For those math types, that's
~~5.50 per day just to pay for the fare system, not to mention the cost
of electricity, trains, maintenance, etc...  How many people spend more
than 5.50 per day on train/subway/bus fare?  This system, and its
attendant costs - though obsolete even before its inception - will
probably be amortized over a few decades.  Which is why fraud is a very
important issue.  In that time frame, it is very likely that the
criminal underground could produce, and profit from, counterfeit cards
on a large scale.  Unlike turnstyle jumpers, fraud of this kind could
easily become so widespread that the subway system operates at a
significant loss.  A turnstyle jumper is easily caught; a rider with a
cloned card is virtually undetectable (without expensive upgrades to the
system).  If this system had been securely implemented, we might be able
to know if the fraud prevention would ever have exceeded the 2 billion
cost of the system; but because it isn't, the Dutch have essentially
flushed the money into the sewer.

And, bringing economics back into the picture, the purpose of the Mifare
system is *to prevent fraud*.  I seriously doubt that such a system -
especially now that it is broken - will eliminate 2 billion worth of
fraud.  It seems the Dutch would have been better off simply issuing
paper tickets and relying on the honor system.  Most people are honest;
the purpose of the ticket system is to keep people that way.
Unfortunately, it fails from both perspectives: it isn't economically
viable, and neither is it secure.

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