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November 30, 2023
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 min read

Data Encryption 101: How it Works and Why it Matters ?

Data encryption is the process of converting readable information into a secure code to prevent unauthorized access. Learn more about it in this guide.

Data Encryption 101: How it Works and Why it Matters ?
Calendar Icon White
November 30, 2023
Clock Icon
 min read

Data Encryption 101: How it Works and Why it Matters ?

Data encryption is the process of converting readable information into a secure code to prevent unauthorized access. Learn more about it in this guide.



  • Data protection and encryption are critical security methods that encode information into a secret code, protecting it from unauthorized access.
  • Encryption relies on robust algorithms and keys, which are used to maintain the privacy and integrity of data and prevent unauthorized use.
  • Strac enhances data encryption with compliance adherence, seamless business platform integration, and advanced security features.

According to a report by Varonis, a staggering seven million unencrypted data records are compromised daily. As cyber threats evolve, encryption becomes the frontline defense, ensuring data privacy and integrity. This article aims to demystify data encryption, breaking down how it works, its diverse applications, and why it's vital for safeguarding our digital information today.

What is Data Encryption?

Encryption working diagram

Data encryption is a security method where information is encoded into a cipher or secret code, making it inaccessible to unauthorized users. This process transforms readable data, known as plaintext, into an encrypted format, often called ciphertext. 

Encryption is critical in protecting sensitive data from unauthorized access, cyber threats, and data breaches. It ensures that even if data is intercepted or compromised, it remains secure and unreadable to those without the necessary decryption key.

How does Encryption Work?

Out of Encryption Showcase

Data encryption operates through a sophisticated blend of mathematical algorithms and digital keys, forming the backbone of this security process. At its most basic level, encryption involves taking plaintext, i.e., the original, readable data, and applying a mathematical algorithm to transform it into ciphertext. There are two main types of encryption: 

Symmetric Encryption

Symmetric encryption, also known as private-key encryption, uses the same key for both encrypting and decrypting data. This method is efficient and fast, making it suitable for encrypting large volumes of data. However, the key must be kept secret and shared securely between the sender and receiver, as anyone with access to it can decrypt it.

Asymmetric Encryption

Asymmetric encryption, or public-key encryption, uses two different keys. Public keys enable encryption, while private keys enable decryption. This method allows for secure data transmission even if the encryption key (public key) is known to others, as only the private key holder can decrypt the data. Asymmetric encryption is typically used to secure communications, such as email encryption and digital signatures.

Asymmetric Encryption Flow

What is the Purpose of Encrypting Data?

The primary purpose of encrypting data is to ensure the confidentiality and integrity of information, protecting it from unauthorized access and tampering. Here are the key reasons why data encryption is crucial:

1. Protecting user privacy

By encrypting data, personal details, communication, and other sensitive information are kept confidential, ensuring that only authorized parties can access them. This protection is crucial not just for individuals but also for businesses that handle customer data, helping to maintain trust and confidentiality.

2. Preventing data misuse

When you encrypt sensitive data, it serves as a crucial defense mechanism against identity theft and blackmail. By securing personal and financial information, encryption makes it significantly harder for cybercriminals to access and misuse this data. This protection is vital in preventing crimes like identity theft, financial fraud, and blackmail, where sensitive information is exploited for malicious purposes.

3. Enabling secure file sharing

Encryption allows for the safe transmission of files over the internet, ensuring that data remains secure and intact from sender to receiver. This is particularly important in corporate settings where confidential documents and contracts are frequently shared.

4. Protecting data on lost or stolen devices

When data is encrypted on these devices, it remains inaccessible to unauthorized users, thus protecting against data breaches and information theft. This is especially important for mobile devices, which are more prone to being lost or stolen.

5. Ensuring compliance with regulatory requirements

Many industries are governed by strict regulatory requirements regarding data protection, such as HIPAA for healthcare and GDPR for data protection in the EU. Organizations benefit from encryption as it ensures that sensitive data, especially customer and client information, is securely stored and transmitted, thereby avoiding legal penalties and maintaining regulatory compliance.

Hashing vs. Encryption

The purpose of hashing and encryption differs, and they operate differently in data security. Let’s explore:

Aspect Encryption Hashing
Definition The process of turning plaintext into ciphertext with the help of an algorithm and key. The process of converting data into a fixed-size string of characters, typically a hash value.
Objective To protect data confidentiality. To verify data integrity and index data.
Process Two-way (data can be encrypted and decrypted). One-way (data is transformed and cannot be reversed).
Key Usage Requires keys for encryption and decryption. Does not use keys.
Reversibility Reversible (data can be reverted to its original form). Irreversible (once data is hashed, it cannot be converted back to the original form).
Typical Uses Securing data during storage or transmission. Ensuring data integrity, password storage, and indexing data in databases.
Hashing Vs Encryption Table

The Three States of Data Encryption

Data encryption is a dynamic process that adapts to the state of the data, whether it's stored, in transit, or being used. Understanding the three states of data encryption contributes greatly to comprehensive data security measures.

Three States of Encryption Banner

1. Encryption at rest

Encryption at rest is vital for protecting data stored on physical or virtual storage systems. This includes data on servers, hard drives, and cloud storage. The primary goal is to safeguard data from unauthorized access, especially in cases of physical theft or unauthorized entry into data storage locations.

The security of encrypted data at rest heavily depends on how the encryption keys are managed and stored. Key management practices include storing keys in a separate location from the data, using dedicated hardware security modules (HSMs), and implementing strict access controls. Moreover, regularly updating and rotating encryption keys also enhances security.

2. Encryption in transit

Encryption in transit safeguards data by moving across networks, such as during internet communication, email transmission, or data transfer between internal networks. This type of encryption prevents interceptors or eavesdroppers from accessing or tampering with the data.

Common methods for encrypting data in transit include using Secure Sockets Layer (SSL)/Transport Layer Security (TLS) for web traffic, Virtual Private Networks (VPNs) for secure remote access, and secure file transfer protocols like SFTP or FTPS.

3. Encryption in use

Encrypting data in use is the most challenging task since it involves protecting data that is actively being accessed or processed, such as in databases, applications, or during computations. The challenge lies in allowing authorized access and processing while still maintaining data security.

The solutions for encrypting data in use include using Trusted Execution Environments (TEEs) to process sensitive data in isolated environments, implementing access controls at the application level, and using format-preserving encryption to allow certain computations on encrypted data.

Encryption in action: Popular case studies

The application of encryption spans various industries. Below, we explore real-world scenarios where encryption protects sensitive data across different sectors.

Financial sector: The Heartland payment systems breach

In 2008, Heartland Payment Systems, one of the largest payment processors in the US, experienced a massive data breach. The breach was orchestrated through SQL injection, an attack that exploits vulnerabilities in a database's software. It resulted in the compromise of approximately 100 million debit and credit card numbers from several sources.

Following the breach, Heartland took significant steps to enhance its security measures. One of the most critical changes was the implementation of end-to-end encryption for payment data. This move significantly enhanced their security, making it much harder for hackers to access usable data even if they could infiltrate the system.

Healthcare: Anthem Inc. Data breach

Anthem Inc., a major health insurance company, suffered a huge data breach in 2015, compromising the data of nearly 80 million customers. A significant factor that exacerbated the breach's impact was the absence of encryption for data at rest. While Anthem encrypted data in transit, the data stored in their databases was not encrypted, making it vulnerable once the attackers bypassed the perimeter defenses.

The Anthem breach served as a wake-up call for the healthcare industry regarding the importance of robust data security practices, especially encryption. It highlighted the risks associated with storing large volumes of sensitive data and the need for comprehensive security strategies that include encryption as a key component.

Role of DLP tools in data encryption

DLP technologies are crucial for identifying, monitoring, and protecting data in use (endpoint actions), in motion (network traffic), and at rest (data storage). They ensure that unauthorized users do not lose, misuse, or access sensitive information. Here's a deeper look into their role:

  • Identification and encryption of sensitive data
  • Monitoring data movement
  • Endpoint data security
  • Regulatory compliance
  • Prevention of unauthorized access
  • Real-time alerts and reporting

Encrypt data across devices and channels with Strac

Strac is a modern DLP solution that complements data encryption practices. It caters to businesses prioritizing robust data security and compliance with various data protection regulations. Here’s how Strac helps you maintain a robust security posture:

Ensures compliance with data protection regulations

With zero downtime and built-in compliance templates, Strac ensures that your organization consistently complies with stringent regulatory standards such as PCI DSS, HIPAA, SOC 2, GDPR, and CCPA. This commitment guarantees a secure and compliant data environment.

Seamless integration with key business platforms

Strac integrates seamlessly with commonly used business platforms including Slack, Zendesk, Salesforce, Google Workspace, and Microsoft 365. This ensures encryption of data across various applications, safeguarding sensitive information throughout the business ecosystem.

Real-time identification and redaction of sensitive data 

Strac employs the PII Redaction API to automatically detect sensitive Personally Identifiable Information (PII) from documents and communications. Once identified, it automatically initiates predefined actions such as data redaction or alerts administrators, ensuring swift and effective protection of sensitive data.

Book a demo to protect your data against emerging threats.

Founder, Strac. ex-Amazon Payments Infrastructure (Widget, API, Security) Builder for 11 years.

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