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Lesson 7E-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 keyUses a single key to encrypt and decrypt data.DES, Triple DES, RC2; used for encrypting large amounts of data.
Asymmetric keyUses 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 wayA one way encryption algorithm produces ciphertext that cannot be taken BACK to the original plaintext.Used for signing data and transactions.
Hash functionA 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 encryptionUses 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 Slide Show below describes how this process works.

  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.

Public Key Encryption 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.