仮想通貨に関する用語集(CRYPTO GLOSSARY) K行

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Keylogger

A keylogger is a tool deployed by hackers to record keystrokes and access sensitive data from a victim’s computer. In the crypto industry, cybercriminals often use it as an instrument to steal important information.

What is a Keylogger in Crypto?

A keylogger, also called a keystroke logger, is a hardware device or a software program that monitors and records the keystrokes pressed by someone on a computer.

Hackers use keyloggers to steal confidential details like private keys, passwords, bank details, browsing history, etc.

There are two types of keyloggers: hardware and software. Hardware keyloggers connect to the computer through a cable, wire, USB port, or built-in device (like a chip).

They sometimes have a camera that captures keystrokes or a USB device that sends malware to the victim’s computer to track all information.

Software keyloggers are software programs that are installed in the victim’s computer to collect data and screenshots. Often difficult to detect, software keyloggers can be in web forms or APIs.

How to Avoid a Cyber Attack From Keyloggers

Here are a few ways to protect against keylogging attacks:

・Use a hardware or cold wallet to keep your digital assets safe; cold wallets are offline, and therefore not connected to the internet.

・Use a trusted antivirus software or anti-keylogger to detect any keylogging activity on your device.

・Avoid opening suspicious links and attachments, or downloading suspect files.

・Enable two-factor authentication (2FA) and OTPs (one-time passwords) for accessing exchange accounts and wallets, or to conduct transactions.

・Keep your operating system, anti-malware, and other software applications up to date.

Know Your Customer (KYC)

KYC or “Know Your Customer” is a procedure used within financial institutions to confirm their customers’ identities and prevent fraudulent activity.

What is Know Your Customer in Crypto?

Know Your Customer is an anti-money laundering (AML) due-diligence regulation.

As with traditional financial institutions, it is mandatory for many crypto service providers. These regulations are designed enable transactions to be tied to customers’ real-world identities, in an effort to detect and mitigate tax evasion, terrorist financing, and prevent other financial crimes.

KYC is a common protocol in investment firms, insurance agencies, banks, and other financial institutions to ensure that all customer information and data is genuine.

KYC policies are also important to verify whether a customer is involved in any fraudulent activity.

What KYC Information is Required?

The main objective of KYC is to prevent crypto for being used to facilitate illicit activities, or launder money.

Although some crypto exchanges allow their customers to open an account without going through the KYC process, these accounts will be highly restricted until they complete their verification process.

They limit the amount that customers can deposit, and may restrict them from purchasing assets or withdrawing funds.

The KYC process may vary depending on the exchange, but in general, an exchange will ask for details, including:

・Customer name

・Social Security number

・Account number

・Date of birth

・Residential address (proof of residency)

・Electronic identity verification

・Government-issued ID cards such as passports, driver’s licenses, utility bills, etc.

The exchange validates this information from official databases and assesses whether they are in compliance with the KYC measures.

They will also assess if the customer has a high-risk or low-risk profile, or is involved in any corruption or criminal activity.

They will also screen a customer to see if they are:

・A politically exposed person (PEP)

・Involved in adverse media (negative or unfavorable news)

・Part of international sanctions.

What is the Point of KYC in Crypto?

Most cryptocurrencies are unregulated assets and do not fall under the jurisdiction of any centralized authority, banks, or AML restrictions.

Crypto transactions are anonymous and fast, making it easier for bad actors to engage in money laundering schemes.

KYC procedures help limit these criminal activities, prevent scams, and boost user confidence in crypto as a whole by ensuring that crypto exchanges are safe places for financial transactions.

Benefits of KYC in Crypto

The benefits of KYC regulations include:

・Ensure compliance for platforms – KYC procedures help businesses and financial organizations comply with state legislations and international norms, reducing legal disputes and risks.

・Build customer trust and transparency– Many crypto exchanges are still unregulated and can facilitate nefarious activities. KYC processes largely prevent this and help build trust.

・Enhance market stability – Identity verification secures transactions to support stability in the market.

・Safeguard reputation – By evading criminal activities, organizations can protect their funds, prevent damages, and protect their reputation in the market.

・Curb money laundering cases – The crypto market reported a 30% hike in money laundering from 2020 to 2021.

KYC is an important preventive measure that crypto exchanges can undertake to curb money laundering.

Risks of KYC in Crypto

Cryptocurrencies are a part of the decentralized economy, and any regulation compels them to remain under the control of a regulatory authority.

KYC also affects anonymity, as customers must share their personal information with a centralized authority.

Identity verification is time-consuming and can delay transactions and other financial activities.

Moreover, it also provides an opening for hackers to steal customers’ personal information from exchange databases.

Known Plaintext Attack

A known plaintext attack is a type of cyber attack where the bad actor has access to encrypted data and its corresponding plaintext.

What Is a Known Plaintext Attack?

A known-plaintext attack or attempt (KPA) is a type of cryptographic attack where an attacker has access to both the ciphertext and the plaintext (called crib) of data.

This plaintext-ciphertext pair allows the attacker to compare and analyze the pair in an attempt to retrieve the secret key or encryption method.

What’s more, retrieving the secret keys allows the attackers to decode other messages encrypted using the same keys or encryption technique.

In other words, the attackers try to reverse engineer the encryption algorithm by analyzing the relationship between the known pair and trying to match the plaintexts with their ciphertext counterparts.

How Does KPA Work?

In KPA, the attacker collects pairs of the crib and the matching ciphertext from data leaks or intercepted communications.

Technically speaking, having access to even a single plaintext-ciphertext pair is enough for a bad actor to exploit the weaknesses of an encryption algorithm.

Of course, the more pairs the actor acquires, the higher their chances of discovering the secret key and encryption method.

The bad actor then compares the plaintext characters or letters with corresponding ciphertext letters to understand how each plaintext character is transformed into a different character in the ciphertext.

After this analysis, the actor guesses the cipher or determines the encryption method based on the changes between the plaintext characters and their corresponding ciphers or positioning.

The attacker then uses the pattern they’ve figured out to decode other parts of the message or other messages encrypted using the same keys or encryption technique.

For example, consider a simple Caesar cipher, which shifts each letter by a fixed number of positions. If the bad actor knows the crib “HELLO” as well as the corresponding cipher “KHOOR,” the attacker can deduce the key by shifting each letter by three positions.

Techniques Used to Exploit KPA

Attackers can exploit KPA in three ways – frequency analysis, pattern matching, and statistical analysis.

・Frequency analysis – In frequency analysis, the attacker compares the frequency of characters in the plaintext-ciphertext pair, allowing the attacker to replace each character with a specific one. For example, “e” is the most frequent letter in English text. An attacker can suspect a recurring character in the ciphertext to correspond to “e” in plaintext. The attacker can use this little information to recover the key or crack the rest of the data.

・Pattern matching – This involves the attacker identifying recurring patterns in the pair. If there’s consistency in a specific sequence of characters in the plaintext-ciphertext pair, they can identify the trend and use the pattern to figure out the encryption technique.

・Statistical analysis – This involves analyzing the distribution of characters and other statistical properties. The bad actor applies statistical methods to establish a likely pattern within the ciphertext based on the known crib.

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