Inca Digital awarded DARPA contract to map the risk of crypto contagion

There are many theories out there that say crypto can destroy everything – and now the US has given a firm the nod to study how.

Why it’s important: The same government agency credited with developing life-changing technologies like GPS, Siri and the internet is digging in to advance its understanding of digital assets.

Driving the news: The Defense Advanced Research Projects Agency (DARPA) awarded a research contract to crypto market data provider Inca Digital, based on a relationship that began last year.

• It’s part of DARPA’s small business research effort, Mapping the Impact of Digital Financial Assets (MIDFA), which explores advanced methods for identifying and analyzing activity involving distributed ledgers, crypto and other digital assets.

What they say: While DARPA is not involved in investigations and does not have law enforcement authority, part of its mission “is to prevent strategic surprise, and situational awareness is a critical element of national security,” Mark Flood, DARPA program manager, told Axios.

• “A beneficial side effect is a better understanding of the behavior of illegal actors,” he said.

Between the lines: Any potential threat crypto could pose to the US financial system also has national security implications.

• “Understanding the intricacies, relationships and interactions between the diversity of players, entities and geographies can help shed light on the potential consequences of stressors, including those intentionally generated by adversary nations or groups,” adds Flood.

Zoom in: Understanding the intersection of cyber threats to traditional finance and crypto is what Anita Nikolich, Inca’s project manager and the University of Illinois’ director of research and technology innovation, is working on.

• “People talk about contagion, it’s actually very theoretical,” Nikolich said, “What we’re trying to do is show if it is and where.”

For example, “Everybody uses [Amazon Web Services (AWS)]”, Nikolich said — both traditional financial and digital asset firms.

• “From a national security perspective: We are physically in places where if [someone] took it out [they] can have an impact.”
• “Crypto digital assets are no longer a vertical that stands alone. They depend on banking services, the internet – and that’s what people should be alerted to: That it’s one combined system and pervasive in everyday services.”

Inca aims to create a taxonomy of risk, study indicators of compromise.

• The language of token drops and air drops. “The words that were put out there a couple of years ago might have been ‘make a quick buck’ now it’s ‘I have a new project’ – a softer sell,” says Nikolich, who in her non-Inca life studies disinformation and social engineering .
• Roman fraud demographics. Younger, tech-savvy people were early targets, now these scammers are looking for retirees.

Bottom line: “Our goal is that tools developed under MIDFA will support industry and government in maintaining safe and secure markets,” Flood said.