Encryption

Intermediate

Updated Jul 22, 2026

What Is Encryption?

Encryption is the process of converting readable information into a coded form so that only authorized parties can access it. It is one of the core tools within cryptography, the broader field concerned with securing information. Governments, businesses, and individuals rely on encryption to protect sensitive data and reduce the risk of fraud.

Today, the majority of internet traffic is encrypted, largely through the HTTPS protocol that secures communication between web browsers and websites. This helps keep activities such as messaging, online banking, and shopping confidential while data travels across networks.

How Does Encryption Work?

Encryption transforms plaintext (data that can be clearly understood) into ciphertext (data that appears unreadable). The transformation uses a mathematical algorithm together with a key. Only someone holding the correct decryption key can reverse the process and convert the ciphertext back into its original, readable form.

There are two main approaches, often described together as symmetric and asymmetric encryption. Symmetric encryption uses a single shared key to both encrypt and decrypt data, which tends to be fast. Asymmetric encryption uses a key pair: a public key to encrypt and a separate private key to decrypt. This key-pair model is the foundation of public key cryptography, which allows parties to exchange information securely without first sharing a secret key.

Encryption and Cryptocurrencies

Contrary to a common assumption, most cryptocurrencies and their blockchain networks do not rely on encryption to secure transactions. Instead, they typically use hashing and digital signatures. For example, the Bitcoin protocol uses cryptographic proofs to validate transactions and digital signatures to confirm that funds can only be spent by their rightful owner.

Encryption still plays a supporting role in the crypto ecosystem. Cryptocurrency platforms may encrypt customer information, and many wallets encrypt local wallet files and passwords to protect them if a device is compromised.

Why Does Encryption Matter?

Encryption helps protect sensitive information such as names, addresses, payment details, and private messages. If an attacker gains access to a system, encrypted data generally remains unreadable without the corresponding decryption key, which can limit the damage of a data breach.

Encryption also supports compliance and confidential communication. In some jurisdictions, organizations are required to encrypt certain records, such as healthcare data under regulations like HIPAA in the United States. Applied forms of encryption, including end-to-end encryption, extend these protections to messaging and other everyday services, helping keep data confidential both in transit and at rest.

Learn more: Symmetric vs. Asymmetric Encryption

Related Glossaries

Cryptocurrency

A digital currency that is secured by cryptography to work as a medium of exchange within a peer-to-peer (P...

Cryptography

The science of using mathematical theories and computation in order to encrypt and decrypt information.

Nonce

A single-use arbitrary string or number generated for verification purposes to prevent replaying past trans...

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