Calculating the Benefits of the Advanced Encryption Standard

NIST has completed a study—it was published last year, but I just saw it recently—calculating the costs and benefits of the Advanced Encryption Standard.

From the conclusion:

The result of performing that operation on the series of cumulated benefits extrapolated for the 169 survey respondents finds that present value of benefits from today’s perspective is approximately $8.9 billion. On the other hand, the present value of NIST’s costs from today’s perspective is $127 million. Thus, the NPV from today’s perspective is $8,772,000,000; the B/C ratio is therefore 70.2/1; and a measure (explained in detail in Section 6.1) of the IRR for the alternative investment perspective is 31%; all are indicators of a substantial economic impact.

Extending the approach of looking back from 2017 to the larger national economy required the selection of economic sectors best represented by the 169 survey respondents. The economic sectors represented by ten or more survey respondents include the following: agriculture; construction; manufacturing; retail trade; transportation and warehousing; information; real estate rental and leasing; professional, scientific, and technical services; management services; waste management; educational services; and arts and entertainment. Looking at the present value of benefits and costs from 2017’s perspective for these economic sectors finds that the present value of benefits rises to approximately $251 billion while the present value of NIST’s costs from today’s perspective remains the same at $127 million. Therefore, the NPV of the benefits of the AES program to the national economy from today’s perspective is $250,473,200,000; the B/C ratio is roughly 1976/1; and the appropriate, alternative (explained in Section 6.1) IRR and investing proceeds at the social rate of return is 53.6%.

The report contains lots of facts and figures relevant to crypto policy debates, including the chaotic nature of crypto markets in the mid-1990s, the number of approved devices and libraries of various kinds since then, other standards that invoke AES, and so on.

There’s a lot to argue with about the methodology and the assumptions. I don’t know if I buy that the benefits of AES to the economy are in the billions of dollars, mostly because we in the cryptographic community would have come up with alternative algorithms to triple-DES that would have been accepted and used. Still, I like seeing this kind of analysis about security infrastructure. Security is an enabling technology; it doesn’t do anything by itself, but instead allows all sorts of things to be done. And I certainly agree that the benefits of a standardized encryption algorithm that we all trust and use outweigh the cost by orders of magnitude.

And this isn’t the first time NIST has conducted economic impact studies. It released a study of the economic impact of DES in 2001.

Posted on October 22, 2019 at 5:56 AM8 Comments


POLAR October 22, 2019 6:56 AM

How on earth can they estimate a benefit/cost ratio with 3 to 7 significant digits for a product adopted worldwide for a few decades? The BS/I (BS to Information) ratio of this paper is exactly 4508.362, therefore its NPV for the US throughout 2019 is $-171,178,200. Most importantly, when looking at the plausible future scenario of the legitimatization of alike papers, and assuming a +37% YoY increase in such papers, the NPV further stretches to $-357,121,801,600 for FY19 to FY25 when all of the effects of similar papers are taken into account for diverse sectors such as transport, fishing, oil&gas, construction, pet food. A follow-up study will try to determine the search engine keywords used to even think such numbers and the amount of CO2 generated in the process.

M@ October 22, 2019 8:42 AM

Anything can be calculated. Their methodology is not aberrant, although certainly open to criticism as anything like this would be. I was on a team that calculated all sorts of morbid “costs” for sport, to create models to inform decisions and compare with eventual real events (bird flu, Ebola, plague, famine, etc.). Math.

Winter October 22, 2019 9:42 AM

“I don’t know if I buy that the benefits of AES to the economy are in the billions of dollars, mostly because we in the cryptographic community would have come up with alternative algorithms to triple-DES that would have been accepted and used.”

However, this is also an indication of the value of strong, backdoor-free cryptography is to the economy.

These $8.9 billion or $251 billion benefits should be set against the potential loss of them when offical backdoors are mandated. Most of these benefits might be lost if there is a backdoor implanted.

POLAR October 22, 2019 10:02 AM

@M@ Everything can be calculated, provided there’s no information loss. On a global scale and for a few decades you’re guaranteed of missing something.
When data is incomplete you can use -I’m in love with the-Fermi approximations, and if your a assumptions are reasonable they usually get scary close.
$2.5 billon? Fine.
$3.4 billion in the long term? Perfectly fine with that.
70POINT2 B/C and $250,473,200,000NPV? Nope sir, you’re making me spill coffee all over my servers.
I’m sure Bruce posted it in good will and the underlying message “AES is good/did good stuff” is true, but this totally not the way NIST(the NIST,!!) should publish numbers.

Clive Robinson October 22, 2019 10:19 AM

@ Bruce,

crypto policy debates, including the chaotic nature of crypto markets in the mid-1990s,

The more things change, the more they stay the same…

Crypto is an Escher triangle, of security, policy and privacy. It is only at a couple of odd view points do things appear to line up, but on closer inspection you realise it is all by trickery and they never can align up in the real world.

There are reasons for this, not least of which is “The King Game” and “Tithing”. Those who lay claim to the land and thus it’s citizens, make the citizens pay for the guard labour to enforce both the tithing and the lord of the lands right to exploit. That is the benifit to society of the guard labour is purely coincidental, and judges have made this clear in judgments, that the police and armed forces have no duty of care to the citizens except where the lord of the land has decided otherwise. It goes by the name of The Royal Prerogative and is why as many in the US have found it is very difficult to get liability found against guard labour in the courts.

Thus the guard labour see any method of limiting their access to information, not just as a threat but an existential one. Further that any and all who support the notion that the citizens have rights against the guard labour is seen as gross provocation tantamount to declaring war. Thus the citizen by definition must be the enemy or potential enemy, thus a “them and us mentality” arises and becomes open warfare as was seen sixty years ago for more than a third of a century.

As this hostility is mostly in the heads of empire building guard labour, and they suffer no penalty for pushing their position. Even if they loose 99 times out of a hundred the line still moves in their favour slowly but surely…

Thus there is only one place this can end if remedial action is not taken.

Such reports as this one tend to give more amunition to the guard labour, so tend actually to be counter productive, as the obvious question the guard labour asks is “How much of this benift hides the proceads of crime?”. The Guard Labour then apply similar multipliers to the report, thus claiming hugely inflated crime statistics as “Head line grabbers”.

The simple fact is the more NIST claim as benifit, the more Guard Labour can claim as harm.

Alan Striegel October 23, 2019 7:01 AM

While some people will need to be convinced of an economic rationale for developing and promoting a standard, there should also be a discussion of the non-dollar value.

If we only treat security as another commodity, we overlook the responsibility to push for justice, freedom, and guidance for the future. Is there an analysis of the softer benefits to society?

Craven Lous March 29, 2021 4:06 AM

I can’t believe that the NIST’s costs have been reached the highest level in the last few months. Stakeholders are enjoying this era by earning millions of dollars every month. It has never happened before in the history of business that profit ratio has reached the peak. I have been thinking to visit a website to read that how I could get Korean translation services online at cheap rates.

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