My backgrounds is in security and specifically in authentication technology like smart cards, I have been watching Bitcoin for some time but the recent security issues has prompted me to take a closer look.

Bitcoins use an algorithm called ECC, specifically it uses ECDSA; this is the same algorithm that is used on the most recent DoD smart cards (though they use different input parameters to the algorithm).

With that in mind it would not be terribly difficult to apply these same cards (or at least a derivative of them) to Bitcoin. This can have a number of positive side effects for example in the the typical smart card design pattern one can say:
1) The key material is generated on the card
2) The key material never leaves the card in clear text
3) All operations using the key material happen on the card
4) Access to perform operations with the key material require authentication
5) Failure to authenticate locks the card preventing use by the attacker
6) Cards are designed to be both tamper evident and resistant to different levels of attacks

Basically when properly used the keys cant be stolen, transactions are restricted to the card owner; in other words the current issues of wallet theft would not be possible, that is without a rubber hose.

There are downsides to this approach, though they can be mitigated to various degrees, some of them include:
1) If you lock the card you may lose access to the key (and the associated cash)
2) If you loose the card you will lose access to the key (and the associated cash)
3) They have a limited storage capability (you can only have so many keys on the card).

Hardware comes in lots of different form factors, some are fobs (no card, they look like flash drives though they typically do not have storage) as well as the traditional card form factors.

The cost of the hardware varies (volume and capability are the two largest factors) but my best guess is under $50 a user, and much lower if it was adopted broadly by the community (as little as 10 per user).

The reason I started this thread is I am curious how much interest there would be in something like this.

Ryan