Lesson 7	E-commerce and encryption
Objective	Define encryption methods and types.

E-commerce and Encryption

Cryptographic methods form the foundation of all e-commerce transactions. For the purposes of e-commerce, applied cryptography is the study of the process of creating cipher text (encrypted text) from plain text (human readable text). The types of encryption relevant to e-commerce are listed in the table below.

Encryption type	Description	Common algorithms and uses
Symmetric key	Uses a single key to encrypt and decrypt data.	DES, Triple DES, RC2; used for encrypting large amounts of data.
Asymmetric key	Uses a mathematically related public/private key pair; also known as public key encryption.	RSA enables secure key exchange. Diffie/Hellman explains the concept of key exchange.
One way	A one way encryption algorithm produces ciphertext that cannot be taken BACK to the original plaintext.	Used for signing data and transactions.
Hash function	A smaller numerical representation of the plaintext.	A hash of a message is encrypted using one way encryption to become the signature for that message.
Applied encryption	Uses a combination of symmetric, asymmetric, and one-way encryption for enhanced security.	Email, credit card encoding, S/MIME and SSL protocols, SETs, payment gateways.

Using encryption

Symmetric encryption^[1] is necessary because it encrypts data quickly and it is relatively secure. However, it is very difficult to distribute the symmetric keys securely in an e-commerce setting. Because the same key both encrypts and decrypts the data, you must keep the key secret. Yet, how do you get this key to its destination once you have encrypted the message? Asymmetric encryption^[2] handles this process, because it is able to use a key pair, where one key is made freely available and the other remains completely private.
For example, an email program uses symmetric encryption to encrypt the actual data. It uses asymmetric encryption to encrypt symmetric keys. It then uses one-way encryption to sign the data to ensure that the information has not been tampered with. This is all encrypted to the receiver's public key, then sent across the network wire. When the receiver gets the message, the receiver uses the private key (the second half of the key pair) to decrypt the asymmetric encryption. The receiving computer decrypts the text with the symmetric key, then calculates the hash value. If the hash value is correct, the message has not been tampered with, and the email browser that supports these protocols allows the message to be read.
The Image Gallery below describes how this process works.

Ad Network Security Essentials

1) To understand how public-key cryptosystems work, consider two users, Alice and Bob. Both users have a public/private key pair.

2) When Alice wants to send a signed, encrypted message to Bob, she indicates that she wants the message signed and encrypted, and sends the message.

3) Alice's email program selects a random symmetric key to encrypt the message and creates a message digest of the message.

4) The program encrypts the digest with Alice's private key to create a signature. The random symmetric key is encrypted to Bob's public key.

5) The entire package containing the encrypted symmetric key, the encrypted message digest or signature, and the encrypted message is sent to Bob.

6) Bob's email program uses his secret key to decrypt the encrypted random key, which is then used to decrypt the message.

7) To ensure the message was from Alice, the program decrypts the message digest using Alice's public key. If Alice's public key decrypts the message digest, then Bob knows that only Alice could have encrypted it.

8) Bob's program cannot reverse the message digest because of its one-way nature. The program can ensure that the message was not tampered with by calculating a message digest from the original message and matching it to the message digest sent from Alice.

Encryption and certificates

The defense-in-depth strategy toward security requires system administrators to take every possible action to improve security. One significant improvement to security can be obtained by widespread use of encryption. With respect to the UNIX workstation, the following are security advantages to be gained:

If a workstation gets compromised and taken over by an attacker, previously encrypted files are likely to be protected. This assumes that passphrases used to encrypt the data are kept in the users memory and not on the workstation.
By encrypting traffic on the local area network (LAN), the risk of being attacked from a local source is greatly reduced. Many organizations consider their biggest security feature to be the firewall between the LAN and the Internet. Hower, other workstations on the LAN also pose a significant threat. For example, if the LAN is hubbed, any workstation can listen in on all instant messaging to and from another worksation. Even if the network is switched there are readily available tools, such as ettercap, that can monitor all traffic in and out of a workstation.
Much of the traffic that travels over the Internet, such as e-mail or FTP, is in the clear or unencrypted. The only protection afforded to this traffic is security through obscurity. In other words, the telnet, e-mail, and FTP traffic can be read in many places as the traffic is routed, but who would want to? Most users would not find this level of security very comforting.

You will learn about security services in the next lesson.

[1]Symmetric encryption: Encryption that uses the same key to encrypt and decrypt information.

[2]Asymmetric encryption: Encryption that creates a public key and a private key. The private key remains secret, on your computer. You can freely disseminate the public key.