Everything You Need To Know About Tokenization And Encryption

When it comes to data security, the terms tokenization and encryption are used a lot, and it is likely that you’ve probably read these terms somewhere on the internet while using a web or mobile application but didn’t really bother knowing what they are, what they do, and how they differ from one another.

The thing is, these two technologies are different in so many ways, and each one of them has its own strengths and weaknesses, which is why having in-depth knowledge is a must so you can find the right security technology to keep your data safe.

Right now, there are so many options that you can go with when it comes to keeping your data safe, and to assist you in the process of finding the best technology for you and your needs, we are going to compare Tokenization VS Encryption by explaining everything in a detailed way.

What Is Encryption?

Before we talk about anything else, allow us to explain what Encryption is.

Encryption is a way that allows the scrambling of data on the internet, and only the parties that are authorized with access to that specific data are capable of understanding the information that’s being sent to one another.

In simple terms, Encryption converts readable messages into messages that are extremely hard to understand, which is also known as ciphertext in technical terms. This allows the readable data to appear random in case an unauthorized party gets access to the data that’s being sent out.

But remember, there is also a twist.

Despite the fact that encrypted data will appear random when accessed by an unauthorized party, a hacker or data thiefs, the proceeds are required to be logical and predictable, which will allow the receiving party to decrypt the data so it can be turned back into plaintext.

In some cases, particularly in truly secure encryptions, keys that are complex enough are going to be used so a third party would not be able to decrypt the ciphertext.

Why Is It Important To Use Encryption?

There are 4 main reasons on why it is important to use data encryption technology, and they are:


The thing with encrypted data is that if an unauthorized party or data thieves manage to get hold of it, they would automatically have a hard time decrypting what you sent to a receiver.

Basically, data encryption does a lot in preventing attackers, internet services providers or anyone from intercepting or reading data that is being sent. In simpler terms, encryption ensures user privacy.


Encryption not only prevents third parties or unauthorized people from decrypting your data, but it also plays a huge role in preventing major or minor data breaches.

For example, if your hard drive or data is stolen, and is lost, the data will stay secure thanks to ciphertext, which is really hard to decrypt. Not only that, but encrypted communication also allows safe communication between parties without having to worry about data being leaked.

No Alterations

Along with privacy and security, encryption also ensures that no one will be capable of making alterations when the data is being transmitted across the internet.

This technology ensures that the person on the receiving end will be getting the right message, which has not been viewed by anyone else or has not been tampered in any sort of way.


All technologies that use data encryption security services are required to follow regulations, which includes HIPAA, PCI-DSS, and the GDPR.

This allows companies that handle user data to keep all the data that they have encrypted at all times.

Where is Encryption Used For?

Encryption is mostly used in the following things:

  • Wireless security
  • Processor security
  • File encryption
  • SSL/TLS protocol (website security systems)
  • Wi-Fi security systems
  • Mobile app encryption
  • Most VPNs (virtual private network), and etc

Note: These are just some of the many scenarios where Encryption is used.

Common Encryption Algorithms

There are two common encryption algorithms that are used to protect data, the symmetric encryption algorithm and the asymmetric encryption algorithm.

When it comes to symmetric encryption algorithms, these are the most used ones:

  • AES
  • 3-DES
  • SNOW

When it comes to asymmetric encryption algorithms, some of the most used ones include:

  • RSA
  • Elliptic curve cryptography

What Is Tokenization?

Now time to explain what Tokenization is.

Tokenization is the process that involves the swapping of sensitive data for nonsensitive data, also referred to as tokens, which can be used in a database or an internal system without bringing it into a scope.

This one is basically a process where PANs, PHI, PII, and other sensitive data elements are replaced by tokens.

Originally, it was just a form of encryption, but this one is now known for encoding human-readable data into incomprehensible text that can only be decoded if an individual holds the right decryption key.

The main purpose of tokenization is to protect sensitive data, which makes it different from encryption as that technology only converts data into ciphertext, but with Tokenization, you are swapping sensitive data for nonsensitive data, which can only be decoded with the right decryption key.

Where Is Tokenization Used For?</strong >

Tokenization is mostly used in securing different types of extremely sensitive data, which includes:

  • Credit/debit card data
  • Social security numbers
  • National identification numbers
  • Telephone numbers
  • Passport numbers
  • Names
  • Addresses
  • Birth dates
  • Bank account numbers
  • Email addresses
  • Personal document information, and etc.

Note: This is not a complete list where tokenization is used for.

Why Is It Important To Use Tokenization?

Here are some of the most important reasons on why it’s important to use Tokenization:

Reduced Risk Of Data Breach

There were 1,864 data breaches in 2021, according to the Identity Theft Resource Center, which just shows that we need to work so much in protecting the data that’s being kept.

With those numbers alone, it just shows how important it is to invest in proper security these days and with Tokenization, you can secure the data that you have with you to minimize the chances of being involved in a data breach, which could cost you millions of dollars or even worse.

Remember, with Tokenization, you are swapping sensitive data for nonsensitive data, which can only be decoded with the right decryption key. This reduces the risk of data breach in such a huge way!

Build Trust With Your Customers

Holding sensitive data is not an easy thing to do, which is why investing in proper security technologies is a must.

With Tokenization, you are ensuring that correct formatting and data is transmitted the right way, which makes it less likely to be involved or vulnerable to payment fraud and cyberattacks.

Once you reduce the risk of being involved in payment frauds and other data breaches, you are building good trust and reputation with your customers and clients in the longer run, which is really good for business.

Internal Security

Because tokenizations involve tokens that are unreadable, companies, individuals or anyone that’s involved in the transaction can benefit from improved internal security as nothing will be shared with any third party.

This one is mostly beneficial for those companies that offer payment gateways as tokenization offers secure sale acceptance.

Secure Sensitive Data With Tokenization

Remember, Tokenization is becoming popular as time passes by, especially because it has capabilities to protect data and can play a huge role in offering data protection solutions.

With the right tokenization technology implementation and methods, companies can improve in securing the sensitive data that they hold thanks to the intelligent encryption and robust authentication process it offers.

Differences Between Tokenization And Encryption

Tokenization is different from Encryption in so many ways.

Remember, encryption alone cannot complete a secure payment or can hold personal information properly, which means that in order to secure data that’s in transit or is resting, both tokenization and encryption should work together.

These two can perform critical tasks that would allow them to protect sensitive data from getting involved in data breaches or theft.

There’s much more to know about these two, which is why here is a table that would allow you to understand the differences between Tokenization and Encryption in a better and easier way:

Tokenization  Encryption 
With tokenization, this technology replaces sensitive data with random values that are completely unrelated to it. Also, it creates two distinct databases to maximize security. It uses algorithms, asymmetric encryption algorithms and symmetric encryption algorithms, to convert plaintext data into ciphertext. It also mixes up plaintext information. 
When it comes to adaptability, it has scalability and performance challenges with the database.  This one is a good option when it comes to scaling data volume.
A good option for structured data fields.  A good option for both structured and unstructured data fields.
Has a hard time exchanging sensitive data.  Is very reliable and flexible when it comes to data exchanging.
No compromises in security and the format stays maintained.  Compromises in quality and is unstable when it comes to determining tradeoffs.

Which One Is Better?

So basically, tokenization replaces sensitive data, which includes credit card or debit card data, social security numbers, national identification numbers and others, with surrogate random values that are called tokens in order to protect data. While in the encryption method, you are just translating plaintext into ciphertext using an algorithm and a key.

Also, with tokenization, it will randomly generate a token value for plaintext and store the mapping in a database, but with encryption, it scrambles the data, which can only be accessed by authorized parties.

Both of them are secure in their own ways, which means that the decision is yours to make!

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