Exploring Hardware Security Modules, its Types, and Applications!

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Hardware Security Modules

In the current interconnected world, the possibility of cyberattacks is inevitable. As per stats, the number of zero-day attacks has increased by almost 200% since 2011. And this number is not reducing in any way. Around 42% of all cyberattacks in 2021 were zero-day attacks. These attacks cause organizations a butt load of money. Now, the core thing to understand here is that these financial losses can be reduced. How? By using Hardware Security Modules!

As over 43% of cyberattacks are targeted at SMBs, the loss of money is significant. The cybercrime loss is already racing to hit $10.5 trillion by 2025, which is a mind-boggling number. Looking at the numbers, it is easy to say that HSM security is imperative.

The term HSM might seem a bit unfamiliar to many of you. But, it has been in use for security for over a decade. Here in this article, we will analyze the hardware security module to its core. This piece will uncover the definition, utility, applications, and various other aspects of HSM.

Let’s get started!

What are Hardware Security Modules?

It is easy to understand if you are providing customers with the assurance of security. You need to employ state-of-the-art methods to keep your sensitive data safe. Most importantly, it is necessary to keep your security systems intact.

HSM is one of those intact security systems used by 47% of the firms as of 2021. We all know that organizational websites and devices use encryption to keep your data secure. But what if the hacker gets hold of the cryptographic keys? It will be catastrophic from the digital perspective.

HSM or hardware security module is a physical device that houses the cryptographic keys securely. These hardware components are intrusion and tamper-resistant, which makes them ideal for storing keys. Moreover, the HSM hardware security module also enables encryption, decryption, authentication, and key exchange facilitation.

Being a physical device, the hardware security module has a powerful OS connected to restricted network access. It means that only authorized personnel can access its functionality.

The coolest part of an HSM system is that it allows the employees to use the keys without direct access. The software used by the web server handles all the cryptographic functions without loading a copy of the keys on the server. As servers can be vulnerable to cyberattacks like DDoS, you can rest assured that the keys are stored securely.

How do Hardware Security Modules work?

Well, the core aspect of an HSM module is that it does not let the cryptographic keys leak out. It handles all the security operations within its system and provides you with the desired result, just like a vending machine.

A vending machine does not let you touch or tamper with its inside contents. But, when you provide an input to the vending machine and pay for what you want, it dispenses the snack.

Similarly, if a user wants to get a digital certificate signed, they can provide it to the HSM. The HSM system accepts the certificate, signs it with the cryptographic key in the isolated environment, and sends it back. The user receives the signed certificate without accessing the cryptographic key.

What are the different types of Hardware Security Modules?

Now, the basic functionality of the Hardware Security Module is clear. Let’s take a look at the types of HSMs.

As the need of each business is different, the HSMs required for them also change. For example, HSMs can be divided based on their usage and form.

HSMs based on usage

As the usage of businesses varies based on their size and niche, HSMs used by them are also different. HSMs can be categorized into two types based on their usage!

  1. General-purpose HSMs: The general purpose HSM uses the most common HSM encryption algorithms. It is useful for businesses that deal in the basic form of security systems. This includes basic sensitive data, public key infrastructures, cryptocurrencies, and more.
  2. Payment Hardware Security Module: As the name clearly depicts, the Payment Hardware Security Module is used by financial institutions. Primarily leveraged by the banking industry, the module is used for protecting cryptographic keys and customer PINs. When customers use the magnetic stripe and EVM cards to handle payments, the payment hardware security module securely handles the transactions.

The payment hardware security module has numerous functions!

  • Sharing keys with third parties for transactions securely.
  • PIN generation, validation, and management.
  • PIN blocking ability while switching ATMs and POS.
  • Point-to-point encryption key management and secure data encryption.
  • Credentials issued for payment cards.

Here is an overview of general-purpose and payment hardware security modules!

TypeGeneral-purposePayment HSM
Formats/TypesDedicated physical hardware devices and appliances.   Cloud-based access to a vendor’s physical devices or virtual functionalities.Dedicated physical hardware devices and appliances.
Compliance requirements and standardsFIPS 140-2 (level 3 or higher)   Common Criteria (ISO/IEC 15408)   EN 419 221-5PCI HSM   FIPS 140-2 (level 3 or higher)   ANSI   ICO and various regional and payment card industry vendors’ specific security requirements
API support specsPKCS#11, CAPI/CNG, JCA/JCENon-standardized APIs
IndustriesGovernment and Public Sector   Cyber Security   Entertainment ServicesBanking and Financial Institutions

HSMs based on form

So far, we know that HSMs are of physical form, but that’s not the end of the topic. As businesses evolve, HSMs also need to be changed.

For example, if today, you are using an HSM in a small USB drive or a plug-in card, you may need a bigger one tomorrow. These devices can then get transformed into large external drives and appliances that can take up more space. With size, the hardware security module price also increases.

Now, if you are one of those firms that do not have enough budget, you need not worry. If you cannot make a full-fledged investment in a physical HSM, you can go for a cloud-based HSM.

When you use a cloud-based HSM, you have the following options!

  1. Pay for accessing the functionalities of an HSM vendor’s appliance or device.
  2. Pay for accessing the virtual environment within a shared HSM.
  3. Rent a physical HSM device that gets stored in your off-site data center.

By renting or using the HSM of a vendor, you can get the same services at a smaller cost. Amazon Web Services, IBM, and Thales are some of the leading hardware security module vendors.

Each type of HSM, physical, or cloud, has its pros and cons. Hence, when you are making a choice, keep all the necessary factors in mind and read the SLA (service level agreement).

So based on form, there are two types of HSMs, namely physical and cloud HSMs.

What are the key uses of Hardware Security Modules?

Being a self-contained unit housing highly sensitive data, the HSM has countless purposes and applications. Here are some of the prime ones!

Cryptographic key protection and generation

One of the primary functions of an HSM is to store, protect, and generate cryptographic keys. The keys are generated within the HSM with a true random number generator. The TRNG produces unique and unpredictable keys ideal for encryption. Further, these keys are stored securely and protected inside the HSM until they are destroyed.


Though an HSM module is tamper-resistant, both physically and logically, it can be captured. In case of such an event, a possibility of data tampering may arise. Hence, HSMs are made to destroy everything that they contain to avoid any type of data compromise.

Boost server performance

It is normal for servers to get overloaded in a business digital architecture. And if HSMs are present, they can be of great use. HSMs can offload the cryptographic operations and take care of the operations that are slowing down the servers. Some of them are made to act as web traffic accelerators when required.

Prevent Insecure extractions

Though it is highly unlikely, HSMs are built to prevent insecure extractions. How? They store the keys in an encrypted form which prevents any sort of extraction in the form of plain text.

Protects the keys required for your internal operations

Businesses require cryptographic keys for internal processes like development, testing, and production. As these keys have to be accessible to some people only, the HSM enables the functionality of access control. However, direct access is not provided to any. It is advised not to use the same HSM across multiple environments.

How do Hardware Security Modules ensure data security?

We have been talking about cryptographic key security for a while now. We know that an HSM protects the keys from getting tampered with. But how?

Here is the answer!

The HSMs are kept independent of the server network to ensure superior security. So, if the hacker has to access the HSM, they need to do it physically. Even if someone gets their hands on the HSM, they may not be successful. Hardware security modules are fitted with various protection measures like voltage sensors, temperature sensors, and drill protection mechanisms. These mechanisms shield the data from unauthorized access. If, in any way, the cybercriminal tends to breach these barriers, the HSM will self-destruct its contents to prevent data compromise.

Where and who uses Hardware Security Modules?

With these widespread and critical applications, HSMs are used by various industries and businesses.

  • IoT device developers
  • Financial organizations like banks, credit card companies, etc.
  • Cloud service providers
  • Entertainment service providers like OTT platforms (protecting digital watermark properties)
  • Certificate authorities
  • Blockchain and crypto mining and management organizations

Wrapping Up!

The cybersecurity space is changing, and the number of cyberattacks is increasing day by day. In a world where businesses run solely on data, it is imperative to have a powerful HSM system on the side. An HSM system, as elaborated, is your one-many army for data protection. Make sure you back your internet communications and transactions with the best HSM encryption. We hope this article helps you with the same.

Janki Mehta

Janki Mehta

Janki Mehta is a Cyber-Security Enthusiast who constantly updates herself with new advancements in the Web/Cyber Security niche. Along with theoretical knowledge, she also implements her practical expertise in day-to-day tasks and helps others to protect themselves from threats.