The team from QinetiQ, the commercial arm of Britain's defence research agency, and their colleagues at Ludwig-Maximilian University in Munich, say they developed a secure method for sending the encryption keys used to unscramble coded information.
They have sent a key encoded in photons of light over a record 23.4 kilometres (14.5 miles) of open space between two mountains in Germany.
The researchers say the breakthrough is an important step towards a global communications system that is completely secure.
Pulses of light
Satellites are increasingly relied upon for military and intelligence use. But there is a danger that encrypted messages could be intercepted and decoded.
Current encryption technology uses mathematical keys that are exchanged between trusted users.
Keys are random strings of numbers needed to encode and decode sensitive data. The distribution of keys is essential for secure global communications.
If keys are sent electronically, they could be intercepted and no one would know it.
"At the moment, highly secure encryption keys are typically sent by a man on a motorbike or a guy with a diplomatic bag," said John Rarity, a scientist with QinetiQ.
New satellites
Quantum cryptography gets around this by sending an encoded message and, separately, a key to decode it, which are transmitted in pulses of individual light particles called photons.
The state of the photon changes if a key is intercepted and read, so the recipient knows that the code has been compromised.
In a demonstration reported in the journal Nature, the researchers say they successfully exchanged encryption keys transmitted on a beam of invisible light.
The team say the quantum cryptography could be used by satellites within seven years, although it would require the construction and launch of new satellites.
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