What is encryption?

Encryption works by using encryption algorithms to scramble data into an indecipherable format. Only the authorized parties with the right secret key, known as the decryption key, can unscramble the data.

Encryption can protect data at rest, in transit and while being processed, regardless of whether the data is in a computer system on-premises or in the cloud. For this reason, encryption has become critical to cloud security efforts and cybersecurity strategies more broadly.

According to the IBM 2023 Cost of a Data Breach report, organizations that use encryption can reduce the financial impact of a data breach by over USD 220,000.

Encryption is also increasingly necessary to comply with regulatory requirements and standards like PCI DSS and the GDPR.

Investment in encryption is growing as individuals and organizations face escalating threats and cyberattacks. According to recent estimates, the global encryption software market will reach USD 20.1 billion by 2025, with a compound annual growth rate of 15.1 percent from 2020 to 2025.

Also, artificial intelligence (AI) has changed the encryption landscape. Specifically, organizations are exploring how AI can help optimize key management and enhance encryption algorithms.

Encryption has evolved significantly over time. Early instances of cryptography and techniques resembling encryption date back to ancient civilizations such as the Egyptians and Mesopotamians. Encryption was later popularized in wartime and espionage efforts and famously associated with the Enigma Machine, a World War II encryption device that was used by the Germans to encode secret messages.

Today, encryption is critical in safeguarding sensitive data, especially as organizations transition to the cloud or employ hybrid cloud environments. This shift often leads to data complexity, including data sprawl and expanding attack surfaces.

As a result of this data complexity, data breaches can become more costly and more frequent. According to the Cost of a Data Breach report, the global average cost to remediate a data breach in 2023 was USD 4.45 million, a 15 percent increase over three years.

With encryption, organizations can deter or mitigate the severity of data breaches. This is achieved by ensuring that hackers can’t access their most sensitive data, including social security numbers, credit card numbers, and other personally identifiable information (PII).

Organizations, particularly those in healthcare and financial services, also use encryption to meet compliance standards.

For example, the Payment Card Industry Data Security Standard (PCI DSS) mandates that merchants encrypt the customer payment card data they handle. Similarly, the General Data Protection Regulation (GDPR) highlights encryption as a critical measure for safeguarding personal data against unauthorized access or disclosure.

Still, it's not just organizations demanding encryption. Users increasingly seek the peace of mind encryption brings. Signal, a messaging app that uses end-to-end encryption, reported a jump from 12 million to 40 million users in 2022 amid concerns over WhatsApp's privacy policies and data-sharing practices.

In recent years, modern encryption algorithms have largely replaced outdated standards like the Data Encryption Standard (DES).

New algorithms not only mask data but also support key information security principles such as integrity, authentication, and nonrepudiation. Integrity ensures that unauthorized parties do not tamper with data, authentication verifies data origins, and nonrepudiation prevents users from denying legitimate activity.

Current trends in encryption focus on enhancing encryption algorithms and protocols to keep pace with evolving cyberthreats and technologies.

Quantum encryption uses principles of quantum mechanics to create cryptographic keys that are theoretically immune to brute-force attacks.

Homomorphic encryption allows organizations to perform computations on encrypted data without requiring decryption. This approach means that organizations can use sensitive data for things like AI model training and analysis without compromising confidentiality or individual privacy.

The two main types of encryption are:

• Symmetric encryption: Encrypts and decrypts data by using a secret symmetric key that is shared by all the parties that are involved in a transaction.

• Asymmetric encryption (also known as public key encryption and public key cryptography): Encrypts and decrypts data by using two different keys. Anyone can use the public key to encrypt data, but only the holders of the corresponding private key can decrypt that data.

Both methods have their strengths and weaknesses. Symmetric encryption is faster and more efficient. However, it also requires meticulous key management because anyone who obtains the symmetric key can decrypt the data.

Asymmetric encryption, though slower due to its complexity, offers more robust security by eliminating the need for a secure key exchange.

One of the most versatile and well-known solutions for managing asymmetric encryption is a public key infrastructure (PKI). A PKI provides a comprehensive framework for secure communication and authentication, enabling the creation, distribution, and validation of public and private key pairs. PKI can help secure various applications, including email, digital signatures, and SSL/TLS encryption for web browsing.

Organizations generally choose symmetric encryption when speed and efficiency are crucial, such as when encrypting large volumes of data or securing communication within a closed system.

When secure communication between parties over insecure channels is essential—such as online transactions, email encryption and digital signatures—organizations might lean on asymmetric encryption.

Encryption begins by identifying the sensitive information that requires protection. This information can be messages, files, photos, communications, or other data. This data exists in plain text format—the original, readable form that needs safeguarding.

Encryption algorithms transform this plain text into ciphertext by scrambling the data into an unreadable sequence of characters. This process ensures that only the intended recipient(s) can read the original data.

Next, encryption keys are created. An encryption key is like a complex code that is needed to unlock a safe. Without the correct cryptographic key, you cannot access the encrypted data. A longer key size provides higher security by making the decryption process exponentially more complex.

In symmetric encryption (see "Types of data encryption”), a single shared key is used for encryption and decryption. In asymmetric encryption (see "Types of data encryption”), two keys are created: a public key for encryption and a private key for decryption.

For those without a decryption key, encrypted messages are virtually impossible to decipher. However, users with the decryption key can successfully decrypt the data, essentially reversing the encryption process and converting the ciphertext back into unencrypted, readable plain text.

Decryption can also involve an authentication stage, where decrypted data is verified to ensure its integrity and authenticity. This step may include verifying digital signatures, hash functions (see next section) or other forms of authentication to confirm that the data has not been tampered with during transmission.

Hash functions are closely related to encryption, but these tools address distinct security problems.

Hash functions are a type of cryptographic algorithm that is primarily used for data integrity and authentication. They work by taking an input (or message) and producing a fixed-size string of characters, which are known as a hash value or hash code.

Their defining feature is their deterministic nature. Given the same input, a hash function will always produce the same output. This process makes them critical for verifying data integrity. Users can compare hash values before and after transmission or storage. If the hash values match, no one has altered the data.

While encryption is a reversible process, hash functions are irreversible. It is computationally infeasible to derive the original input data from its hash value alone. For this reason, the primary purpose of hash functions is not to mask sensitive data but to create unique digital fingerprints that cybersecurity professionals can use to verify data integrity and authenticity.

Key management is critical for effective data encryption. To understand why, consider the example of a safe. If an individual forgets their code to a safe or it ends up in the wrong hands, they risk losing access to their most valuable possessions or having them stolen.

The same logic applies to cryptographic keys. If organizations don't properly manage their keys, they can lose the ability to decrypt and access data or expose themselves to data breaches.

For this reason, organizations often prioritize investing in key management systems. These services are critical given that organizations frequently manage a complex network of cryptographic keys, and many threat actors know where to look for them.

Encryption key management solutions often include features like:

• A centralized management console for encryption and encryption key policies and configurations

• Encryption at the file, database, and application levels for on-premises and cloud data

• Role- and group-based access controls and audit logging to help address compliance

• Automated key lifecycle processes

• Integration with the latest technologies, such as AI, to improve key management by using analytics and automation

• Data Encryption Standard (DES): IBM introduced DES in the 1970s as the standard encryption algorithm, a role it held for many years. However, its relatively short key length (56 bits) made it vulnerable to brute-force attacks. Eventually, more secure algorithms replaced it.

• Triple DES (3DES): Developed as an enhancement to DES, 3DES applies the DES algorithm three times to each data block, significantly increasing the key length and strengthening security. Despite its improved security over DES, 3DES is now considered outdated. AES has largely replaced it.

• Advanced Encryption Standard (AES): Often hailed as the gold standard for data encryption, AES is a symmetric encryption algorithm that is widely adopted by organizations and governments worldwide, including the US government and the US National Institute of Standards and Technology (NIST). AES offers strong security with key lengths of 128, 192 or 256 bits.

• Twofish: Twofish is a symmetric key block cipher that is known for its speed and security. It operates on blocks of data with a block size of 128 bits and supports key lengths of 128, 192 or 256 bits. Since it is open source and resistant to cryptanalysis, organizations often rely on Twofish when security and performance are critical.

• RSA (Rivest-Shamir-Adleman): RSA is an asymmetric encryption algorithm that is named after its inventors. It relies on the mathematical complexity of prime numbers to generate key pairs. It uses a public-private key pair for encryption and decryption, making it suitable for secure data transmission and digital signatures. RSA frequently helps secure communication protocols such as HTTPS, SSH, and TLS.

• Elliptic Curve Cryptography (ECC): ECC is an asymmetric encryption method based on the mathematical properties of elliptic curves over finite fields. It offers robust security with shorter key lengths than other algorithms, which makes it well suited for resource-constrained devices such as smartphones and IoT devices.

Encryption can provide various data protection benefits both on premises and in the cloud. Some of the most significant benefits include:

Encryption is among the most critical and widespread data security tools. By encoding plain text as ciphertext, encryption helps organizations protect data against a range of cyberattacks, including ransomware and other malware.

Notably, the use of info stealer malware that exfiltrates sensitive data is up 266 percent from 2022, according to the 2024 IBM X-Force Threat Intelligence Index. Encryption helps combat this threat by making data unusable to hackers, defeating the purpose of stealing it.

Recent advances in AI-powered encryption systems have also revolutionized data security practices. These solutions use AI to dynamically adjust encryption parameters based on contextual factors such as network traffic, device type, and user behavior. This adaptive approach allows organizations to optimize encryption algorithms in real-time and tailor their data protection strategies to evolving security threats.

While cloud service providers (CSPs) are responsible for the security of the cloud, customers are responsible for security in the cloud, including the security of any data. Enterprise-wide data encryption can help organizations protect their sensitive data on-premises and in the cloud.

Many industries and jurisdictions have regulatory requirements and security measures mandating that organizations use encryption to protect sensitive data. Compliance with these regulations helps organizations avoid legal penalties and maintain customer trust.

Cryptographic tools like hash functions can help detect unauthorized modifications or tampering attempts, which can help ensure the accuracy and integrity of stored and transmitted data.

Encryption keeps communication channels secure, allowing individuals and organizations to exchange sensitive information, conduct transactions and collaborate with a reduced risk of interception.

Encryption restricts access to sensitive data to only the users that have the appropriate decryption keys. This measure helps prevent employees from intentionally or unintentionally accessing, misusing, or misplacing sensitive information. For example, even if an employee's company-issued laptop is lost, properly encrypted data on the hard disk remains inaccessible.

Despite its many benefits, encryption is vulnerable to some attacks and misuse. Some common weaknesses of current encryption technologies include:

The rise of quantum computing threatens traditional encryption methods. Quantum computers could break some encryption algorithms, such as RSA and ECC, by running powerful quantum algorithms like Shor's algorithm. Shor's algorithm can efficiently factor large numbers and solve the discrete logarithm problem, a difficult math problem that many encryption schemes rely on.

However, organizations are also using artificial intelligence (AI) to develop quantum-resistant encryption methods. These encryption solutions use AI to anticipate and adapt to potential quantum computing threats before they can break traditional encryption algorithms.

Brute-force attacks involve hackers systematically trying all possible encryption keys until they discover the correct one. Strong encryption algorithms historically take far too long to break when using brute-force methods. However, advances in computing power risk rendering some encryption methods vulnerable to brute-force attacks.

Attackers can exploit vulnerabilities in encryption algorithms to decrypt encrypted data. One significant vulnerability is the "Padding Oracle Attack," which involves hackers manipulating padding (extra bits added to plaintext) to reveal plain text data.

Side channels are unintended pathways for information leakage, such as timing discrepancies and variations in power consumption and electromagnetic emissions. Hackers can use these side channels to gain information about the encryption process and recover encryption keys or plain text data.

One example of a side-channel attack might include hiding induction coils on mobile payment systems. This approach would allow attackers to record transactions and extract keys to forge credit cards or make fraudulent charges.

The security of encrypted data generally relies on the secrecy and management of encryption keys. If encryption keys are lost, stolen, or compromised, it can lead to unauthorized access to encrypted data.

However, AI systems can also help automate key management processes, including key generation, distribution, and rotation. This automation improves the efficiency and security of encryption systems, reducing the risk of human error and ensuring that encryption keys are regularly updated and secure.

Encryption is often the first and last defense against hackers and data breaches. Organizations may use different encryption solutions depending on desired security level, data type, regulatory environment and other factors.

Some of the most common encryption solutions include:

• Encryption software: Organizations across industries rely on encryption software to secure data at rest and in transit. This software generally has features and tools that facilitate encryption and decryption operations, including key management and integrations with existing software such as databases, cloud providers, and communication platforms.

• Virtual private networks (VPNs): VPNs encrypt internet traffic to ensure privacy and security. They are essential for securing communication over public networks, especially when employees work remotely or need to access sensitive information outside secure corporate networks.

• Cloud encryption: Cloud encryption ensures data confidentiality and integrity by encrypting sensitive information before storing it in cloud environments. These solutions protect data in cloud-based applications, platforms and storage services against risks associated with the cloud, including unauthorized access and data exposure.

• Network encryption: Network encryption encrypts data exchanged between two endpoints over a network to ensure confidentiality and integrity. For example, the Transport Layer Security (TLS) protocol, an updated version of Secure Sockets Layer (SSL), protects data sent over a browser, such as credit card information sent through an online retail website or login credentials transmitted during online banking sessions.

• Database encryption: Database encryption encrypts sensitive information stored in databases, such as customer records, financial data, and intellectual property, to prevent unauthorized access or theft.

• Whole disk encryption: Whole disk encryption encrypts entire storage devices to protect data stored on endpoint devices, such as laptops and mobile devices.

• Hardware-based encryption: Specialized hardware components in devices like encryption chips or modules can provide additional protection for sensitive data, especially when software-based encryption may not suffice. Smartphones, laptops and storage devices often feature hardware-based encryption solutions.

• File and folder encryption: Individuals and organizations often use file and folder encryption to encrypt sensitive individual files or folders on computers or networks, such as sensitive photos, documents and other digital assets, to prevent unauthorized access.

• Email encryption: Encrypting email messages and attachments to secure communications channels ensures that sensitive information that is shared via email remains confidential and protected from unauthorized interception and tampering.

• End-to-end encryption (E2EE): End-to-end encryption is a secure communication process that encrypts data on-device before transferring it to another endpoint to prevent third party tampering. Chat and messaging apps, email services, and other communication platforms frequently use E2EE to protect user privacy and confidentiality.