What Is a Hardware Security Module and Why Is It Important?

With how much data is exchanged daily, it’s a growing necessity that organizations maintain iron-clad and multi-layered security measures. Hardware Security Modules offer a physical solution that shores up some of the weaknesses of traditional strategies.

Correctly implementing HSMs allows professionals to secure transactions, IoT devices, and vital records. Understandably, they’ve become indispensable to the modern cybersecurity landscape, which is increasingly leaning toward cloud-based solutions and their accompanying vulnerabilities.

What is a Hardware Security Module (HSM)?

Hardware security modules are physical devices that add another layer of protection for important data. These devices create, distribute, and delete cryptographic keys while data moves from place to place.

HSMs can be standalone plugin cards or integrated into another piece of hardware. They’re also versatile enough to accommodate use for both active and offline servers.

Organizations rely on HSMs to perform cryptographic functions that hide or limit access to specific operations. HSMs provide a separate and centralized location to manage cryptographic keys rather than keeping them on components like applications, CPUs, memory cards, or storage drives.

There are two major types of HSMs: General Purpose and Financial.

• General Purpose: This type of module handles an organization’s standard data encryption processes. It is the more flexible of the two types and handles the majority of data flow in a business.
• Financial: This module type comes in when the former isn’t up to the task. It comes with extra features designed to comply with standards set by The Payment Card Industry Security Standards Council. As such, financial HSMs are used mainly by financial institutions.

How Do Hardware Security Modules Work?

Protecting keys within a cryptographic system is paramount in upholding system security. Nevertheless, effectively managing these keys throughout their use periods is an issue. Endpoint devices are thrown out, taken home, or can be compromised through various social engineering attacks.

These situations give Hardware Security Modules their value in helping manage cryptographic operations. Every HSM goes through the following steps:

• Step 1: The module generates the keys through a dedicated system or outsourced party. This step relies on using a random number-generating algorithm that’s confirmed to provide a high level of password entropy.
• Step 2: The HSM creates a backup of the keys in case of an emergency. While these can be stored on a separate media device, keeping them on a continuously protected and centralized source is best. The stored keys may be further encrypted based on their security risks.
• Step 3: The stored keys are organized and kept under surveillance for signs of tampering. This monitoring is determined by specific standards and the level of compliance the organization strives for.
• Step 4: Inactive keys are archived for future use. For example, a decommissioned key may be pulled up for decrypting old financial data during an audit. The management system may determine that a key no longer serves a purpose and ultimately eradicate it from the archives.

Additionally, HSMs can generate and authenticate digital signatures. Every interaction and access instance is meticulously recorded, so there’s a trail to follow in future investigations. This considerably smooths out an audit process as the data can be easily translated to traditional paper records.

Benefits of a Hardware Security Module

Organizations often question the necessity of introducing HSMs into their processes, given the growing capabilities of servers in generating unique keys. While HSMs aren’t the most accessible tool to implement, they’re still unmatched regarding cryptographic security.

HSMs exist outside the organization’s network. This border placement forces potential attackers to physically breach the HSM if their goal is the protected data. Additionally, HSMs possess unique security features that protect data against threats, including:

• Cryptographic Attacks
• Side-Channel Attacks
• Unauthorized Access
• Malware
• Insider Threats

Finally, HSMs utilize curated and tested random number generators to craft the strongest cryptographic keys. Organizations can have complete trust that their entropy algorithms aren’t lazily manufactured with abusable patterns.

Disadvantages of a Hardware Security Module

This technology certainly isn’t without its downsides. The most apparent barrier to integrated HSMs is their cost. Microsoft’s Azure Dedicated HSM has an hourly usage fee of $4.85/hour, and setting up your own could be even more expensive, depending on how it’s managed.

Apart from the upfront and maintenance costs, organizations must keep up with new trends in the field and update their setup accordingly. In some cases, it’s more dangerous to use an outdated security measure than to omit it entirely.

While we previously praised HSMs random number generation, it’s also true that providers aren’t the most transparent entities. They don’t open-source their generators and let the good folks of GitHub test them to oblivion. So, finding a trustworthy service outside of major (and expensive) names is a challenge.

Despite their shortcomings, hardware security modules are undeniably worth the trouble. They fill a unique and often overlooked role in most cybersecurity infrastructures. 

What are Important HSM Features?

Hardware Security Modules have many security features that make them safer than traditional key management.

• Rigorous Hardening Process: HSMs undergo a hardening process designed to increase their resistance to unauthorized interference. Cybersecurity professionals locate exploitable vulnerabilities in the hardware and rigorously test them to reduce the attack surface.
• Customized Operating System: HSMs don’t run on one of the major operating systems or a Linux variant. Most use a proprietary OS that heavily emphasizes security rather than user features.
• Detached Storage: HSMs are separated from other segments of the infrastructure. Doing so makes HSMs easier to protect from physical tampering.
• Strict Access Controls: HSMs exercise tight control over data access. These modules are designed to display obvious signs of tampering, which makes it easier for professionals to recognize and address problems. Highly compliant HSMs will go as far as wiping their storage entirely in response to tampering.
• Application Programming Interfaces (API): Skilled cybersecurity professionals can customize HSMs to better fit their needs through a versatile array of APIs.

Compliance Standards Surrounding Hardware Security Modules

Various laws and regulations are in effect to ensure HSMs are doing their job. The Federal Information Processing Standard (FIPS) is the most important set of regulations, which confirms whether hardware is effective.

Both American and Canadian governments can validate FIPS certificates, specifically FIPS 140-2. The standard has been internationally accepted and is separated into four levels of compliance with increasing levels of quality.

• Level 1: The minimum security measures to earn the FIPS 140-2 certification. HSMs include a cryptographic algorithm and align with the general-purpose model. All modules must be compatible with all operating systems to ensure technological changes don’t invalidate security.
• Level 2: Includes all requirements set in Level 1 but must also include tamper response. HSMs must be able to separate entities into roles and designate access privileges accordingly. Software implementations must use an operating system that’s passed EAL2 Common Criteria.
• Level 3: Mandates tamper resistance, tamper response, and identity-based authentication models to be set by the organization. HSMs strictly control cryptographic keys, so they can only be moved in an encrypted state. This level also requires protection from other security parameters spread throughout the organization’s infrastructure.
• Level 4: Most organizations are happy to stop at a level 3 certification, but some may want to aim for level 4 and earn some brownie points in the process. This rank ups the ante on physical security and demands HSMs be tamper-active by voiding stored data if it detects an attack.

Apart from FIPS 140-2, HSMs can also be tested under Common Criteria. This compliance standard is internationally recognized for HSMs and across countless procedures and products in cybersecurity. Similarly to FIPS 140-2, Common Criteria is separated into increasing quality levels, starting with level 1 and culminating in level 7.

The last compliance standard, the PCI PTS HSM version 3.0, applies only to financial-type HSMs. Its specifications list protections around PIN processing, card verification, ATM interchange, and many other similar processes.

Use the Benefits of Hardware Security Modules to Your Advantage

Organizations, especially businesses, have a moral and financial responsibility to defend data. Hardware Security Modules are one of the most effective, trusted, and regulated ways to pull that off effectively. By isolating your cryptographic processes away from the usual spaces, criminals are left wondering where to strike.

IDStrong's blog has dozens of posts covering the myriad of threats you’ll face while conducting online activities, professional or otherwise. Contact our team to learn more about the dark side of the web and how to protect yourself better moving forward.