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One of the primary reasons smart cards exist is security. The card itself provides a computing platform on which information can be stored securely and computations can be performed securely. The smart card also is highly portable and convenient to carry around on one's person. Consequently, the smart card is ideally suited to function as a token through which the security of other systems can be enhanced.

In financial systems, sensitive information such as bank account numbers can be stored on a smart card. In electronic purse applications (cash cards and the like), the balance of some negotiable currency can be stored on a card and this currency can be credited or debited by external terminals (systems) in a local transaction.

In physical access systems (e.g., opening the door to your office), a smart card can hold the key through which an electronic system can be enticed to unlock the door and allow entry. In network systems or even local computer systems, the smart card can hold the password through which a user is identified to the network or local system and through which privileges are granted by those systems to access information or processing capabilities.

When viewed in the abstract, all these seemingly disjointed systems have very similar needs and operational characteristics, particularly with regard to the security of those systems. On that basis, let's examine some of the general characteristics of systems that collectively are referred to as security.

The term security is often used in a rather loose fashion to refer to a variety of characteristics related to the performance of transactions between two or more parties in such a manner that everyone involved in the transaction trusts the integrity and, perhaps, the privacy of the transaction. With the advent of computer networks and of highly distributed financial transactions, it is often the case that all the necessary parties to a transaction cannot be physically at the same place, or even at the same time, in order to participate in the transaction.

Consider the purchase of an item with a credit card at an airport gift shop while on a trip. This transaction includes a number of distinct steps:

  • presentation of the consumer's credit card to the vendor

  • validation by the vendor that the cardholder is really the owner of the card

  • validation by the vendor that the credit card account represented by the card is valid

  • validation by the vendor that the account maintains a sufficient credit balance to cover the cost of the item being purchased

  • debiting the credit account represented by the card by the amount of the item purchased

  • crediting the account of the vendor with the amount of the item purchased (less any fees due to the bank, etc. related to the credit card transaction)

In the performance of this transaction, the cardholder would also like some assurances that much, if not all, of the information related to the transaction is held private. The credit card name, account number, and validation code should not be obtained by some unscrupulous character bent on making fraudulent purchases with the purloined information.

In the performance of a credit card transaction, there are actually many more components than previously mentioned. However, in just the steps noted, you can see that physical separation of the various parties to the transaction makes it difficult to guarantee that all these parties are satisfied about the integrity and privacy of the transaction.

This section discusses the characteristics of security involved in supporting such a transaction. To facilitate this discussion, the objectives of a security environment are first presented in somewhat abstract terms. After, some of the elements (we'll call them players) of a widely distributed transaction system are examined. Then, some of the mechanisms currently in wide use to provide the desired characteristics through the identified players are examined. Finally, some of the attacks used to thwart these security mechanisms are reviewed.

Objectives and Characteristics of Security Systems

Security within physical or electronic systems can be viewed as the provision of one or more general characteristics:

  • authentication
  • authorization
  • privacy
  • integrity
  • nonrepudiation

When part or all of these characteristics are provided to the extent required to satisfy all the participants of the transaction, the transaction can be said to be secure.


Authentication means establishing an identity within a transaction. Consider a very simple (nonelectronic) transaction such as a student providing homework to a teacher. In general, the teacher wants to confirm that a specific set of homework comes from a specific student. What's involved in establishing identities in such a transaction? Well, when the homework is turned in to the teacher, the teacher will likely just visually recognize the student and accept the homework. In order to identify the homework of a specific student, the teacher may inspect the homework when it is turned in to confirm that the student's name is on it. Then, at some later time after the teacher has reviewed the homework and graded the paper, the grade can be recorded next to the name. In such a transaction, an environment of trust must be established; the teacher can associate (visually) a student, the student's homework, and the student's name on the homework, and the teacher believes this association to be true. Establishing this trust environment for a classroom setting is typically a subtle—and not usually rigorous—procedure.

In general, the rigor applied to establishing trust is commensurate with the value of the transaction. If the transaction does not involve simply homework, but something much more valuable (to one or both parties), such as a final examination or an SAT examination, then establishing the trust environment can be much more involved. Verification of identity may be required at the door of the testing facility; the form of this verification might be a student ID card or a state drivers license. Such forms of authenticated identity suffice to introduce the concept of a trust broker or a trusted third party that both of the parties to the transaction can look to for establishment of a trust environment if they don't know each other. The test monitor might not be able to visually recognize a student, but does know what a valid student ID looks like. So if the student presents such an ID with a picture on it that matches the bearer of the card and a name on it that matches a name on the test list, then the monitor can believe that the bearer of the ID card is really the person authorized to take the examination and hence received the grade derived from taking the examination.

If the transaction in question involves something of even greater value (to one or both parties), then establishing the trust environment can be even more involved. For example, purchasing a house with a mortgage loan may require that a wide variety of information be collected and the validity of that information be attested to in legally binding ways.

The object then of a security system is to provide authentication mechanisms through which a trust environment can be established among all the participants in a transaction even though the participants might not know each other, might not be physically together during the transaction, and might even be participating in the transaction at widely different times (i.e., the transaction requires a significant elapsed time to complete).


Authorization is the establishment of privileges within a transaction. That is, after the identity of a participant in a transaction has been authenticated, what that participant is allowed to do as part of the transaction must be established. In a financial transaction, this authorization might consist of simply confirming that the authenticated individual has enough money to make the desired purchase or enough money to provide the desired loan. In the earlier exam example, authorization might consist of finding a student's name on the class roster; that is, if the student can authenticate that her identity is Jane Doe and the name of Jane Doe is found by the monitor on the class roster, then that student will be allowed to take the final examination.

Just as in establishing identity (authentication), the length to which various parties in the transaction will go to establish authorization is generally related to value ascribed to the transaction by one or more parties. To gain entry to a room containing particularly sensitive information in a high-security facility, your name might have to be on an access list that can be checked by a guard of that room. To enter that room, you must meet at least two criteria. First, you must present the correct identification information to the guard to establish (authenticate) your identity. Then the guard must find your identity on the list of individuals allowed access to the room.

In some situations, the concepts of authentication and authorization might be merged together. In many office buildings, each office has a physical key. The key patterns might be such that a master key can open any office door. In this case, authentication is established by physical possession of the key. From the standpoint of the lock on the door (which is one of the participants in the transaction of unlocking and opening the door), both the authenticated identity of the individual and that individual's authorization to enter the room guarded by the door is satisfied by that individual physically presenting the key.


Privacy is the concept of allowing only the participants in a transaction to know the details of the transaction, and it might even mean that only the participants know that a transaction is occurring.

When a credit card purchase is made, the protocol of presenting the card to the vendor, performing the financial transaction, and returning a receipt of the transaction to the cardholder is set up to minimize the conveyance of sensitive information such as the account name, number, or validation number to those who might be casually observing the transaction. Similarly, when using a telephone calling card at a public telephone, conventional wisdom mandates that one be very cautious to hide the entry of the card number, lest it be seen by someone who will make note of it and use it to make cardholder telephone calls that the cardholder has not authorized.


Integrity is the concept that none of the information involved in a transaction is modified in any manner not known or approved by all the participants in the transaction, either while the transaction is in progress or after the fact. In the previous homework example, when the student turns in the homework, the total transaction may not actually be concluded until the teacher reviews the homework and records a grade. In this simple example, the integrity of the information is maintained by the teacher keeping the homework in controlled possession until it is graded and the grade recorded. The student's integrity facility in this case is to get the homework back from the teacher and to be able to review it to make sure that it's in the same state as when it was submitted.

For the homework example, the integrity of the transaction system is typically not of paramount importance to the student because teachers don't often maliciously modify homework in their possession. The teacher might be more concerned with the integrity of the information: first, in the sense of knowing that the homework hasn't been modified since it was turned in (usually not too likely) and second, in knowing that the homework was actually done by the student.

This latter aspect is often not guaranteed by any stringent mechanism in the case of homework. In the case of examinations, which might be viewed as more valuable, more proactive mechanisms are sometimes used. For example, some universities make use of an "honor code" under which a student might be required to attest to the fact that an examination was completed by the student and that the student neither gave nor received any assistance during the examination proper. Providing mechanisms to facilitate this concept in the highly dispersed environment of electronic transactions across a wide area computer network is a bit more challenging.


Nonrepudiation is establishing the fact of participation in a particular transaction by all the parties to the transaction such that none of the parties can claim after the fact that they did not actually take part in the transaction. Mechanisms to facilitate this concept are typically closely related to the mechanisms used to authenticate identity. In many discussions, the two concepts are viewed as essentially equivalent.

Of these five characteristics of security, it is the concept of privacy that precipitates the greatest concerns on the part of governmental entities. As you will see, encrypting information through mechanisms that allow only the intended participants of a transaction to be able to understand it is often a highly regulated capability. The same encryption mechanisms used to establish privacy can often also be used to authenticate identity. When used for authentication, encryption is viewed much more benignly by governmental entities than when used for privacy.

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