Wednesday September 18, 2013 | 09:54 AM

In the past 20 years, internet-based financial transactions have become integral to the global economy, from online personal banking to multi-million dollar stock transactions executed within microseconds.

We've come to trust the security of those transactions thanks to the Secure Socket Layer (SSL) protocol, which uses huge, unsolvable math problems to hide our personal data until it reaches a trusted recipient. Here's a metaphorical video of how it works:

We're not literally sending keys and padlocks over the internet, though. Instead, we're trading huge  numbers that, when multiplied together like a key fitting a lock, generate even bigger numbers that can't be unscrambled into the original factors. The wikipedia article about prime factors explains:

"Determining the prime factors of a number is an example of a problem frequently used to ensure cryptographic security in encryption systems...  it is relatively easy to construct a problem that would take longer than the known age of the universe to solve on current computers using current algorithms."

In God we trust; all others use cash.

But yesterday, thanks to Edward Snowden's leaks, we learned that the government has been spending billions of dollars to crack and weaken these common internet encryption methods, collecting the secret "key" numbers from various institutions and introducing "back doors" to allow its agents to decode encrypted messages.

"The N.S.A. has been deliberately weakening the international encryption standards adopted by developers," reported the New York Times. "One goal in the agency’s 2013 budget request was to 'influence policies, standards and specifications for commercial public key technologies,' the most common encryption method."

In other words, we can't really trust SSL and other "secure" internet protocols to protect our online financial transactions (not to mention our emails, medical records and all the other stuff we send over the internet). Nate Thompson, writing on Ars Technica, points out that "backdoors create security breaches exploitable by unintended users—remember the Athens Affair? A built-in backdoor meant for law enforcement was accessed by others to spy on some of Greece's top leaders."

If NSA agents use their access to spy on their exes (as frequently happens, as we recently learned) what's to prevent them from "borrowing" our credit card numbers? Or rigging a short spike in certain stock prices for personal financial gain?

While the Syrian Electronic Army may be emboldened to leave Justin Bieber alone for a bit while they try to hack the Federal Reserve, these new revelations are having definite short-term effects on the U.S. software industry. Bloomberg cites a report that U.S. cloud computing providers may lose up to $35 billion by 2016 as foreign firms shift their data to more trustworthy servers. And in today's paper, we have a story about how worries over a networked motion-sensing camera in the new XBox One game console has created a huge backlash among gamers.

Financial transactions (even with cash) have always had issues with security, but SSL encryption was supposed to usher in a golden era of easy, secure, cashless transactions. These revelations might give banks, consumers and investors second thoughts about how they wire funds over the internet.

 

 

About this Blog

Subscribe to the
Commercial Confidential RSS feed

Commercial Confidential tracks Maine's business leaders and economic indicators.

About the Author

I'm an economics wonk and an online content producer for the Portland Press Herald.

You can get in touch with me by emailing cmilneil [at] mainetoday.com, or by calling 791-6307, or by following @vigorousnorth. Also check out my business and economics list on Twitter.

"On the Move": Submit items of interest regarding new employees, promotions and professional honors — with photos and LinkedIn URLs — to business [at] pressherald.com.

Favorite Sites

Previous entries

April 2014

February 2014

January 2014

December 2013

November 2013

October 2013

More

September 2013

August 2013

July 2013

May 2013

April 2013

March 2013

February 2013

January 2013

Further Discussion

Here at PressHerald.com we value our readers and are committed to growing our community by encouraging you to add to the discussion. To ensure conscientious dialogue we have implemented a strict no-bullying policy. To participate, you must follow our Terms of Use.

Questions about the article? Add them below and we’ll try to answer them or do a follow-up post as soon as we can. Technical problems? Email them to us with an exact description of the problem. Make sure to include:
  • type of computer or mobile device your are using
  • exact operating system and browser you are viewing the site on (TIP: You can easily determine your operating system here.)
Prefer to respond privately? Email us here.