Frost & Sullivan: Moving Forward with Distributed Cryptography

Split to Secure: Moving Forward with
Distributed Cryptography
www.frost.com
Stratecast
Executive Brief
August 2012

2 © 2012 Stratecast. All Rights Reserved.August 2012
Stratecast | Frost & Sullivan
SPLIT TO SECURE: MOVING FORWARD WITH
DISTRIBUTED CRYPTOGRAPHY
INTRODUCTION
Data thieves know all too well where to direct their attacks—at servers. Furthermore,
they earn a good return on their efforts. Confirming this has been the data breach
investigations conducted and chronicled by the Verizon RISK Team.1
Of the data
breaches investigated in 2011, servers were among the targeted assets in 64 percent of
the breach investigations, and those breaches accounted for 92 percent of compromised
records.
Another interesting point from this comprehensive report is that hacking (i.e.,
intentionally accessing information assets without authorization) has consistently been
among the top categories of threat actions since the Verizon RISK Team began
summarizing its breach investigations.2
Reaching a new high with the 2011 investigative
caseload, hacking was involved in 81 percent of the breaches and contributed to 99
percent of the compromised records. Digging a layer deeper into the 2011 caseload
reveals that exploitation of stolen login credentials was, by a significant margin, the most
popular hacking method used
against large organizations (30
percent of breaches and 84
p e r c e n t o f c o m p r o m i s e d
records). A sample of news
reports in the first half of 2012
further confirms that data
breaches resulting in the theft of
login credentials are occurring
and affecting millions of
accounts.
This combination of breach statistics—servers under siege and exploitation of stolen
login credentials being a principal hacking method—suggests that if credentials could be
better protected where they are stored (e.g., in a single system such as a database
server), the number and severity of data breaches would be reduced. Distributed
cryptography, as incorporated in RSA Distributed Credential Protection (DCP), elevates
the protection of credentials by splitting user’s credentials into randomized objects
1
2012 Data Breach Investigations Report accessible at: http://www.verizonbusiness.com/resources/reports/rp_data-breach-
investigations-report-2012_en_xg.pdf.
2
Malware, social engineering, and physical theft are other categories of threat actions.
Breached
Company
Stolen Passwords
Zappos 24 million records, including passwords
Gamingo 8.2 million passwords
LinkedIn 6.5 million passwords
eHarmony 1.5 million passwords
Yahoo! 450,000 passwords
Formspring 420,000 passwords
This combination of
breach statistics suggests
that if credentials could
be better protected
where they are stored,
the number and severity
of data breaches would
be reduced.

3© 2012 Stratecast. All Rights Reserved. August 2012
Split to Secure: Moving Forward with Distributed Cryptography
stored in two systems. Consequently, each object on its own is useless as a credential.
This attribute of each object on its own being useless is also
relevant in safe harbor provisions. For example, with credentials
being the “keys” that unlock access to private and sensitive data,
practicing good faith in the protection of those keys could limit a
company’s data breach liabilities. Distributed cryptography is that
linchpin in good faith protection of credentials and, therefore, the
good faith protection of the data those credentials unlock.
More on this safe harbor attribute is included in this paper, as
well as a description of how distributed cryptography operates,
including representative examples of distributed cryptography in
action.
HOW DISTRIBUTED CRYPTOGRAPHY WORKS
The premise underlying distributed cryptography is that if a credential (e.g., something
you know, in authentication parlance, such as a password or a response to a challenge
question) is stolen, the illegitimate possessor of that credential now has access to the
secured material (i.e., material that requires authentication to access). While various
techniques have been developed and deployed to secure these credentials, the
aforementioned data from breach investigations demonstrates that credential
compromises persist and are used to steal additional valuable data. Distributed
cryptography raises the bar of difficulty for hackers in their quest to steal credentials.
With more effort required, fewer hackers will have the fortitude or skills necessary to
succeed.
The means to “raising the bar” is to effectively
split the credential. This is conceptually similar
to a safe deposit box. A safe deposit box
requires two keys to open—one in the
possession of the safe deposit box owner and
the other in the possession of the vault owner.
Theft of just one key is insufficient to unlock the
box. Other than physically tampering with the
box, the would-be thief would need to steal both
keys and then use them to unlock the box
before either of the parties recognizes that a key
is missing and takes action to reduce the risk of
unauthorized access (i.e., change the lock or move the valuables to another box or
location).
As stated previously, the application of distributed cryptography on an authentication
This attribute of each
object on its own being
useless is also relevant
in safe harbor provisions.
For example, with
credentials being the
“keys” that unlock
access to private and
sensitive data, practicing
good faith in the
protection of those keys
could limit a company’s
data breach liabilities.

credential follows a similar approach. In the safe deposit box example, the two keys,
stored separately, can only unlock the box when operated in tandem. To accomplish the
same with a user’s password, the password must first be split and the two halves stored
separately (e.g., in two separate servers). At the moment the user attempts to
authenticate by entering his or her password, the “stored password halves” are virtually
rejoined and compared to the “entered password.” If the entered password matches the
rejoined stored password halves, authentication is confirmed and access is allowed. It is
this virtual rejoining of the password halves that is synonymous to the tandem unlocking
operation of the separate keys held by the safe box owner and the vault owner.
In similar fashion to the tandem safe deposit box keys, each stored password half is
useless without its pair. If the server containing one of the password halves is
compromised, the thief does not have a valid and useable password. Only by
compromising both servers and matching password halves can the password thief be
successful.
The preceding example is, however, a simplified explanation of distributed cryptography.
In practice, the application of distributed cryptography has to be more sophisticated to
defend against the formidable hacker underworld. To serve that purpose, elements of
sophistication include: randomization, blind equity testing, the ability to refresh the
password halves at any time and in a manner that is completely transparent to users, and
adaptability. We will explain each in succession.
Randomization and Blind Equity Testing
The mere splitting of passwords will not stop hackers. The guiding assumption should be
that if a formula is used in password splitting, that formula will eventually be determined
by hackers, which unfortunately can include insiders. To evade formula deciphering by
both outsiders and insiders, distributed cryptography incorporates randomness. In
stepwise fashion, this is how randomness works in distributed cryptography:
1. As a user registers his or her password, P1, a random key or pad, A, is generated
from the user’s device.
2. A is used to mask (i.e., obfuscate) P1, creating P1 + A.
3. P1 + A is stored in Server1 and A is stored separately in Server2.
4. To authenticate, the user enters a password, P2.
5. A random key, B, is generated from the user’s device.
6. B is used to mask P2, creating P2 + B.
7. P2 + B is combined with P1 + A and, separately, B is combined with A.
8. If the user entered the correct password, the two combinations return equal
values and access is granted.
The application of
distributed cryptography
has to be more
sophisticated to defend
against the formidable
hacker underworld. To
serve that purpose,
elements of sophistication
include: randomization,
blind equity testing, the
ability to refresh the
password halves at any
time and in a manner
that is completely
transparent to users,
and adaptability.

Inherent in this authentication procedure are significant points regarding non-exposure
of the password credential. First, both the registered and entered passwords are not
exposed (i.e., in cleartext) when they leave the user’s device. In both cases, they are
masked. Second, in the receiver’s environment, the password is also never in cleartext.
The password credential is received in a masked state, stored in a masked state, and
does not leave the server (i.e., Server1) to support authentication. Only a value
associated with the masked password leaves the server. This latter point—does not leave
the server while also supporting authentication—is referred to as blind equity testing.
Passwords are compared blindly as the passwords are not in cleartext or reconstructed
to test for equality. The testing is via comparisons of values and these values have no
deterministic connection with the password credentials.
By incorporating randomization and blind equity testing into the splitting and comparing
of credentials, the only means for credential-stealing hackers to succeed is to
compromise both servers, exfiltrate the masked passwords and the pads, and then
calculate the users’ passwords. While this is a formidable task, it is nevertheless a
possibility. There is a means to limit the value of exfiltrated data and authentication
fraud, which is described in the next section.
Refreshing the Password Halves
With the pad being the means to unmasking the password, periodically refreshing or
modifying the pad is the means to protect the password, if both the masked password
and pad are stolen. Considering our safe deposit box analogy, changing the locks and
issuing replacement keys (or just one lock and key) makes the original pair of keys
obsolete. The stolen pair of original keys can no longer open the box. The same is
applicable in distributed cryptography. If the pad is refreshed and the new pad is used
to refresh the original masked password, the new masked password cannot be
unlocked by the original pad.
In similar stepwise fashion, this is how refreshing retains protection of the password if
both servers are compromised:
1. A hacker compromises Server1 and steals P + A.
2. Pad A is refreshed, resulting in a new pad, A + R, stored in Server2.
3. Coordination between Server1 and Server2 changes P + A to P + A + R.
4. The same hacker compromises Server2 and steals pad A + R. The hacker now
has the masked password P + A and pad A +R.
5. Since A + R does not match A, the hacker cannot unmask P + A; the stored
password remains protected.
The periodic refreshing of the pad and the masked password effectively places an
expiration date on hacker exploits. The bar of difficulty is raised again. Not only must
By incorporating
randomization and
blind equity testing into
the splitting and
comparing of credentials,
the only means for
credential-stealing
hackers to succeed is to
compromise both
servers, exfiltrate the
masked passwords and
the pads, and then
calculate the users’
passwords.
The periodic refreshing
of the pad and the
masked password
effectively places an
expiration date on
hacker exploits.

the hacker compromise both servers and exfiltrate data from each, the compromises
and exfiltration of the two servers must be timed close enough together to avoid the
refresh cycle.
An added benefit of refreshing is that it is completely transparent to users. Because the
refresh is of the pad in Server2 and subsequently the masked password in Server1, a
new locking mechanism is essentially being erected around the user’s registered
password without user involvement.
Furthermore, by being systematic in pad and masked password refreshing—that is, acting
in good faith—the holder of registered passwords reduces the risk of password theft and
user accounts being compromised. This risk reduction also reduces the precautionary
and, at times, mandatory step of user password resets. In fact, following each of the 2012
password breaches listed earlier in this paper, users were recommended and, in some
instances, required to register new passwords.
Even so, distributed cryptography with user-transparent refresh capabilities does not
insulate users from having their passwords stolen when entered through devices infected
with password-stealing malware, phishing schemes, or if the user follows the self-
defeating rituals of writing down or choosing easily-deduced passwords. For these
reasons, users should change their passwords periodically, choose nonsensical
passwords, commit their passwords to memory, and use anti-malware software on their
devices.
Adaptability
Distributed cryptography leverages advances in other technologies to offer organizations
a range of deployment options to meet their risk management, governance, and business
objectives. For example, server virtualization allows a single physical server to function
as the physical host to multiple but isolated virtual hosts. A security benefit in this
deployment option is that different operating systems could be used to create the virtual
hosts. Consequently, the vulnerabilities in one operating system are not the same in the
other—that is, what the hacker could exploit in one is not exploitable in another. This
operating system diversity adds to the challenges that a hacker would need to overcome
to compromise two virtual servers—one storing the masked password and another
storing the pad.
Another option is to apply distributed cryptography between two distinct departments,
with one department operating a server where the pads are stored and the other
operating a server that stores the masked passwords. In this scenario, the hacker would
not only need to be successful in compromising two servers and exfiltrating the data
from both before refresh cycle is run; the hacker would need to do all of this with the
right two servers. For organizations with multiple departments and each having multiple
dedicated servers, finding the right two servers intensifies the hacker’s challenges. A
variation on this organizational diversity option is one server remaining with the
By being systematic in
pad and masked
password refreshing—
that is, acting in good
faith—the holder of
registered passwords
reduces the risk of
password theft and user
accounts being
compromised.
Distributed cryptography
leverages advances in
other technologies to
offer organizations a
range of deployment
options to meet their
risk management,
governance, and
business objectives.

organization and the other hosted with a cloud services provider.
As just two examples, these illustrate that adaptability is a structural attribute in
distributed cryptography. Consequently, organizations are not obligated to adhere to one
deployment approach; they can choose the deployment approaches that best fit their
own circumstances initially, and change as circumstances change.
SECURING OTHER SECRETS
Adding to the appeal of distributed cryptography is its use in reducing the risk of
unauthorized access to other types of valuable data. To understand this, consider that
encryption is used to protect valuable data at rest; for example, encrypted files in a file
server. For possessors of the encryption key, they have a cleartext view into this
valuable data. Non-possessors, naturally, cannot view this data. Even if a hacker
extracted the files containing valuable data, the data itself would be obfuscated unless the
hacker also steals the encryption key. To lessen the risk of stolen encryption keys and
encrypted data files coming together, encrypted data is frequently stored in one server
and the keys in another.
The inherent vulnerability in splitting encrypted keys and data is that they are not truly
split unless the authentication system used to release the encryption keys and encrypted
data files is also split. If not, compromising that authentication system undermines the
security of data encryption.
Distributed cryptography eliminates this vulnerability. As a replacement to a single-server
authentication system, all of the security attributes of distributed cryptography—
randomness, blind equity testing, refreshing, and deployment adaptability—now protect
split encryption keys and encrypted data.
DISTRIBUTED CRYPTOGRAPHY AT WORK
Another beneficial attribute of distributed cryptography is its “universal insert-ability.”
Distributed cryptography is a tool that can make permanent repairs to many of the
inherent challenges in securing secrets, frequently with very limited modifications to the
organization’s IT infrastructure and workflow. Here are two representative examples.
Online Businesses
As with most online businesses, their customers must authenticate to gain access; an
acceptable practice and one that typically entails customers entering their usernames and
passwords or another secret (e.g., PIN or an answer to a challenge question). Yet, as
highlighted earlier, password database breaches are in the headlines. For customers
directly affected and those that may be affected, the trust they had that their credentials
Adding to the appeal of
distributed cryptography
is its use in reducing the
risk of unauthorized
access to other types of
valuable data.
Distributed cryptography
is a tool that can make
permanent repairs to
many of the inherent
challenges in securing
secrets, frequently with
very limited modifications
to the organization’s IT
infrastructure and
workflow.

are safe in the business’s possession is shaken and they face the inconvenience of having
to change their passwords. Businesses that store their customers’ passwords in the
traditional manner—in a single server—wonder “could it happen to us, too?” It can.
With distributed cryptography, the passwords are randomized, split, and secured. The
risk of a breach involving these stored credentials is reduced and so is the risk of
password exposure during the authentication procedure. Blind equity testing allows the
masked passwords and pads to remain in their respective servers throughout the
authentication procedure. The masked password and the pads are never reassembled by
the online business.
Best of all, the adoption and operation of distributed cryptography is invisible to the
online business’s customers. For end users, their online routines are undisturbed.
Owner of High Value Intellectual Property
The implication to businesses that sustain a breach involving their intellectual property
(IP) can, for some, be terminal. What made the business special is now in someone else’s
hands. However, choosing to lock this IP away so only a few select individuals can access
it restricts the business’s ability to profit from that very same IP. Therefore, broader
access becomes a business imperative. Yet, in doing so returns the risk of unauthorized
access to this IP.
Distributed cryptography pushes that risk back down by protecting the two principal
secrets that open up authorized access to the IP: users’ authentication credentials and
data encryption keys.
Additionally, IP, at times, can represent the collaborative efforts and outcomes of
multiple parties. In this scenario, each has a stake in protecting authentication
credentials. The adaptive property of distributed cryptography allows each party to be an
equal partner in protecting the credentials, with the added benefit of taking protection
up a notch by distributing the pads and masked passwords across organizational and
physical boundaries.
The adoption and
operation of distributed
cryptography is invisible
to the online business’s
customers. For end users,
their online routines are
undisturbed.

Stratecast
The Last Word
In closing, protection of the secrets your organization owns or is entrusted with is
only as good as the investments your organization makes. In a world where the
sophistication and relentlessness of cyber threats is intensifying, investments are
essential to fight back.
Distributed cryptography is an investment that demands serious consideration. Not
only does distributed cryptography address head-on the long-standing vulnerability of
single point of compromise in the protection of authentication credentials, but it
does it in a way that is transparent to the user community, is boundless in the types
of secrets that can be protected, and is highly adaptive in deployment configurations.
Distributed cryptography also presents a new perspective on safe harbor provisions.
By strengthening the protection of authentication credentials stored and used in an
organization’s environment (i.e., registered credentials are randomized, distributed,
never in cleartext, and never reconstructed), and by enabling re-randomization of the
pads and masked passwords, organizations narrow the potential of data breaches and
the extent of data breach exposure.
In practical terms, distributed cryptography transforms a static secret, such as a
password, into a split and dynamic secret with a shelf life that is no greater than the
period between refresh cycles. By deploying distributed cryptography and periodically
refreshing the pads, organizations close the window on hackers. These organizations
are now armed with evidence that if compromises of their authentication systems
were to occur, they would either have no data breach impact (only one server
compromised) or the impact would be measureable (user accounts accessed between
refresh cycles). Consequently, an organization’s degree of data breach liability is
capped. Rather than having to notify all users with credentials contained in the
compromised authentication system (which could be in the millions), notification and
remediation is limited to only those users that had account activity between refresh
cycles, and only if both servers in the distributed cryptography system have been
compromised within the refresh cycle.
Moving forward in distributed cryptography calls for a vetted solution developed and
supported by a trusted provider. RSA is a heavy-weight provider of distributed
cryptography solutions. RSA’s new Distributed Credential Protection (DCP)
technology incorporates distributed cryptography as described in this white paper.
Plus, there are more capabilities; we have only provided a surface-level perspective.
Furthermore, RSA DCP is a “go and grow” type of solution. The nature of RSA DCP
being performed in the authentication system easily supports proof of concept and,
when moved into production, there is no impact on users.
Michael Suby
VP of Research
msuby@stratecast.com
By strengthening the
protectionofauthentication
credentials stored and
used in an organization’s
environment, and by
enabling re-randomization
of the pads and masked
passwords, organizations
narrow the potential of
data breaches and the
extent of data breach
exposure.

877.GoFrost • myfrost@frost.com
http://www.frost.com
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