Federal Reserve System

The Federal Reserve System is the central bank of the United States and debatably the most powerful financial institution in the world. The Federal Reserve System was instituted by the U.S. Congress in 1913 to deliver the nation with a innocuous, flexible, and stable monetary and financial system.

It is founded on a federal system that encompasses a central governmental agency (the Board of Governors) in Washington, D.C., and 12 regional Federal Reserve Banks that are each accountable for an exact geographic area of the U.S. The Federal Reserve is considered to be independent because its decisions do not have to be ratified by the president or any other government official. However, it is still subject to Congressional oversight and must work within the framework of the government’s economic and financial policy objectives. Often known simply as “the Fed.”

The Federal Reserve’s creation was precipitated by repeated financial panics that afflicted the U.S. economy over the previous century, leading to severe economic disruptions due to bank failures and business bankruptcies. A crisis in 1907 led to calls for an institution that would prevent panics and disruptions. The 12 regional Feds are built in Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco. The Federal Reserve’s responsibilities can be characterized into four wide-ranging areas:

Conducting national financial policy by influencing monetary and credit conditions in the U.S. economy to ensure maximum employment, stable prices and moderate long-term interest rates.
Supervising and regulating banking institutions to ensure safety of the U.S. banking and financial system and to protect consumers’ credit rights.
Maintaining financial system stability and containing systemic risk.
Providing financial services – including a pivotal role in operating the national payments system – to depository institutions, the U.S. government and foreign official institutions.

The Fed’s main income source is interest on a range of U.S. government securities it has acquired through its operations. Other income sources include interest on foreign currency investments, interest on loans to depository institutions, and fees for services (such as check clearing and fund transfers) provided to these institutions. After paying expenses, the Fed transfers the rest of its earnings to the U.S. Treasury.

Perpetual Future Contracts Explained

To understand the functions of a Perpetual Future Contract it is important to first fully understand the meaning of a future contract. A futures contract is an arrangement to buy or sell a commodity, currency, or another tool at a prearranged price at a definite time in the future.

Unlike an old-fashioned spot market, in a futures market, the trades are not ‘settled’ promptly. Instead, two counterparties will trade a contract, that defines the clearance at a future date. Also, a futures market doesn’t allow users to unswervingly purchase or sell the product or digital asset. Instead, they are trading a contract representation of those, and the actual trading of assets (or cash) will happen in the future – when the contract is exercised.

As a simple example, consider the case of a futures contract of a physical commodity, like wheat, or gold. In some traditional futures markets, these contracts are marked for delivery, meaning that there is a physical delivery of the commodity. As a consequence, gold or wheat has to be stored and transported, which creates additional costs (known as carrying costs). However, many futures markets now have a cash settlement, meaning that only the equivalent cash value is settled (there is no physical exchange of goods).

Additionally, the price for gold or wheat in a futures market may be different dependent on how far is the contract settlement date. The longer the time-gap, the higher the carrying costs, the larger the probable future price uncertainty, and the larger the potential price gap between the spot and futures market.

Perpetual Future Contract

A perpetual contract is a special type of futures contract, but unlike the traditional form of futures, it doesn’t have a termination date. So, one can hold a position for as long as they like. Other than that, the trading of continuous contracts is based on an underlying Index Price. The Index Price contains of the average price of an asset, according to major spot markets and their relative trading volume.

Thus, unlike conservative futures, perpetual contracts are often traded at a price that is equal or very similar to spot markets. Still, the principal difference between the traditional futures and perpetual contracts is the ‘settlement date’ of the former.

Advantages and Disadvantages of Fiat and Cryptocurrency

Since we’ve already understood what fiat currency and cryprocurrencies are in our previous blog. Let’s look at what advantages and disadvantages that each of them entails.

Advantages of Fiat Money

Fiat Money has remained legal tender in most countries in part because they are highly stable and controlled. Unlike other forms of money, such as cryptocurrencies and commodity-based currencies, fiat currencies are relatively stable. The stability allows regulators and governments to navigate the economy against recession and inflation. Stability also allows fiat money to act as a means of storing value and facilitating exchange. It can also be used to provide a numerical account. Greater control also allows central banks to manage various economic variables such as liquidity, interest rates and credit supply key to ensuring a robust, stable economy.

Disadvantages of Fiat Money

Though Fiat Money is considered a stable currency, yet that is not always the case. Economic recessions over the years have highlighted some of the deficiencies associated with Fiat money. The fact that a central bank’s greater control at times does little to stop inflation or recession has led most people to believe that gold could be a much stable currency given its unlimited supply. The notion of central banks control over the economy and the constant increase in global prices create the need for cryptocurrencies.

Cryptocurrencies Advantages

Cryptocurrencies are available on a click of a button, all over the world. Anyone that can make an online transfer can also acquire and own a digital coin of choice. Although the process is still complicated, in the futures, it will be easier to transact and own cryptocurrencies.

Fast settlement times are another attribute that continues to accelerate widespread adoption of virtual currencies. Unlike other electronic cash settlement systems that take days to process transactions, cryptocurrencies enable instant settlements. Lower transaction fees have seen cryptocurrencies emerge as a preferred means of sending money across borders. Transferring money using other bank gateways can be quite expensive given the number of fees charged along the way. Privacy is another aspect that has made cryptocurrency desirable as users don’t have to share their identity to be able to complete transactions. There are altcoins which the main functions are to maintain the privacy of people behind transactions.

Disadvantages of Cryptocurrencies

Cryptocurrencies can be quite difficult to understand – one of the reasons why some countries and regulators continue to shun them. A lack of knowledge on how to use them is another headwind that continues to clobber digital currencies prospects and sentiments. The fact that it is not possible to reverse a transaction once it is made is another headache that has forced most people to shun cryptocurrencies. If a wrong a transaction is made the only thing one can do is ask for a reversal from the recipient. There is nothing one can do on recipients of a wrong transaction turning down a request for a refund. Volatility is by far the biggest disadvantage that has clobbered cryptocurrencies sentiments. Volatility goes a long way in affecting the value of a coin, which can be difficult to comprehend or contend with.

Fiat Currency Vs Cryptocurrency

Before we get into the the differences lets understand what Fiat currency and Cryptocurrency. Fiat Money is a kind of currency, issued by the government and regulated by a central authority such as a central bank. Such currencies act like legal tender and are not necessarily backed by a physical commodity. Instead, it is based on the credit of the economy.

Fiat currencies such as the US Dollar, Pound or Euro derive their value from the forces of supply and demand in the market. Such currencies are always at risk of becoming worthless due to hyperinflation as they are not linked to any physical reserves such as commodities.

Fiat currency first came into being at around 1000 AD in China before spreading to other parts of the world. Initially, currencies were based on physical commodities such as gold. It is only in the 20th century that President Richard Nixon stopped the conversion of U.S dollar into gold.

A cryptocurrency is a form of digital or virtual currency that can work as a medium of exchange. Being virtual in nature, they use cryptography technology to process, secure and verify transactions.

Unlike Fiat currencies, cryptocurrencies are not controlled by any central authority such as a central bank. Instead, they are limited entries in a database such as a blockchain that no one can change or manipulate, unless certain conditions are met.

Cryptocurrencies came into being as a side product of Satoshi Nakamoto, the brainchild behind Bitcoin cryptocurrency. Nakamoto did not intend to develop a currency but a peer-to-peer electronic cash system for facilitating transactions without any central oversight.

The decentralization aspect of the network means there is no central server where transactions are hosted or controlling authority. In a decentralized network like Bitcoin, every transaction to have ever happened is displayed for everyone to see. Each transaction file also consists of senders and recipients’ public keys.

Differences Between Fiat Money and Cryptocurrencies

While both fiat money and cryptocurrencies can be used as a means of payment, there are some differences.

Legality

Governments issue fiat currencies, which are in return regulated by the central bank. Fiat money is deemed legal tender in that it is often the official means of finalizing transactions. Governments control fiat money supply and issue policies from time to time that affects their value.

Cryptocurrencies, on the other hand, are merely digital assets that act as a medium of exchange that governments have no control over. The decentralization aspect means no central body can control or influence their value.

Some countries have banned cryptocurrencies on concerns that some of them are being used to fuel illegal activities such as terrorism and money laundering.

Tangibility

It is not possible to have a physical feel of cryptocurrencies as they operate online as virtual coins. Fiat currencies, on the other hand, have a physical aspect as they can exist as coins and notes thus possible to have a physical feel. Fiat money physical aspect at times does present a lot of challenges as it can be a nuisance to move around with vast chunks of money.

Exchange Aspect

Cryptocurrencies exist in digital form as they are created by computers and operate as private pieces of code. The means of exchange is thus purely digital. In contrast, fiat money can exist in both digital and physical form. Electronic payment services allow people to transfer fiat money digitally. In addition, people can transact with one another and exchange money physically.

Supply

A major difference between fiat money and cryptocurrency has to do with supply. Fiat money has an unlimited supply which means central authorities have no cap to the extent in which they can produce money.

Most cryptocurrencies have a cap when it comes to supply, which means there is a set amount of coins that will ever be in supply. For example, the total number of Bitcoin coins that will ever be in supply is capped at 21 million.

With fiat money, it is impossible to tell the amount of money in circulation at any given time, but with cryptocurrencies, it is possible.

Storage

Cryptocurrencies virtual aspect means they can only exist online thereby stored in digital wallets commonly referred to as cryptocurrency wallets. While most digital wallets claim to offer secure storage, some of them have been hacked resulting in people losing a substantial amount of holdings.

The versatility of fiat money, on the other hand, means it can be stored in various forms. For instance, there are payment providers such as PayPal that allow people to store fiat money in digital form. Banks also do act as custodian of hard currencies. Cryptocurrencies and fiat money come with attributes that make them stand out as a means of legal tender regardless of jurisdiction. However, they also come with cons that have seen them continue to divide opinion around the world.

While there are many advantages of cryptocurrencies over fiat money, it seems that cryptocurrencies are not yet mature to replace the current standard payment method. It is a matter of time and not necessarily will be in the form of Bitcoin, Ethereum or any other cryptocurrency. The crypto market will most likely evolve to create a positive product that might change the current money system.

Financial Crisis of 2008

The 2008 financial crisis is the worst economic catastrophe since the Great Depression of 1929. It happened notwithstanding Federal Reserve and Treasury Department goes through great lengths to prevent it.

It led to the Great Recession. That’s when the cover prices fell 31.8 percent, more than the price plummet throughout the Depression. Two years afterward the slump ended, unemployment was still above 9 percent. That’s not as well as disheartened workforces who had given up observing for work.

The first sign that the economy was in distress happened in 2006. That’s when covering prices began to fall. At first, realtors celebrated. They thought the excited housing market would reappearance to a more justifiable level.

Realtors didn’t comprehend there were too many homeowners with dubious credit. Banks had permissible people to take out loans for 100 percent or more of the value of their new homes. Many liable the Community Reinvestment Act. It broke banks to make investments in subprime areas, but that wasn’t the fundamental cause.

The Gramm-Rudman Act was the real villain. It permitted banks to occupy in trading lucrative derivatives that they sold to investors. These mortgage-backed reservations needed home loans as guarantee. The offshoots fashioned a voracious demand for more and more mortgages.

Hedge funds and other financial institutions around the world owned the mortgage-backed securities. The securities were also in mutual funds, corporate assets, and pension funds. The banks had chopped up the original mortgages and resold them in tranches. That made the derivatives impossible to price.

Why did stodgy pension funds buy such risky assets? They thought an insurance product called credit default swaps protected them. A traditional assurance company known as the American International Group sold these swaps. When the derivatives lost value, AIG didn’t have enough cash flow to honour all the swaps.

The first signs of the financial crisis appeared in 2007. Banks panicked when they grasped, they would have to absorb the losses. They stopped offering to each other. They didn’t want other banks giving them worthless mortgages as guarantee. No one wanted to get stuck holding the bag. As a result, interbank borrowing costs, called Libor, rose. This mistrust within the banking community was the primary cause of the 2008 financial crisis.

The Federal Reserve began pumping liquidity into the banking system via the Term Auction Facility. But that wasn’t sufficient.

How It Could Happen Again

Many legislators blame Fannie and Freddie for the entire crisis. To them, the answer is to close or privatize the two agencies. But if they were shut down, the housing market would collapse. They guarantee 90 percent of all mortgages. Furthermore, securitization, or the bundling and reselling of loans, has spread to more than just housing.

The government must step in to regulate. Congress approved the Dodd-Frank Wall Street Reform Act to prevent banks from taking on too much risk. It allows the Fed to decrease bank size for those that become too big to fail.

But it left many of the procedures up to federal regulators to sort out the details. Meanwhile, banks keep getting bigger and are pushing to get rid of even this regulation. The financial crisis of 2008 proved that banks could not regulate themselves. Without government oversight like Dodd-Frank, they could create another global crisis.

Forward Contracts Vs Future Contracts

In this article we will look into the key differences between Future and Forward contracts. If you would like to keep yourself informed on the same then please read on…

Forward Contract

The forward contract is an agreement between a buyer and seller to trade an asset at a future date. The price of the asset is set when the contract is drawn up. Forward contracts have one settlement date—they all settle at the end of the contract. These contracts are private agreements between two parties, so they do not trade on an exchange. Because of the nature of the contract, they are not as rigid in their terms and conditions.

Many hedgers use forward contracts to cut down on the volatility of an asset’s price. Since the terms of the agreement are set when the contract is executed, a forward contract is not subject to price fluctuations. So, if two parties agree to the sale of 1000 ears of corn at $1 each for a total of $1,000, the terms cannot change even if the price of corn goes down to 50 cents per ear. It also ensures that delivery of the asset, or, if specified, cash settlement, will usually take place.

Because of the nature of these contracts, forwards are not readily available to retail investors. The market for forward contracts is often hard to predict. That’s because the agreements and their details are generally kept between the buyer and seller, and are not made public. Because they are private agreements, there is a high counterparty risk. This means there may be a chance that one party will default.

Futures Contracts

Like forward contracts, futures contracts involve the agreement to buy and sell an asset at a specific price at a future date. The futures contract, however, has some differences from the forward contract. First, futures contracts—also known as futures—are marked-to-market daily, which means that daily changes are settled day by day until the end of the contract. Furthermore, a settlement for futures contracts can occur over a range of dates.

Because they are traded on an exchange, they have clearing houses that guarantee the transactions. This drastically lowers the probability of default to almost never. Contracts are available on stock exchange indexes, commodities, and currencies. The most popular assets for futures contracts include crops like wheat and corn, and oil and gas. The market for futures contracts is highly liquid, giving investors the ability to enter and exit whenever they choose to do so.

These contracts are frequently used by speculators, who bet on the direction in which an asset’s price will move, they are usually closed out prior to maturity and delivery usually never happens. In this case, a cash settlement usually takes place.

The South Sea Bubble: An Introduction

The South Sea Bubble was formed by a more multifaceted set of situations than the Dutch Tulip mania, but has nonetheless gone down in history as an additional classic instance of a financial bubble. The South Sea Company was formed in 1711, and was promised a monopoly by the British government on all trade with the Spanish colonies of South America. Expectant a repeat of the achievement of the East India Company, which had a flourishing business with India, investors snapped up shares of the South Sea Company. As its directors circulated tall tales of unconceivable riches in the South Seas (present-day South America), stocks of the company gushed more than eight-fold in 1720, from £128 in January to £1050 in June, before crumpling in the succeeding months and instigating a severe financial crisis.

The South Sea Company‘s foundation in 1711 followed the normal joint-stock company model. A joint-stock company held a royal charter which allowable it certain privileges which other companies did not have. Joint-stock company shareholders were protected by limited liability. This meant that they could not be pursued for debts owed by the company. Secondly, joint-stock company shares were readily assignable, i.e. they could be passed easily to another holder by sale or gift. This was an important feature not shared by many other early financial instruments. For instance, government annuities were not readily assignable and could not be sold quickly if the holder required cash urgently. Joint-stock companies such as the South Sea Company sometimes performed debt-for-equity swaps for the government. They would offer their shares in exchange for government debt such as annuities. A debt for equity swap was supposed to benefit all parties. The government would reduce its costs and the complexity of managing its debts. The company would gain the right to increase its capital and gain bargaining power. The former government debt holders would have a more liquid asset with the possibility of higher returns.

The government had issued a large number of annuities as part of its war-financing programme. Annuities were supposed to pay a fixed sum each year, but the government’s payments often fell into arrears. Holders of annuities might prefer to swap their claims on the government for some other sort of investment. A debt-for-equity swap allowed them to exchange their annuities for joint-stock company shares. They would still be paid an annual fee which would now be administered by a company. Their new shares would also give them the possibility of dividend payments or capital gains (by selling the shares on). The shares were easy to sell or bequeath, which was a valuable feature in itself. It was difficult for a large number of small creditors to pressurise a government. By joining together under the aegis of a joint-stock company, small creditors could have a stronger voice. This might make it more difficult for the government to fall behind with payments.

The government could also benefit from a debt-for-equity swap. The bureaucratic costs were reduced as it could now deal with one company, rather than a myriad of small creditors. It had to pay a single fee to the company, rather than different fees to different people. Government debts had often been arranged on a short-term and ad hoc basis and were highly complex to manage. One type of debt contract which was particularly onerous was the so-called ‘irredeemable debt‘. Irredeemable were annuities which the government had no right to redeem, i.e. the government could not compel the holders of this type of debt to sell it back, so creditors often did not receive all the payments they were entitled to. This has to be taken in deliberation when likening annuities with South Sea shares.

Ideally, the government would have the option to redeem its debts. If market interest rates fell, then the government should borrow money cheaply in the market and use it to pay off its more expensive debts. For example, suppose that the government borrows £100 at an interest rate of 5 per cent. If the market interest rate drops to 2 per cent, then the government should borrow enough money to pay back the principal of £100 plus any interest owed and any bureaucratic fees. It now must pay 2 per cent rather than 5 per cent on its debt, but this should still constitute a saving. The government could not automatically take advantage of a fall in the interest rate when dealing with irredeemable debt. Therefore, it was important to persuade the holders of irredeemable annuities to relinquish their claims in exchange for joint-stock company shares.

What is Cryptojacking?

Cryptojacking (also called malicious cryptomining) is an emerging online threat that hides on a computer or mobile device and uses the machine’s resources to “mine” forms of online money known as cryptocurrencies. It’s a burgeoning menace that can take over web browsers, as well as compromise all kinds of devices, from desktops and laptops, to smart phones and even network servers.

Like most other malicious attacks on the computing public, the motive is profit, but unlike many threats, it’s designed to stay completely hidden from the user.

Cryptojacking is a scheme to use people’s devices (computers, smartphones, tablets, or even servers), without their consent or knowledge, to secretly mine cryptocurrency on the victim’s dime. Instead of building a dedicated cryptomining computer, hackers use cryptojacking to steal computing resources from their victims’ devices. When you add all these resources up, hackers are able to compete against sophisticated cryptomining operations without the costly overhead.

If you’re a victim of cryptojacking, you may not notice. Most cryptojacking software is designed to stay hidden from the user, but that doesn’t mean it’s not taking its toll. This theft of your computing resources slows down other processes, increases your electricity bills, and shortens the life of your device. Depending on how subtle the attack is, you may notice certain red flags. If your PC or Mac slows down or uses its cooling fan more than normal, you may have reason to suspect cryptojacking.

The motivation behind cryptojacking is simple: money. Mining cryptocurrencies can be very lucrative, but turning a profit is now next to impossible without the means to cover large costs. To someone with limited resources and questionable morals, cryptojacking is an effective, inexpensive way to mine valuable coins.

How does cryptojacking work?

Cryptojackers have more than one way to enslave your computer. One method works like classic malware. You click on a malicious link in an email and it loads cryptomining code directly onto your computer. Once your computer is infected, the cryptojacker starts working around the clock to mine cryptocurrency while staying hidden in the background. Because it resides on your PC, it’s local—a persistent threat that has infected the computer itself.

An alternative cryptojacking approach is sometimes called drive-by cryptomining. Similar to malicious advertising exploits, the scheme involves embedding a piece of JavaScript code into a Web page. After that, it performs cryptocurrency mining on user machines that visit the page.

In early instances of drive-by cryptomining, web publishers caught up in the bitcoin craze sought to supplement their revenue and monetize their traffic by openly asking visitors’ permission to mine for cryptocurrencies while on their site. They posed it as a fair exchange: you get free content while they use your computer for mining. If you’re on, say, a gaming site, then you probably will stay on the page for some time while the JavaScript code mines for coin. Then when you quit the site, the cryptomining shuts down too and releases your computer. In theory, this isn’t so bad so long as the site is transparent and honest about what they’re doing, but it’s hard to be sure the sites are playing fair.

More malicious versions of drive-by cryptomining don’t bother asking for permission and keep running long after you leave the initial site. This is a common technique for owners of dubious sites, or hackers that have compromised legitimate sites. Users have no idea that a site they visited has been using their computer to mine cryptocurrency. The code uses just enough system resources to remain unnoticed. Although the user thinks the visible browser windows are closed, a hidden one stays open. Usually it’s a pop-under which is sized to fit under the task bar or behind the clock.

Stay tuned to learn how to stay safe form cryptojacking and how to prevent it altogether.

MAN IN THE MIDDLE (MITM) ATTACK

A man-in-the-middle attack is a category of cyberattack where a malevolent actor inserts him/herself into a tête-à-tête between two parties, impersonates both parties and receives access to data that the two parties were trying to send to each other. A man-in-the-middle attack allows a malevolent actor to intercept, send and receive data meant for someone else, or not meant to be sent at all, without either outside party knowing until it is too late. Man-in-the-middle attacks can be abbreviated in many ways, including MITM, MitM, MiM or MIM.

Key Concepts of a Man In The Middle Attack

Man-in-the-middle is a type of eavesdropping attack that occurs when a malicious actor inserts himself as a relay/proxy into a communication session between people or systems.
A MITM attack exploits the real-time processing of transactions, conversations or transfer of other data.
Man-in-the-middle attacks allow attackers to intercept, send and receive data never meant to be for them without either outside party knowing until it is too late.

Interactions that are susceptible to MITM Attack

Financial sites – between login and authentication
Connections meant to be secured by public or private keys
Other sites that require logins – where there is something to be gained by having access

Other Forms of Session Hijacking

Man-in-the-middle is a form of session hijacking. Other forms of session hijacking similar to man-in-the-middle are:

Sidejacking – This attack involves sniffing data packets to steal session cookies and hijack a user’s session. These cookies can contain unencrypted login information, even if the site was secure.
Evil Twin – This is a rogue Wi-Fi network that appears to be a legitimate network. When users unknowingly join the rogue network, the attacker can launch a man-in-the-middle attack, intercepting all data between you and the network.
Sniffing – This involves a malicious actor using readily available software to intercept data being sent from, or to, your device.

General Security Principle: Introduction

A principle which is a core obligation of information security for the safe utilization, flow, and storage of information is the CIA triad. CIA stands for confidentiality, integrity, and availability and these are the three main objectives of information security. For a deeper look into these objectives, check out our security training classes.

The Application Access Layer defines the notion that access to end-user applications have to be constrained to business ought-to-know
The Infrastructure Access Layer describes the notion that access to infrastructure components has to be constrained to business ought-to-know. For instance, access to servers.
The Physical Access Layer describes the notion that the physical access to any system, server, computer, data centre, or another physical object storing confidential information has to be constrained to business ought-to-know.
The Data In Motion Layer describes the notion that data ought to be secured while in motion.
This little icon in the middle of the illustration shows the centre of information security and the reason for the emergence of the CIA principles; the icon represents information and represents the need to protect sensitive information.

Confidentiality

The aim of confidentiality is to ensure that information is hidden from people unlawful to access it. The confidentiality principle dictates that information should solely be viewed by people with appropriate and correct privileges. The science (and art) used to ensure data confidentiality is cryptography, which involves encryption and decryption methods.

Confidentiality can be easily breached so each employee in an organization or company should be aware of his responsibilities in maintaining confidentiality of the information delegated to him for the exercise of his duties. For instance, if an employee allows someone to take a glimpse of his computer screen while he is, at that moment, displaying confidential information on the computer screen may have already constituted a breach of confidentiality.

Furthermore, confidentiality and privacy are often used interchangeably. Below, we discuss cryptography, operative manners of protecting confidentiality, and we have included some tips on confidentiality agreements.

Cryptography

Cryptography’s beginning can be traced thousands of years ago. However, the contemporary cryptography differs substantially from the classic one, which used pen and paper for encryption and which was far less complex. The establishment of the Enigma rotor machine and the subsequent emergence of electronics and computing enabled the usage of much more elaborate schemes and allowed confidentiality to be protected much more effectively.

Encryption is an accepted and effective way of protecting data in transit but is increasingly being used for protecting data at rest as well. The Computer Security Institute published the results of a survey in 2007, which showed that 71% of the businesses used encryption for various data in transit while 53% used encryption for selections of data at rest. Furthermore, there are different techniques for preserving confidentiality depending on whether the data is in motion, at rest or a physical object. Naturally, access controls are also a necessity for maintaining confidentiality. Access controls can consist of passwords, biometrics, or a mixture of both. As regards to physical data, its means of protection are somewhat similar – access to the area where the information is kept may be granted only with the proper badge or any different form of authorization, it can be physically locked in a safe or a file cabinet, there could be access controls, cameras, security, etc.

Encryption consists of changing the data located in files into unreadable bits of characters unless a key to decode the file is provided. In manual encryption, the user utilizes software and initiates the encryption. In transparent encryption, the encryption happens automatically without any intervention on the side of the user.

Symmetric encryption occurs by utilizing character substitution with a key that will be the only means of decrypting the bits of information. Conversely, asymmetric encryption is used when there are two keys, a public key, and a private key. Any person may encrypt the information with the public key but it can only be decrypted by the holder of the private key.

Watch this space for more information on this topic!