Morning Minute is a daily newsletter authored by Tyler Warner. The views and insights expressed are his own and do not necessarily represent those of Decrypt.

Good Morning!

Here are today’s key highlights:

  • Major cryptocurrencies are on the rise ahead of the FOMC meeting; BTC is up by 1.6%, reaching $64,400.
  • BlackRock has joined Fidelity and Goldman Sachs in endorsing the Clarity Act.
  • Anthropic announced that its AI model, Claude Mythos, has compromised post-quantum cryptography.
  • Zcash has implemented its Ironwood upgrade, with 3.8% of its assets transitioning from Orchard to the new system.
  • New meme coin PIPEDOG has surged to over $40 million in value due to high trading volume.

🔓 An AI Model Has Disrupted Post-Quantum Cryptography

According to Anthropic, an unreleased iteration of its advanced model, Claude Mythos Preview, has uncovered two new vulnerabilities in cryptographic algorithms. One of these vulnerabilities affects a digital signature system called HAWK, which is a contender for becoming a U.S. federal standard designed to withstand quantum computing threats.

HAWK operates as a digital signature system that authenticates transactions without revealing private keys, and it was specifically crafted to endure quantum attacks. In May, the National Institute of Standards and Technology (NIST) advanced HAWK to the third round of its post-quantum competition, where it was the last remaining lattice-based candidate. Claude Mythos identified a mathematical symmetry in HAWK that had eluded human researchers, significantly reducing the computational effort required to breach its smallest key from 2^64 operations down to 2^38, making it approximately 67 million times easier to compromise.

To address these vulnerabilities, HAWK would require nearly doubling its key sizes, which, as Anthropic pointed out, would “eliminate many of the reasons” it was initially appealing. The size of signatures corresponds to block space, which in turn affects transaction fees, meaning that any blockchain seeking a quantum-resistant alternative must consider the bytes per signature. HAWK's advantages stemmed from its compact keys and rapid signing capabilities, and this fix would diminish those benefits.

It’s important to note for cryptocurrency users that HAWK has not yet been implemented anywhere, and Bitcoin continues to rely on ECDSA, which is the pre-quantum cryptographic scheme that these new candidates are intended to replace. Therefore, no existing systems are compromised at this time. However, the broader issue lies in the ongoing uncertainty surrounding post-quantum security for cryptocurrencies. Recent initiatives aimed at enhancing quantum defense (like the BlackRock-Coinbase-Strategy consortium and Vitalik Buterin's post-quantum roadmap) depend on the assumption that the post-quantum alternatives to current cryptography are robust. Claude Mythos has raised doubts about a leading candidate before it could even be deployed.

The silver lining is that the same AI technology that can exploit vulnerabilities can also be employed to bolster security, which is why the industry is eager to apply it to its own coding first. The question now is whether AI will undermine cryptography faster than it can assist in its reconstruction.

🌎 Macro Crypto and Markets

  • Major cryptocurrencies are rising in anticipation of the FOMC meeting; BTC is up 2% to $64,400; ETH has increased by 2% to $1,910; SOL is up 1% at $74; HYPE has also gained 1% to $54.90.
  • Notable altcoin movers include Kaito (+10%), JUP (+8%), and UNI (+7%).
  • Oil prices increased by 4% to $83; Gold remains steady at $4,030.
  • Stock futures are mixed ahead of today’s FOMC meeting; DOW is down 0.3%, while Nasdaq is up 0.3%.
  • Major Wall Street firms have publicly supported the CLARITY Act, with BlackRock, Fidelity, Franklin Templeton, Goldman Sachs, and SoFi all advocating for its passage, although JPMorgan has distanced itself due to differing views on stablecoin-yield regulations as the Senate's timeframe narrows.
  • Veteran Wall Street trader Don Wilson criticized regulators, claiming they misunderstand the significance of perpetual futures, which he believes is crypto’s most significant trading innovation, as the CFTC and CME debate onchain oversight.
  • Ondo abandoned its plans for a tokenized-asset blockchain in favor of a private, high-speed trading network, marking a significant shift for a key player in real-world asset tokenization.
  • Ethereum startup EthSystems is focusing on privacy, developing tools that allow institutions to utilize public blockchains without revealing their activities.
  • Michael Saylor described Bitcoin’s code as "a constitution," arguing that modifications like BIP-110 represent threats to "economic rights."
  • Morgan Stanley introduced spot Ethereum and Solana ETPs identified as MSSE and MSOL, each allocating a portion of holdings for staking and distributing rewards to investors.
  • 1inch launched its Aqua shared-liquidity layer across 13 chains, allowing liquidity providers to retain tokens in their wallets while supporting multiple positions simultaneously, claiming it is the first “risk-controlled” DeFi liquidity venue.
  • Russia has accused Telegram founder Pavel Durov of aiding terrorism and placed him on an international wanted list, with the FSB asserting that Telegram has not removed channels used for coordinating attacks within Russia.

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🚚 What’s New in NFTs?

  • NFT market leaders remained mostly stable; Punks dropped 1% to 32.3 ETH, BAYC fell 1% to 8.35 ETH, Pudgy held steady at 4.06 ETH; Hypurr gained 1% to 189 HYPE.
  • StonkBrokers (+50% to 3 ETH) and Satari (+26%) were among the top gainers; TTT rose by 20%.
  • FWA rebounded 23% to $21 million overnight after dipping to $14 million; the protocol introduced several new ERC20 tokens including MOG and REKT.

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