1. ELC 200 Day 11 Copyright © 2007 Pearson Education, Inc.

2. Agenda Questions? Assignment 3 DUE Assignment 4 posted
Due March 9
Quiz 1 Corrected
1 A’s, 4 B’s, 3 C’s, and 1 D
Finish discussion on Security and online payments

3. Possible Bonus Points Questions
Name and origin of 
What does his name mean?
What does he look like all
“grown up”?
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4. Protecting Internet communications (encryption)
Technology Solutions
Protecting Internet communications (encryption)
Securing channels of communication (SSL, S-HTTP, VPNs)
Protecting networks (firewalls)
Protecting servers and clients
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5. Tools Available to Achieve Site Security
Figure 5.7, Page 287
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6. Encryption Encryption
Transforms data into cipher text readable only by sender and receiver
Secures stored information and information transmission
Provides 4 of 6 key dimensions of e-commerce security:
Message integrity
Nonrepudiation
Authentication
Confidentiality
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7. What Is Encryption?
A way to transform a message so that only the sender and recipient can read, see, or understand it
Plaintext (cleartext): the message that is being protected
Encrypt (encipher): transform a plaintext into ciphertext
Encryption: a mathematical procedure that scrambles data so that it is extremely difficult for anyone other than authorized recipients to recover the original message
Key: a series of electronic signals stored on a PC’s hard disk or transmitted as blips of data over transmission lines
Plaintext + key = Ciphertext
Ciphertext – key = Plaintext
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8. Symmetric Key Encryption
Message
“Hello”
Encryption
Method &
Key
Encrypted Message
Interceptor
Network
Party A
Party B
Encryption uses a
non-secret encryption method and
a secret key
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9. Simple example (encrypt)
Every letter is converted to a two digit number
A=1, Z = 26
ANTHONY 
Produce any 4 digit key  (10N-1 choices = 9,999)
Add together in blocks of 4 digits
= 3768
= 5662
= 5168
= (pad with 00 to make even)
Send to fellow Spy
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10. Simple example (Decrypt)
Received from fellow Spy
Break down in 4 digits
Get right Key  3654
Subtract key from blocks of 4 digits
= 114
= 2008
= 1514
= 2500
If result is negative add 10000
Break down to 2 digits and decode
01 = A, 14 =N, 20 = T, 08 = H
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11. Symmetric Key Encryption
Sender and receiver use same digital key to encrypt and decrypt message
Requires different set of keys for each transaction
Strength of encryption
Length of binary key used to encrypt data
Advanced Encryption Standard (AES)
Most widely used symmetric key encryption
Uses 128-, 192-, and 256-bit encryption keys
Other standards use keys with up to 2,048 bits
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12. Public Key Encryption Uses two mathematically related digital keys
Public key (widely disseminated)
Private key (kept secret by owner)
Both keys used to encrypt and decrypt message
Once key used to encrypt message, same key cannot be used to decrypt message
Sender uses recipient’s public key to encrypt message; recipient uses his/her private key to decrypt it
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13. Copyright © 2010 Pearson Education, Inc.

14. Public Key Cryptography – A Simple Case
Figure 5.8, Page 289
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15. Public Key Encryption for Confidentiality
Encrypt with
Party B’s Public Key
Decrypt with
Party B’s Private Key
Encrypted
Message
Note:
Four keys are used to encrypt
and decrypt in both directions
Party A
Party B
Decrypt with
Party A’s Private Key
Encrypted
Message
Encrypt with
Party A’s Public Key
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16. Public Key Encryption Using Digital Signatures and Hash Digests
Hash function:
Mathematical algorithm that produces fixed-length number called message or hash digest
Hash digest of message sent to recipient along with message to verify integrity
Hash digest and message encrypted with recipient’s public key
Entire cipher text then encrypted with recipient’s private key—creating digital signature—for authenticity, nonrepudiation
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17. Digital Signature: Sender
To Create the Digital Signature:
Hash the plaintext to create
a brief message digest; This is
NOT the digital signature
2. Sign (encrypt) the message
digest with the sender’s private
key to create the digital
Signature
Plaintext
Hash MD
Sign (Encrypt) MD with
Sender’s Private Key
The sender begins by hashing the plaintext message to be sent.
The resultant hash is called the message digest. The message digest it not the digital signature. It is a step along the way to creating the digital signature.
Next, the applicant encrypts the message digest with his or her private key, which only he or she should know. The ciphertext that results is called the digital signature.
Encrypting something with one’s private key is called signing it. So the applicant signs the message digest with his or her private key. DS
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18. Digital Signature DS Plaintext Sender Receiver
Encrypted for Confidentiality DS
Plaintext
Sender
Receiver
Initial authentication is fine, but an attacker may slip a message in after a sender is initially authenticated.
We would like message-by-message authentication so that we can authenticate every message as coming from the true party.
To do this, a digital signature is added to the plaintext message before encryption for confidentiality.
Add Digital Signature to Each Message
Provides Message-by-Message Authentication
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19. Digital Signature Send Plaintext plus Digital Signature
Encrypted with Public key of receiver DS
Plaintext
Sender
Encrypts
Now the sender/applicant adds the digital signature to the plaintext.
The applicant/sender then encrypts the combined message with the symmetric session key it shares with the receiver/verifier. This provides confidentiality during the transmission.
Receiver
Decrypts
Transmission
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20. Digital Signature: Receiver
1. Hash the received
plaintext with the same
hashing algorithm the
sender used. This gives
the message digest
2. Decrypt the digital
signature with the sender’s
public key. This also should
give the message digest.
3. If the two match, the
message is authenticated;
The sender has the true
Party’s private key
Received Plaintext DS 2.
Decrypt with
True Party’s
Public Key 1.
Hash MD MD
The receiver first decrypts the arriving message with the symmetric session key. This gives back the received plaintext and the digital signature.
The receiver/verifier hashes the received plaintext with the same hashing algorithm the sender used. This creates the message digest again. (Again, hashing is repeatable: it always gives the same result every time it is applied o the same bit string.)
Next, the receiver/verifier decrypts the digital signature with the true party’s known public key. This should also give the message digest—if the applicant signed the message digest with the true party’s private key, which only the true party should know.
The applicant has now proven that they are the true party. 3.
Are they Equal?
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21. Public Key Cryptography with Digital Signatures
Figure 5.9, Page 291
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22. Digital Envelopes Address weaknesses of:
Public key encryption
Computationally slow, decreased transmission speed, increased processing time
Symmetric key encryption
Insecure transmission lines
Uses symmetric key encryption to encrypt document
Uses public key encryption to encrypt and send symmetric key
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23. Creating a Digital Envelope
Figure 5.10, Page 292
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24. Man in the Middle Attack
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25. Public Key Deception Impostor Verifier “I am the True Person.”
“Here is TP’s public key.”
(Sends Impostor’s public key)
“Here is authentication
based on TP’s private key.”
(Really Impostor’s private key)
Decryption of message from Verifier
encrypted with Impostor’s public key,
so Impostor can decrypt it
Verifier
Must authenticate True Person.
Believes now has
TP’s public key
Believes True Person
is authenticated
based on Impostor’s public key
“True Person,
here is a message encrypted
with your public key.”
Critical
Deception
For digital signatures to work, the verifier must know the true party’s public key. Although this is obvious, getting the true party’s public key is surprisingly difficult to do and is the Achilles’ heel of public key encryption.
However, where will they get the true party’s public key? In public key deception, an impostor sends the verifier the impostor’s own public key, claiming that it is the public key of the true party.
If the verifier is gullible and accepts this public key as being that of the true party, then it will “authenticate” all of the impostor’s digital signatures as legitimate.
The bottom line is that digital signatures will only work if the verifier can get the true party’s public key from a trusted party.
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26. http://swiki. fromdev. com/2009/11/ssl-is-not-secure-anymore-serious
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27. Digital Signatures and Digital Certificates
Public key authentication requires both a digital signature and a digital certificate to give the public key needed to test the digital signature
Digital
Certificate:
True Party’s
Public Key
Certificate Authority
Applicant
<This is really important. Read it and make sure students understand why both a digital signature and a digital certificate are both needed for certification.> DS
Plaintext
Verifier
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28. Digital Certificates and Public Key Infrastructure (PKI)
Digital certificate includes:
Name of subject/company
Subject’s public key
Digital certificate serial number
Expiration date, issuance date
Digital signature of CA
Public Key Infrastructure (PKI):
CAs and digital certificate procedures
PGP
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29. Digital Certificates and Certification Authorities
Figure 5.11, Page 294
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30. Limits to Encryption Solutions
Doesn’t protect storage of private key
PKI not effective against insiders, employees
Protection of private keys by individuals may be haphazard
No guarantee that verifying computer of merchant is secure
CAs are unregulated, self-selecting organizations
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31. Copyright © 2011 Pearson Education, Inc.

32. Insight on Society Web Dogs and Anonymity Class Discussion
What are some of the benefits of continuing the anonymity of the Internet?
What are the disadvantages of an identity system?
Are there advantages to an identity system beyond security?
Who should control a central identity system?
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33. Securing Channels of Communication
Secure Sockets Layer (SSL):
Establishes a secure, negotiated client-server session in which URL of requested document, along with contents, is encrypted
S-HTTP:
Provides a secure message-oriented communications protocol designed for use in conjunction with HTTP
Virtual Private Network (VPN):
Allows remote users to securely access internal network via the Internet, using Point-to-Point Tunneling Protocol (PPTP)
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34. Secure Negotiated Sessions Using SSL
Figure 5.12, Page 298
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35. Proxy servers (proxies)
Protecting Networks
Firewall
Hardware or software
Uses security policy to filter packets
Two main methods:
Packet filters
Application gateways
Proxy servers (proxies)
Software servers that handle all communications originating from or being sent to the Internet
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36. Firewalls and Proxy Servers
Figure 5.13, Page 301
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37. Protecting Servers and Clients
Operating system security enhancements
Upgrades, patches
Zero Day attacks
Anti-virus software:
Easiest and least expensive way to prevent threats to system integrity
Requires daily updates
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38. Management Policies, Business Procedures, and Public Laws
U.S. firms and organizations spend 12% of IT budget on security hardware, software, services ($120 billion in 2009)
Managing risk includes
Technology
Effective management policies
Public laws and active enforcement
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39. A Security Plan: Management Policies
Risk assessment
Security policy
Implementation plan
Security organization
Access controls
Authentication procedures, inc. biometrics
Authorization policies, authorization management systems
Security Organization
Security audit
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40. Developing an E-commerce Security Plan
Figure 5.14, Page 303
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41. The Role of Laws and Public Policy
Laws that give authorities tools for identifying, tracing, prosecuting cybercriminals:
National Information Infrastructure Protection Act of 1996
USA Patriot Act
Homeland Security Act
Private and private-public cooperation
CERT Coordination Center
US-CERT
Government policies and controls on encryption software
OECD guidelines OECD_Cyber_Security.pdf
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42. BRIEF HISTORY OF MONEY Barter Medium of Exchange Tokens
Notational Money
Credit System

43. Types of Payment Systems
Cash
Most common form of payment in terms of number of transactions
Instantly convertible into other forms of value without intermediation
Checking Transfer
Second most common payment form in U.S. in terms of number of transactions
Credit Card
Credit card associations
Issuing banks
Processing centers
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44. Types of Payment Systems (cont.)
Stored Value
Funds deposited into account, from which funds are paid out or withdrawn as needed, e.g. debit cards, gift certificates
Peer-to-peer payment systems
Accumulating Balance
Accounts that accumulate expenditures and to which consumers make period payments
e.g. Utility, phone, American Express accounts
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45. Check Numbers http://en.wikipedia.org/wiki/Demand_draft

46. Table 5.6, Page 312
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47. E-commerce Payment Systems
Credit cards
55 % of online payments in (U.S.)
Debit cards
28 % online payments in 2009 (U.S.)
Limitations of online credit card payment
Security
Cost
Social equity
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48. How an Online Credit Transaction Works
Figure 5.16, Page 315
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49. E-commerce Payment Systems (cont.)
Digital wallets
Emulates functionality of wallet by authenticating consumer, storing and transferring value, and securing payment process from consumer to merchant
Early efforts to popularize failed
Newest effort: Google Checkout
Digital cash (David Chaum)
Value storage and exchange using tokens
Most early examples have disappeared; protocols and practices too complex
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50. E-commerce Payment Systems (cont.)
Online stored value systems
Based on value stored in a consumer’s bank, checking, or credit card account
PayPal, smart cards
Digital accumulated balance payment
Users accumulate a debit balance for which they are billed at the end of the month
Digital checking:
Extends functionality of existing checking accounts for use online
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51. Mobile Payment Systems
Use of mobile handsets as payment devices well- established in Europe, Japan, South Korea
Japanese mobile payment systems
E-money (stored value)
Mobile debit cards
Mobile credit cards
Not as well established yet in U.S
Majority of purchases are digital content for use on cell phone
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52. Mobile-specific Transaction Architecture

53. Electronic Billing Presentment and Payment (EBPP)
Online payment systems for monthly bills
65% + of households in 2010 used some EBPP; expected to continue to grow
Two competing EBPP business models:
Biller-direct (dominant model)
Consolidator
Both models are supported by EBPP infrastructure providers
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