Chapter Four

E-commerce Security and Cryptography

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 Introduction
The openness of the Internet has made it a perfect platform for e-commerce.
However, lack of security in web based transactions and the ease to violate
privacy in online communication are e-commerce’s main stumbling blocks.
Internet’s very openness means that all communication traveling over it is
inherently difficult to secure.

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 Security
Security is an essential part of any transaction that takes place over the
internet.
Customer will lose his/her faith in e-business if its security is
compromised.
Following are the essential requirements for safe e-payments/transactions:
Confidentiality: Information should not be accessible to unauthorized
person.
Integrity: Information should not be altered during its transmission over
the network.
Availability: Information should be available wherever and whenever
requirement within time limit specified.
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 Cont’d…
Authenticity: There should be a mechanism to authenticate user before
giving him/her access to required information.
Non-repudiation: It is a protection against denial of order or denial of
payment.
Once a sender sends a message, the sender should not be able to deny sending the
message.
 Similarly, the recipient of message should not be able to deny receipt.
Encryption: Information should be encrypted and decrypted only by
authorized user.
Auditability: Data should be recorded in such a way that it can be audited
for integrity requirements.

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 Security Threats
A threat is an object, person, or other entity that represents a constant danger
to an asset.
A security threat is a circumstance, condition, or event with the potential to
cause economic hardship to data or network resources in the form of
destruction, disclosure, modification of data, denial of service, and/or fraud,
waste, and abuse.
Security, then, is the protection against these threats.
There are a large number of security threats to businesses and other
organizations in the online environment.
 There are active threats (modification to the data or systems) and passive
threats (monitoring or scanning information).
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 Cont’d…
Security threats can also be classified into three categories as denial of
service, unauthorized access, and theft and fraud.
1. Denial of Service (DoS): these are threats that render a system inoperative
or limit its capability to operate.
They can result from disruptions, natural disasters, or malicious acts.
Disruptions: occur because of equipment or software failures (a router
failure, for instance) or human errors (a construction crew cuts a network
cable, for instance). They are not typically the result of security breaches.
Disasters: caused by natural events, such as earthquakes, tornadoes,
hurricanes, or fires, which can completely destroy systems.
Malicious Acts: are denial of service attacks perpetrated by individuals with
the purpose of destruction, shutdown or degradation of a system.
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 Cont’d…
There are two primary types of DoS attacks. They are :
A. Spamming or E-mail Bombing: can have three meanings
i. Sending of e-mails to many individuals at once.
ii. Sending unsolicited commercial e-mail to individuals.
iii. A hacker targeting one individual computer or network, and sending
thousands of messages to it.
This is a major security threat because it will fill the target’s mailboxes and
flood communication ports and memory buffers, effectively blocking
legitimate messages from entering the mailbox or system.
B. Viruses, Worms, and Trojan Horses
Viruses: are computer programs designed to perform unwanted events.
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 Cont’d…
The harm they cause can range from minor harm such as sending undesirable
messages to highly distinctive harms such as deleting all files, creating so much
traffic on a network.
Viruses attach themselves to programs or files, which, when loaded or executed,
allow the virus to spread and cause damage. Some common virus types include:
 Parasitic virus: this virus attaches itself to files and replicates itself when the files have
been loaded.
 Boot sector virus: this virus is loaded on a floppy disk and gets into the computer when
the disk is loaded.
 Stealth virus: this is a more advanced virus that changes its own bit pattern to become
undetectable by virus scanners.
 Polymorphic virus: this virus changes itself every time it infects a computer. By mutating
this way, the virus is more difficult to detect.
 Macro virus: this virus affects macro applications (such as those found in word processors
and spreadsheets) when the macros are executed.

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 Cont’d…
Worms: are special viruses that spread using direct Internet connections.
Trojan horses: are spread by being disguised as legitimate software and tricking
users into running the program.
2. Unauthorized Access: illegal access to systems, applications, or data including
customer information, trade secrets, or other important information regarding the
organization, its business partners, or employees.
Passive unauthorized access: hiddenly listening to communications in the hopes for
finding trade secrets or scoops.
Active unauthorized access: involves modifying the system or data being hacked or
changing communications to abort or delay negotiations on an important contract.
 If a hacker actually assumes someone else’s identity online, he is said to be masquerading or
spoofing.
 The term is used to refer to sending a message that appears to be from someone else.
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 Cont’d…
3. Theft and Fraud: are two major security threats that affect companies.
When data are used and/or modified, fraud can occur. Illegal transfers of
money or taking advantage of holes in security systems to generate checks are
frequent occurrences of fraud.
Companies also have to deal with theft of software such as installing
unlicensed software and theft of hardware such as laptops, keyboard, mice,
monitors and so on.
Summary of security threats

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 Security Controls
Once security threats are identified, it is possible to establish security
measures or controls to deal with those threats. Security controls can be
categorized as :
A. Preventive control: intended to stop or limit the security breach / problem
from happening. Eg: Scanning files for virus before opening them, requiring
usernames and passwords before allowing access to a system.
B. Detective Controls: meant to find or discover security threats or problems.
Eg: audit logs, system programs that can scan for unexpected actions to
detect potential hackers, and virus check programs.
C. Corrective Controls: used to correct a security issue or problem.
Eg: Recovery software, virus check program to fix or delete a virus from a
file.
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 Disaster recovery
Security is not only about protecting resources from crimes, but also protecting
them from disasters and destruction.
The most important feature of a recovery plan is redundancy. The following list
identifies redundant equipment that can be used to protect against loss of data or
information :
Fault-tolerant systems: these are systems in which several processors run the
same operations concurrently. All transactions, data, and processing is done on
both systems at the same time. If one fails, the other continues running.
Mirrored disks: this involves duplicating storage disks. Every piece of data is
written in two (or more) places at the same time, and is modified concurrently.
Disk duplexing: this involves using two or more disk controllers. Disk
controllers manage access to disk storage devices.
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 Cont’d…
Multiple Lines: when a connection is required between two buildings or
sites, multiple lines can be leased, even if the capacity of one would be
sufficient for the data transfers. If one line fails, data transfers are moved onto
one of the functioning lines.
Different Networks: when communication is crucial, it can be important not
to rely on only one type of network.
Additional devices: redundancy can be applied to all devices in the network,
including routers, hubs, backup devices, communication controllers, etc.
Uninterrupted Power Supply (UPS): one of the key resources needed to run
a computer network is electricity. Companies with critical networks must
ensure that they continue running in the event of power failures. In this case,
the use of a UPS unit is necessary.
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 Physical and Logical Access Controls
When a hacker wants to access a company’s system, there are basically two
points of access : accessing a computer from within the organization
(physical access), dialing into one of the organization’s servers or remotely
accessing the organization’s network (logical access).
Therefore, companies should control access to their data, applications, or
systems physically or logically.
Physical Access Controls: locking computer systems by security systems
such as magnetic cards, fingerprinting, locking computers with physical
locks, use surveillance cameras, temperature control, auto-suppression
systems.
Logical Access Controls: a way to differentiate individuals from one
another and allow gain to data only to authorized ones.
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 Cont’d…
There are three levels of security controls that are available to control
identification of unauthorized individuals : possession, knowledge, and trait.
Possession refers to an individual owning a form of identification.
Knowledge means that the security control requires knowledge on the part
of the individual. Eg: User Id and password to access a computer system.
Traits refers to a particular trait, such as finger-print or a retinal pattern used
to control access to physical spaces, data or systems.

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 Firewalls
A firewall is a computer or a router that controls access in and out of the internal computer
network of an organization by controlling access to its resources and systems.
There are several types of firewalls, which vary in how they control access into and out of
the organization.
Packet-level firewall: also called a network-level firewall, searches the source and
destination addresses in data packets.
 Packets are small units of data that flow through networks, allowing for the transmission
of messages.
 If the source address of the packet is from an “acceptable” computer, the firewall will let
the message through, assuming that the destination address is also a valid internal address.
 Application-level firewall: requires users to log into the firewall before they can access
applications inside the organization (from outside).
 They can also limit the types of applications allowed into the computer network.
 They give much higher level of security than packet level firewalls but it slows
communication. Why?
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 Cont’d…
Firewalls can also be classified as : static, dynamic, internal, and personal.
 Static firewall: has predetermined ways of dealing with transmission requests.
 A default-permit static firewall allows all traffic through except traffic that is
explicitly marked to be blocked by the network administrator.
 A default-deny static firewall lets only allowed traffic through and refuses, by
default, all other traffic requests into and out of the organization. It is, therefore,
much more secure than a default-permit static firewall. Why?
Dynamic firewall: manages the requests as they occur, deciding on both denials and
permissions as they arrive. It requires much more management, but is also much
more flexible.
 Internal firewall: is a firewall used inside an organization, between departments or
divisions. It can also add another layer of protection by stopping widespread hacking
if a hacker accesses one part of the company’s network.
Personal firewall: is a firewall installed on a given personal computer.
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 Cryptography
Cryptography is the study of creating and using encryption and decryption
techniques.
Encryption concepts: is the application of a mathematical algorithm to a message
or information that scrambles message or information to make it unreadable.
 It’s purpose is to render data unreadable.
 This is performed with the use of keys.
 The encryption key makes the data unreadable.
 The decryption key allows the unreadable text to be converted into its original form.
 The strength of an encryption technique is a direct function of the length of the key. Why?
 The readable message is called plaintext whereas the unreadable message is called
ciphertext.
 The algorithm used to encrypt and decrypt the plaintext is called cipher. It is a binary code,
and is contained in the key.

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 Types of Encryption Techniques
 Asymmetric Encryption (Public Key Cryptography):
Refers to a cryptographic algorithm which requires two separate keys, one of which is
secret (or private) and one of which is public which are different but mathematically
linked.
The public key is used to encrypt plaintext or to verify a digital signature; whereas
the private key is used to decrypt ciphertext or to create a digital signature.
Message authentication involves processing a message with a private key to produce
a digital signature.
 Thereafter anyone can verify this signature by processing the signature value with
the signer's corresponding public key and comparing that result with the message.
Symmetric Encryption: use the same cryptographic keys for both
encryption of plaintext and decryption of ciphertext.
It’s drawback is that both parties have access to the secret key.
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a) The encryption process
b) Asymmetric Encryption

b) Symmetric Encryption

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 Exercise
1. Default-permit static firewall gives less security than default-deny
static firewall. Why? (1.5 pts)
2. Why do we say redundancy is the most important feature of recovery
plan? (2 pts)
3. What is the difference between confidentiality and integrity. (1.5 pts)

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