2 news stories on the same day are quite interesting in their contrast.
Pin and Chip is broken
The first one has the collective might and minds of the European banking system and their suppliers who overlooked a slight issue in their authentication protocol for authenticating Chip cards with a pin number. In Europe most Visa/MC cards are smart cards and have to be authenticated with a pin. This in theory allows for an authenticated payment message.
Only problem was that, well one very important bit of the message was not authenticated leaving a gaping hole. I won’t go into the details as well as Ross Anderson does. He is one of the security researchers who discovered the flaw. Unfortunately it sounds like carders discovered it before them.
Now what to do with these supposedly safe authenticated transactions? There is no way of knowing which ones were fake. You can’t mass revoke all european cards. Some one is in a bit of a bind right now.
Grader’s security screw up
The second story was about HubSpot a Cambridge, Mass. based startup who self admittedly screwed up and let a malicious user comprise the security of their Grader service a rating service for twitter users.
Granted we are not talking about a system that handles the majority of Europe’s electronic point of sales transactions here. But they know they screwed up. However due to the fact that Grader used OAuth they were able to mitigate any damage pretty quickly by asking Twitter to revoke their Consumer credentials and any tokens they had issued to it.
The difference is that while both Chip and Pin and OAuth are ways of doing delegated authentication, the only token to revoke in the Chip and Pin scheme is in the card itself. The standards behind Chip and Pin assumes that it’s technology is perfect and through their rule books that all parties involved along the long chain from the card to the issuing bank can automatically be trusted.
This is basically the exact issue I described in The sorry state of Payment Standards.
OAuth does not define how a user authenticates himself to either of the services involved, rather it is focused on the delegation.
The delegation is done in the form of an authorized token that can be equipped with limits and can at any time be revoked. It is under the control of the user. In this case Grader themselves request the revocation as they knew that all of their credentials were compromised. Where do the European bankers even start to clean up this mess?
I think OAuth a simple (as authentication standards go) standard developed on a mailing list by a small group of developers has incredible potential in payments applications. This is of course why we picked it as one of the fundamental building blocks for OpenTransact.
Is OAuth perfect? Probably not. Nothing is 100% secure. It has had one serious security flaw which was fixed. But by design it is revokable. You can do something about it if something goes wrong. There is now an IETF OAuth Working Group working on making it an official internet standard.